La-La-Land

I swore I was going to exercise every day. I was going to get up at six, go for a run, skive off to yoga a couple of times a week. Welcome to La-La-Land, a place I often reside when making plans. It’s impossible to keep up those kinds of schedules, and attempting to will only make your bust-out all the more intense. Be realistic when you write the budget. Don’t lie to the paper, if you spend $200 a week on grog, write it down. Know what you spend the money on, and make small alterations throughout a period of a couple of months to achieve a more balanced budget. Over-enthusiasm can be a killer; gradual change is still the best way to incorporate new things into your life.

All Work, No Play

I am not going to go out this week. No wine, no movies, certainly no breakfasts that spiral into lunch at the cute cafe tucked into the hillside. Sure, theoretically that doesn’t sound like a Herculean task but in reality, you’ll find yourself in a fairly unhappy place should you attempt it. And, probably sooner rather than later, you’ll bust out of the budget and put a dent in all your good, albeit unhappy, saving. Rewards are good, treats are fun. Work out how much you spend on treating yourself, and ascertain what percentage of your budget you would like that part of your life to be. It’s not going to be the same for everyone, and you’re much better off financially if you work out a level that will allow you to stick with a budget for the long-term.

Same Old, Same Old

Life is not unchanging. The exact opposite, in fact. Life is always changing and so will your expenditure every month. Writing a budget that pretends you will spend exactly the same amount of money every month is going to get you exactly nowhere because as soon as you fall down, you’re likely to abandon the entire enterprise. Write a budget that allows for emergencies, and makes allowances for the ebb and flow of expenditure over the year. Have a low-cost November to soften the high-cost December.

Structural Flaws

Some people are anal-retentive. They love keeping their receipts and putting them in little categories; that helps them budget. Others like nothing more complex than essential and non-essential in a big pile. If you’ve jumped ship on a budget, perhaps you’re structuring it in a way that doesn’t suit you. Know your own behaviours, and what methods allow you to stick with things, and incorporate that into how you work with your budget.

So Not 2011

Can’t work out the money keeps going? Instead of packing it in, next time just update your budget. Maybe you’ve forgotten to allow for the rent increase or the new phone plan. Keeping your budget up-to-date is going to make your life so much easier. You’ll be much less likely to bail if your budget is relevant and easy to keep on top of.

Start With After Tax

It’s all very interesting to look at your paycheck and see how much money you are ‘losing’ to tax, but in the end of the day, it’s not going to make any difference to your budget. Work out how much income you have after-tax, and write it at the top of the page, probably with a big black pen to keep you on-task.

50%: The Must-Haves

Cable TV subscriptions don’t count. Rent, utility bills, school fees, groceries, insurance- these things are necessities. Some things straddle the line- for instance, I need my phone for work but I probably can’t count all my roaming charges for when I check my facebook. Internet access is a similar thing. If something can be delayed, then it’s probably not a necessity. My new jeans for instance. My phone bill, on the other hand, isn’t something I can really avoid- though I would love to taper down the costs over the next couple of months. For me, keeping my must-have expenses to 50% of my income is pretty tricky. I’m not a particularly high earner and have a lot of business related expenses, so to truly implement this budget, I would need to think long and hard about what truly constitutes necessity.

30%: The Wants

Finally! A budget that appreciates that having a good time is still allowable, even while being financially responsible. In this form, 30% of your budget ca be spent on wants. Dinners out, new clothes, a more expensive phone plan. These things are wants, and have an important place in your life. Keeping your expenses to 30% will keep you financially on top. Once you’ve spent it, it’s gone. You’ll have to stick to must-haves until your next pay check.

20%: Savings And Debt

The great part of the budget is that you can accommodate your particular circumstances- if you have no debt, that 20% can go on savings. If you’re struggling to pay it off, you can focus a little heavier on repayments. 20% doesn’t seem like a whole lot of money to be putting towards paying off your debts, saving for retirement, and bolstering the emergency fund- it can have the appearance of being quite a small amount of money being asked to do a huge number of things. But while 20% might not seem like it will get you anywhere fast, it’s a consistent number that won’t ruin your life in the process. The most important thing in saving- like eating healthily or getting to the gym- is being able to build into your life so it can stay in your life on a permanent basis.

