It’s killing you that no matter how many times you try, you can never stick to a budget. Don’t stress, you’re not a financial failure. You’re a human.
If you’re reading this, chances are you’re not a ‘numbers person’. Or maybe you are and you still can’t still to a budget. That’s because budgets are usual finicky and time consuming and basically boring enough to ignore as often as you can.
It’s not your fault you find budgeting such a chore. It’s the budget’s fault.
Fact is, most budgets aren’t nice. They demand endless number analysing and inputting and tracking. So much budget tracking.
Which leads many of us to assume that since we hate numbers, we’re destined to always be slightly stressed about our finances. We’ll never get on top of our money. We’ll never save enough, invest enough or budget enough.
The simple way to stick to a budget
Relax. Despite evidence to the contrary, learning to stick to a budget doesn’t need to be so complicated or so difficult. Or so numbery.
Instead, try this simple approach that helps you move your money to where it needs to go, so you don’t need to be so rigid about it all. You take care of the big dollars up front so you know they’re covered. What you do with the little dollars doesn’t matter so much.
Keep in mind that at every step, it’s worth seeking advice from a financial adviser to help you figure out exactly where you’re at.
1. Know why you need a budget in the first place
You’ve got financial goals, right? You know how much money you need to buy your first home or retire how you fancy? Or even enough money to pay the bills each month without resorting your credit card?
If you don’t have any, it’s fair to say you need financial goals more than you need a budget. Not knowing your why might be the fundamental reason why you can’t stick to a budget. A few questions that can help you figure out what you need your money to do for you:
- What kind of lifestyle would make me feel content?
- How much money will I realistically earn next year, in five years, in 10?
- What lifestyle do I want next year, in five years, in 10?
- Are there challenges ahead that I can anticipate and prepare for?
- What future do I want for my children? My parents? My community?
- Do I want to contribute money to others?
- What age do I want to retire at and how will I fund it?
- What do my retirement years look like?
Once you’ve worked out what your big plans are, you can take steps to fund them.
2. Finance your financial goals first
While it may seem counterintuitive, money works best when you finance your future self first. So, once you’ve figured out your goals, work out how much money you need to set aside each month to reach them.
This might involve setting money aside to top up your super, pay off a debt, fund your kids’ education, add to an ETF, pay down your mortgage, or build your emergency fund. In all of these cases (and any other future you plans), you’ll be taking money out of your everyday account and putting it to work elsewhere. The main point here is that you can start to look at long term savings and planning as putting money ‘towards something’, not ‘giving up’ something in order to save.
Be realistic about your dreams. Your expectations at step 1 will have a flow on effect for all the other steps. What can you realistically afford to put towards your future without making your present difficult? Don’t make the mistake about putting away nothing, of course. You want to be consistently saving something, anything, not matter how small.
Once you’ve pulled all the money you need from your everyday account, what’s left over is what you have to fund your bills.
3. Pay your bills
Everyone has ongoing bills they need to finance each month. Whether you think you can stick to a budget or you can’t, those bills still need to be paid.
Eventually, though, you’re going to have a set amount you need to pay in bills every month. Work out how much that’s going to be then keep that money in your everyday bank account. Add a small buffer so your direct debits can function smoothly regardless of any monthly bill fluctuations.
Once you’ve allocated your bill money to your everyday account, what’s leftover is what you have to fund your lifestyle.
4. Be realistic about your lifestyle
You may want to live a luxurious lifestyle, but can you actually afford it? Take a good look at the money left after your goal and bill money has been allocated. Right now, what can you afford to eat and what can you afford to do?
The reality is that what you have to live off is what you have to live off. There’s actually no ‘budgeting’ involved. This is why it’s so important to move money out of your everyday account first. If you can’t see it, you can’t spend it.
You’ve allocated your money where it needs to go and what you have leftover means you can either afford something or you can’t. That might mean choosing a less expensive restaurant for a weekly meal out, or it might mean you can only dine out once a month, or it might mean a takeaway treat instead.
At this point, it pays to save money wherever you can. These 101 frugal tips to help you live a richer life will be your best friend here. They prove that you can cut plenty corners and still live a luxe life.
If you can’t afford something right now, but you still really want it, add it to your financial goals in step 2 above and fund it over time. Only you can decide what you really need and what you merely want. No one else. But in the same way, only you can decide to live within your means, no one else.
If you do all that and you still don’t have not enough to live on, you’ll need to go back to step 1. It’s one thing to dream and quite another to fund those dreams… what you put away at step 2 will have a knock on effect for what you can afford to live off here at step 4.
Once you’ve figured out your everyday spending, you can move towards keeping it in balance.
5. Keep things in balance
At this point, if you choose to keep spending money you don’t have, that’s not you being unable to stick to a budget. That’s you deliberately jeopardising your present self, future self and general peace of mind. Talk to a financial adviser about how you can sort your money mindset out.
To get things into balance, you either need to reduce your expenses (see step 4), reduce your future financial expectations (see step 1), or figure out how to bring in more money.
Remember, any tweaks you make now aren’t necessarily for life. At any time you can go back to your financial goals to assess whether they are still working for you. Just remember, whatever you change at step 1 might make things a bit easier right now, but it won’t work if it’s at the expense of making life easier for you for many years to come.
This article contains general financial information only. It should not be relied on as finance or tax advice. You should obtain specific, independent professional advice from a registered tax agent or financial adviser in relation to your particular circumstances.