Budgeting and cashflow. Ughh. It strikes fear into the heart of all but the most focussed, the most disciplined among us. There are great reasons to have a budget. Below we’ll explore how to set and succeed at sticking to a budget.
Why don’t we like budgets?
We get scared off because:
- We will have to fess up to how much we spend.
- It’s a lot of work (it can be).
- We know it’s going to be an enormous time commitment.
I can’t help with the first one, but oddly enough both the government and the finance industry can help with the second and third fears.
A budget is simply a matter of deciding where to spend your money before it arrives in your bank account – every fortnight or every month. The simplest tool for putting your decisions down on paper, so to speak, is free.
According to Ronald Regan the nine most terrifying words in the English language “I’m from the government, and I’m here to help”, but there are exceptions to every rule.
You wouldn’t believe it, but the simplest tool for setting your budget is from the government and they are here to help – genuinely. They’ve got a downloadable spreadsheet so you can get started. I have it on good authority that a glass of wine can help https://moneysmart.gov.au/budgeting In fact if you have a minute, browse through the rest of the site, there are some great tools and some really interesting info available.
OK, the dreaded budget is set, now what?
Now all you have to do is stick to it. How? Start by tracking it.
Tracking your spending is incredibly valuable, because how you choose to allocate your money is going to be the basis of your financial success or failure. The process of tracking makes sure that where you decided to spend your money before it arrived matches where you actually spent it after it arrived.
Tracking your spending either shows you’re on target or you’re not.
If you’re on target (or ahead), you deserve the satisfaction of a job well done. The satisfaction is like a little sugar hit – it reinforces your wins and spurs you towards more.
If you’re not on target, you either choose to adjust your spending back to match your budget or choose to let it slide. In either scenario there are no surprises, you can see ahead of time what things are going to look like come month end or year end.
Why do we care about being on track?
If you match your spending to your budget, you hit your savings targets. Hitting your savings target usually results in more cash in the bank, more investments or less debt. These wins materially change your finances, put you in front and give you more choices and more freedom in future.
OK, you’re sold on budgeting and tracking. How to track it?
This one’s a bit trickier.
Free options
If your mantra is “if it’s free it’s for me” you can:
- download your spending from your online banking and input into excel
- check out some of the free cashflow apps available on your phone
Pros
The upside is the price. Also worth noting some of the banking apps have these features starting to feed in
Cons
The downside is that the download of banking and input in a spreadsheet is labour intensive. It’s similar to a diet – great idea but it gets old, quickly.
Another consideration is free apps may track and use your data.
Paid options
If you’re happy to pay for convenience, there are some real time savers available.
We use Moneysoft for our clients in the business https://www.moneysoft.com.au/ to great effect – it incorporates budgeting, live data feeds from banking, budget tracking and goal tracking but there are a range of alternatives available – check out this article from Investopedia https://www.investopedia.com/personal-finance/best-budgeting-software/
In summary, if you want to lock in financial success budgeting and cashflow tracking are the foundation.
If you’re looking for more detail, more ideas on budgeting, check this article out https://www.sandringhamwealth.com.au/make-the-most-of-what-you-earn-heres-how