Creating A Budget

We should all know how to do this, but somehow I still have months in the red so it never hurts to refresh. Even if you have a budget, sit down and write down your income. Have a spouse? Write down their income as well. In the next column, write down all your fixed monthly expenses. Rent/ mortgage, insurance, debt repayments, gym membership, electricity bill. It’s easy to forget them, so make sure you have a comprehensive list. Next, pull out your bank statement and receipts and find out where the rest of your money goes. Groceries, entertainment, subscriptions. It will probably be shocking. Potentially you should buy some chocolate before you start this. Now do the sums- you’ll see if you’re in the black or in the red, and probably some areas you can improve upon.

Dig Deeper

The first swing at your budget might be good, but if you can track your spending for a month, you’ll be on fire when it comes to the revised budget plan that definitely needs to happen one month in. Bad spending habits usually stem from thoughtlessness, and the process of writing it down will help you both track your money and stem the tide of spending as you are more conscious about where the money goes. Use whatever tool helps- internet, pocket book. I like iPhone apps, I can update them all the time and they sync to a website. Pocket Money is a good simple one, or Mint is comprehensive. Bundle is meant to be a great online tool, although I have yet to check it out.

Cull

You don’t necessarily start a budget expecting to cull some of your outgoings, but once you see what’s happening, it’s a certainty that you will. Eating out- even including the 3pm chocolate bar from the servo- is often the first thing to go. Cull according to your goals- living within your means, saving an extra couple of hundred a month, having more of an income for travel. Wasted money- money spent without thought on things that bring brief enjoyment- is glaring once it’s on paper, so cull away until you are happy with where your money is heading.

Revise

You’ve got the basics, and should start to see improvements. I would suggest revising the budget at the one month mark, and then every three months after that, pretty much religiously. If you’re using a tool, make sure you update it every time you get an extra income strand or regular expenditure. Revising will help you tighten or loosen up your budget according to your needs, and to check any unnecessary costs. A budget is no use to you if it’s out of date, so make sure you keep it current. You’ll find often that a budget allows you to afford the things you really want and to save money on the things you don’t necessarily like all that much- meaning that while it might seem budgeting is about misery, it will actually improve your enjoyment of life. And- with an absolute guarantee- it will improve your bank balance.

The Nuts And Bolts App: Pennies

Pennies is beautifully designed. If you think that’s not important, spend some time trying to navigate a poorly designed app and you’ll realise how crucial a straightforward concept is. This is the nuts and bolts of financial apps, an expense tracker. Enter your monthly budget, and then start adding your expenses. It will save the expenses that occur most frequently, so after a while, the entering process is a breeze. The fuel gauge on the opening page will show you whether you’re doing well or about to run on empty for the month.

The Integrated App: MoneyStrands

MoneyStrands is a well-developed website, that has an equally thorough iPhone app that syndicates with the website. Meaning that you can update your phone if you’re on the road, and balance it all online once you’re home. This app is no holds barred, and it sends you alerts early in the morning should you require them. Useful, but not always the most appealing way to wake up in the morning. With reminders for upcoming bills, spending plans and multiple account information, it’s like a financial app for the anal retentive.

The Hole In One App: Pocket Money

Pocket Money is deceptively simple. Two pages, one for accounts, one for bills. One of the advantages of this app- the app I plan to invest some time in setting up properly- is that it has detailed help instructions that guide you through using it’s features. It’s easy to navigate, incredibly comprehensive and allows you to set up all your repeating transactions and keep track of expenses and additional income sources. In terms of a holistic app, this is the one I’m setting my money on for the time being. It might take a while to enter all the information but, in the end, you want an app that is as thorough as possible to save on time when entering information later.

The Steady Investor App: Bloomberg

I’m no investor, but word on the street is that this app is a winner if investment and portfolios are your thing. It’s the best possible price- free- and has a variety of investment –related tools and portfolio tracking. You can even get audio news on it. If you were vaguely interested before, obsession is potentially your destination now.

The Grand Dame App: Mint

Mint has been kicking around online for a long time now, and their iPhone app shows all the advantages of having been in the game a long time. It does everything that common sense would dictate it should- automatically enters transactions, sends alerts for over budgets and gives you a virtual iPhone kick should you be over-spending. Again, the design is clean and sensible, and it’s fairly easy to navigate. It’s like having a good conscience on your phone. Patiently adding your expenses throughout the month will allow you to control your money, and improve your savings and debt repayment strategies.

