Setting up a budget isn’t exactly a fun way to spend a Sunday afternoon, is it… but dreaming about something glorious, that you can suddenly afford, is! Because really, we all have dreams about things, or trips, or houses, or clothes, or kitchen equipment that we’d love but think are out of our reach.
A budget is a very personal thing and that’s what I love about it. What is important to me may not be important to you and therefore we make different choices around where to spend our hard earned cash. But one thing we all have in common is, that we need to be clear on how much we’ve got, so we can make informed choices about how to spend it (and that’s where the fun comes in)!
Everything starts with ‘Why’!
The best way to make a budget more fun is to set yourself a financial goal. What that looks like is entirely up to you. If you are a saver (like my husband), it may be enough to think about a sum you want to see in your savings account at the end of the year. Nothing wrong with that. But if you are a spender (like me…) you may find it much more appealing to think about what you will be able to afford if you set up – and stick to – a budget.
I am determined to take the family to Germany next year for a family reunion, and then to Denmark for some Danish Pastries!! Because let’s be honest, nearly all my decisions are based on food.
A side note on financial equality
A lot of women I know found it hard when kids came along and for a period of time the family was down to one income. Not just because there was money missing, but because they felt they didn’t have ‘their own’ money.
I feel very strongly about this subject because I think all family income should be viewed as one income, not who earns which part of it. You can only be truly financially equal if you value what the person at home and the person at work does equally.
The way my husband and I do it, and have done it since the beginning of our relationship, is to view any money coming in as going into one ‘pool’. From that pool each of us gets the same amount of personal money (which we agree on and which changes depending on our financial situation) to spend on whatever we choose each month and the rest goes towards bills, groceries, etc.
Of course the amounts have changed over the years, from when we both earned little, to when we both earned well, to when I started being a stay at home mum and only my husband was earning. But the system hasn’t changed. So when I stopped earning, we still considered his income as the ‘pool’ from which we both ‘pay’ ourselves and the rest goes towards bills, groceries and now kids expenses.
This is probably the most important corner stone of our budget and financial happiness.
I have never felt I don’t have my own money and I never have to ask him for money because we get the same amount and the rest of the financial decisions we make together. He is definitely the saver and I’m the spender, no doubt about it. And of course we argue on occasion about what we think is important to spend money on. But the boundaries of what we can and can’t afford are quite clear and neither of us judges what the other one does with their ‘own’ money.
How to make a budget happen
Ok so you’ve got your why, you’ve pooled your money, now what.
Setting up an initial budget is a bit tedious, I’m not gonna lie. But unless you’re in financial strife you can let it built over time. Set it up as best as you can now and then refine it as you go. That’s still better than not having one at all and getting surprised by expensive bills that are rolling in a few times a year.
There’s a clever free budget calculator online which might be helpful. And there are 1001 apps, I’m sure. Personally, I think all you need is a simple list of how much money comes in and how much money goes out regularly, and then you see what you are left with. I set up ours in google sheets so my husband and I both have easy access to it. It’s an online version of excel basically. You can choose whichever works best for you!
1. Get clear on your Outgoings (Bills)
- Pour yourself a cup of tea
- Get all your bills, credit card and bank statements ready
- Start writing down where you regularly spend money
- Make a note how often a particular bill comes in.
5. Break down the payment to how much that is per month/week (whichever suits you).
Below is a list of our outgoings, which might help you as a guide:
Mortgage (monthly)
Council Rates (yearly)
Home Insurance (monthly)
Electricity (Quarterly)
Gas (bi-monthly)
Water (Quarterly)
Health Insurance (Monthly)
Ambulance Membership (Yearly)
Internet (Monthly)
Mobile Phones (Monthly)
Foxtel/Netflix (Monthly)
Day Care (Fortnightly)
Citylink Tolls (Monthly)
Car Service (Twice Yearly)
Car Registration (Yearly)
Car Insurance (Yearly)
RACV/Roadside Assist (Monthly)
No matter how often a bill comes in, we put money away for all of these things every month.
I have also included Christmas in these outgoings. Not a bill, but good to put some money away for each month. You know that’s an expensive time of year.
2. Divide the rest
Ok so you’ve got your monthly income and you’ve taken out what you’ve calculated your monthly outgoings to be. Now you can divide the rest!
For us that means:
Personal money for my husband and I
Fuel/Public Transport
Groceries/Household Expenses
You could go into more detail, for example kids expenses, but while Finn is young it is easier for us to cover that under household expenses. I want our budget to be detailed but as little fussy as possible.
Setting up the right bank accounts
I recommend having different bank accounts for different needs. It keeps things seperate and therefore clearer.
We have:
One personal account each for our own money,
and joint accounts for
Bills (see Outgoings above) and
Everyday Expenses (Fuel, PT, Groceries and Household Expenses)
Most of our bills get direct debited out of our bills account which I highly recommend. You have so much less to worry about if you automate that. (If you use a credit card for it you still have to pay that off, so by having it come directly out of the account it’s much simpler.)
By the time less frequent bills (bi-monthly, quarterly or yearly) are due, you will have accumulated that money in your bills account. Peace of mind!!
Hang on, where are the savings?
Ah, yes. The savings. Ideally you’d also have a savings account where you accumulate your glorious savings to then go on fun holidays or shopping sprees or whatever floats your boat. This would be part of ‘dividing the rest’.
Well, being on a single income means things are tight at the moment. The only money we can save is our personal money or if we’re being good with our household expenses. There isn’t a lot of wiggle room in either, so I have started being a bit more interested in where our monthly household money goes. Because all the bills are automated, I can now focus on keeping an eye on our everyday living expenses and (hopefully) make smarter choices.
I’ve designed a weekly budget sheet which helps me keep track. If you want to do this digitally, rock on, but I found it very satisfying to sit down after our weekly big shop, take 10 minutes and note things down while enjoying a peaceful cup of coffee. There is something about putting pen to paper that holds you just that little bit more accountable.
After automating our non-food related shopping needs, it’s also not as time consuming as it may seem. And if I do top-up shops during the week, I simply add that in the next columns.
This will make it clearer where you are at and prevent you from running out of money by the end of the month! It’s so frustrating when you run out of money but you’re not exactly sure where it’s gone.
You can download the weekly budget template – prefilled: Here!
You can download the weekly budget template – unfilled: Here!
But Katrine, seriously… it sounds like such hard work
I get it.
BUT:
- You feel good about yourself and more in control if you know where your money goes.
- Knowledge is power! If you know where it goes you can make smarter choices.
- Your grocery budget can become a guide of where you can make healthier choices.
- Having a financial goal will motivate you and you’ll be proud working towards it, rather than feeling tight.
Much love,
Katrine x