Learn how to budget

When it comes to budgets there are endless tools, apps, websites and other resources that are supposed to make it easier. You can even pay subscription services to track your spending and provide you with regular reporting.


I've done a fair bit of work helping my clients with budgeting and I found it could be difficult to keep the costs low, the information accurate and inspire behavioral change. Having two out of three won't get results.


I would like to share with you what works for us and our clients so that you may be able to motivate yourself into good spending habits.

• Leverage off electronic banking - The problem with cash is you have no record of what you spent your money on unless you keep receipts and lets face it not many people do. By leveraging off electronic payment services such as eftpos we can then use our internet banking for full spending records.

• Categorise 3 months of your Income and Expenses - Using your internet banking go through and categorise three months worth of your income and expenses. I found three months gave a pretty accurate number as it averaged out your employment income and included quarterly expenses such as rates and electricity.

• Compare equal payment frequencies. - Everything is relative. I like to annualise spending over a year, a month and week/fortnight. It is easier to understanding your spending habits that way. For example has it ever annoyed you how expensive your electricity bill  is? How does your fast food spending compare quarterly? You know how much you spend on your phone bill every month so how does that compare to your alcohol spending?

• Look for your biggest luxury expenses - Generally these will have the most opportunity to cut down spending and start saving. Give yourself an allowance for these expenses but try not to go over your allowance.

• Use bucket strategies - I am a big fan of bucket strategies. After creating your budget you will know exactly where your money is going, how much money needs to be spent on Mandatory expenses, Discretionary expenses that you can cut down on and Luxury expenses you can allocate an allowance for.

• Keep it simple - Try not to over complicate your budget or optimise it too much too early. If you try and squeeze every saving out, limit yourself too much or keep blowing your budget you are likely to revert back to having no budget at all. Remember we want to change the way we think about money and how we spend money to positive experience.

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This post contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information