Whilst I spend hours upon hours reading literature on budgeting, investing and saving money I still lack the self control to say no to a post Christmas sale. Even though it is rare that I spend any more than $100 in one hit, it is horrifying to see how many of those small splurges I have had over the space of 2 weeks.

This year I have decided, it’s time for some harsh reality. No more ‘oh I’ll just put that on my credit card’ or ‘I’m sure I can find a way to afford it’, because the reality is and has been for all of the year that I have been living way beyond my means. I cannot describe to you the fear that is instilled in you when you can’t find a spare $250 to pay for 3 months rego and you have to choose between catching public transport or driving illegally.

Even though I have a budget spreadsheet, which I do stick to and try to make every cent stretch, there is always one or two things by the end of the week that I simply must have and ‘accidentally’ left them out of my budget.

Then in the following month I have to dodge the phone calls from my credit card company trying to let me know my card is over the limit/ overdue. This year it’s time to be honest, starting with myself and then my creditors.

If you have ever found yourself in the same boat or are getting close, let it be your new year’s resolution too, to face some facts about your finances.

Fact: paying only the minimum on your credit card could mean a lifetime of debt!

Did you know that a $5000 credit card at 19% interest will take 653 months to pay off if you only make the minimum payment each month? Not only that you will pay interest of nearly $18,000 over that period and that’s provided you don’t any other purchases on the card during that time!

Fact: All those little purchases add up!

I opened my utensils draw on the weekend to look for a potato masher and found three of them, not to mention six pairs of tongs, three ladles, four serving spoons and much, much more. Setting the contents of the drawer out on the kitchen bench I realised I had spent nearly $50 on items I already had duplicates of, why, because I can’t say no to a bargain.

So this year I am committed to no impulse buying and the best way to prevent it is to do a thorough clean of the house and a little mental stock take to avoid double purchasing in future. However, if your memory is like mine, then maybe write it down room by room.

Fact: Having a fancy car does not make you more attractive…except to the debt collectors

I’d been zooming about in a $1,000, 17 year old car for 12 months, sure it was work – I was topping up fluids daily and servicing at home every 3 months, but the fact was it cost me $1,000 and maybe $100 of maintenance each quarter.

About 6 months ago my partner told me he didn’t want to see me driving around such a heap every day and that I earned good money and deserved to drive something much nicer. For a weekend, I agreed. Unfortunately for me, that weekend I also signed up a finance contract for 5 years and bought a 2 year old wagon, which I have to say is much nicer than the old car, but I was also hit with $700 stamp duty, $800 rego & greenslip, $300 loan establishment fee and now pay $300 a fortnight in repayments for the next 5 years.

For my last service I had to take it to the mechanics to maintain the warranty and it cost me $300. Suddenly having a nice ‘new’ car wasn’t looking like such a great idea. Needless to say a contract is binding so unless I want to pay an early repayment fee, I’m stuck with it for the next 4 ½ years. Lesson? Cars depreciate at an alarming rate and one of the biggest drains on your finances second to your mortgage. So as long as it gets you from A to B, does it really matter if it has a sunroof?

Walk it off

Exercise is a fantastic way to give yourself a natural boost of endorphins – the happy chemicals in the body. Get outside for a run/walk at least once a day or anytime you find yourself feeling stressed about your finances. Best of all it doesn’t cost anything so it won’t add to your worries.

Imagine

Whether you’re saving for a holiday or new car or just trying to clear the credit card debt, it can seem that the end is never in sight. Take five minutes out of your day, either first thing in the morning or before bed at night. Visualise your goal, imagine the feeling of relief/ enjoyment you will receive as a result of reaching that goal and meditate on those thoughts.

Surround yourself

Visual reminders of your end goal can be subtle, but the effects can be invaluable in reducing budget blues. Above my desk at work I have a picture of the new car I want to buy next year. Every time I decline a lunch invite or say no to coffee with a friend, I look at my photo as a reminder of why I’m doing all this. It’s not quite the same as the caffeine hit, but it makes me feel better!

You are still entitled to spoil yourself

Small rewards can come in numerous forms. My personal favourite is a pack of caramel tim tams for the week (although sometimes they don’t make it past Tuesday). Set yourself a small budget of no more than $10 for the week that allows you to buy yourself a small reward for sticking to your budget. It could be a magazine, ice-cream, a couple of coffees at work – whatever tickles your fancy so long as you make the mental link that the reward is for sticking to your budget. If you blow the budget there’s no reward, put the reward budget back in to the weekly budget to account for some of the deficit.

Vent

Talking about your stress can be a good reliever, as long as you know the difference between venting and being a whinger. Choose your moments to vent, if everything that comes out of your mouth is “oh I have no money,” or “it’s soooo tough being on a budget,” that’s whinging! Choose a good listener and go for a coffee, or speak to a counsellor, there are many free services offered for debt counselling. Getting it off your chest can certainly help you get on with the budget.

Net, Not Gross

I like looking at my gross pay too. Generally, it makes me full of despair, to think of those extra couple of dollars that disappear every hour. What I could do with those dollars right now!
Wishing doesn’t make it so, and using anything other than your net pay (the amount of money you get in your hot little hands at the end of the month) isn’t doing anyone any favours. It’ll also throw your budget into disarray.

Monthly Buzz-KIllers

Now you know what you earn, find out what you pay. I live my life in constant shock at where the money goes, and am now resolved to find out for myself. Write down everything you spend money on in your diary for a month. Then add up all the costs, and you’ll have the basis for a comprehensive idea of where you are spending money.

First, write down the non-negotiables. Rent/ mortgage. Food. Bills. Transport. These must be covered. Savings, and debt repayment over the minimum get sorted next. Now you know how much money you will have left at the end of every month.

Red Or Black

Your first budget is going to stare you in the face with some rather personal knowledge. Either your expenditure is lower than your income, and you are living a cheerful existence in the black, or it is higher and yours is a life of red. So here’s the part where you start changing things. Look at your expenses, try tracking them over a couple of months. What, for example, is your entertainment budget, and what would you like it to be?

Try curtailing your spending, to either get yourself in the black (in the first instance) or increase the amount of money that you can save.

Budget For Life

Budgeting as if you are going to spend the next year in a cave isn’t really going to work. Don’t end your social life as you know it, just alter it a little to encompass the new, financially leaner you. If you love the movies, go on cheap nights. Budget to buy lunch once a week, as opposed to living in a fantasy world where you never eat out again.

Monitor

Now that you’ve written a budget you can relax, right? Yeah, not so much. Track your budget over the next couple of months. Life changes, circumstances are rarely static, and so too must your budget be. If your budget is unrealistic or too lax, alter it to reflect your circumstances. Don’t neglect to re-budget when you get a pay raise or buy a house and have suddenly got a new level of debt.

Try and increase your savings percentage when you can. Keeping a spending diary is never going to hurt, and there are loads of online tools that can print you off very pretty little graphs if you should so desire.

Things don’t always work out that way. Having a poorly developed or unrealistic budget is realistically going to have little effect on your finances. So don’t invest the time and money into something slapped together- here are some tips to make your budget watertight,

Downsize

Everyone should have a budget, but somehow they’ve become a little like our approach to keeping healthy. Instead of everyone eating healthily and exercising, people don’t eat carb for a week or exist solely on egg whites. Budgets, and financial wellbeing, follow the same track. People tend to ignore the slow and steady and instead budget to spend $5 a week. It’s never going to work. Understand that the best place to start a budget is in the fundamentals- you must spend less than you earn. That’s it, simple. If you can cut down your expenses to be less than your income, then you’ve made the most important first step.

Get Committed

Having a budget is a lot easier to live with if you know why you’re living with it. Sick of your boring job? Need some improvements on the house? Want to get 100% debt free? Whatever your long-term ambition may be, make sure your budget centres on it and how it can be achieved. That way, when faced with the temptation of takeaway or buying a DVD, you can remember why you’re budgeting in the first place.

Get It Down

I can’t emphasise this one enough- until you know what you spend, you’re unlikely to have a realistic budget. Where is your money going? Keep a daily diary of everything you have spent and earnt. Once you know, you can see areas where you can afford to cut back and make savings from without being unrealistic. Don’t go overboard; just make necessary, realistic cuts. If you find you still have room to move in that area a couple of months down the track, then trim it again.

The 5% That Counts

Being in it for the long-term means you can afford to do things properly. So, start with the 5% rule. Instead of refusing to ever go out or see a movie, cut down your entertainment expenses by 5%. Live with that for a while, see how it goes. Then cut it by another 5%.

Repeat the procedure, until you’re saving reasonable money but don’t feel as if you’ve entered purgatory prematurely. If you can find a comfortable balance, you’ll find it easier to live with it long-term.

Emergency

The thing that’ll scuttle your budget pronto is if you have no emergency allowance. Sure, you can put money away in a term deposit and feel like you’ve achieved but then someone gets sick and you need to put all the medication on your credit card. Or you lose your job.

Then you end up right where you started- in financial difficulty, with increased debt. Don’t make life harder than it needs to be. Set aside some of your savings every week into an emergency fund. Your financial wellbeing will skyrocket.

If I don’t want to do it, I’ll invest a lot of time in working out any way that I can do it more quickly and with less pain.

This list is made up on ten tricks that will make your life a bit easier without detracting from the quality of your budget.

1. See the big picture

Visualise what you want to achieve with your budget. Get some post-it notes and stick it up around your room, in your wallet, on your youngest child’s forehead- whatever. If you remind yourself what you are aiming for, you’re more likely to stick to the budget.

2. Get into the day by the day

Note down what you’ve spent every day, including the sneaky coffees and guilt Kit Kat. Don’t shirk from the truth, and write it down every night before you sleep. Knowing what you spend is as important as projecting what you need to save,

3. Reward thyself

Make allowances, you’re not superhuman. Set aside a little bit of money, and reward yourself with it if you stick to your budget at the end of week or month. It shouldn’t be a lot of money, just enough to feel good about what you’re doing and reignite your purpose.

4. Have no money in your wallet

If you leave large amounts of money in your wallet, you’ll be more likely to spend it. Put as much as you need every morning (bus tickets, groceries) and you’ll find you spend a lot less money if you’ve got none on you.

5. Don’t go rounds

Friday drinks after work are fantastic, but they will sink your budget very quickly. Instead of becoming a social pariah, just refuse to go rounds. That way you can sit on a drink without any pressure, and have a cheap night. When researching this article, someone suggested that you just should leave before it’s your round. While it certainly would help you stay on budget, it won’t help you with your mates.

6. Sell the flotsam and jetsam

Clean out your house, and sell everything you need. Incorporate the extra money into your weekly budget, and resist the urge to buy more junk to replace the stuff you’ve just discarded.

7. Late afternoon discounts

Coles late at night will always have discounted bread, green grocers will have cheaper fruit and vegetables on a Sunday afternoon. Staying on budget is about frugality, so work out where you can find the necessities cheaply.

8. Stay centered

Beating yourself up because you’ve gone over budget isn’t going to make the problem go away. Punishing yourself with an extra stringent regime will only make the splurge all the greater. Stay realistic- budgets get blown out on occasion. Staying sensible is an important part of staying on budget.

9. Cheap nights

Cheap luxuries are as important as cheap necessities. Tuesday nights at the movies are cheap, as are gigs for up and coming bands. If you’re having a night out, search out the cheaper versions.

10. Revisit

Budgets are only effective if they accurately represent your financial state. Revisit your budget regularly to ensure that you’ve accurately accounted for your income and expenditure. Don’t use a three-year-old budget if you’ve changed jobs and had a child in that time. It won’t work. Revisiting your budget is an effective means of sticking to it.

What tricks do you have to stay on budget?

Tell us below!

That pretty much cuts all of my nightly activities, so I’m on the search to find myself a nightly ritual for the half an hour before I get some REM action.

Here’s what you’ll find me doing before beddy-byes from now on.

30 minutes before bed

Toting up my day, in financial terms. This means adding all my expenditure into my financial journal (without sparing details about the chocolate purchases or the taxi that I caught due to extreme sloth and wet shoes), and making any necessary alterations to my income in the journal.

I’m a pen and paper kind of girl, but if you like computer versions, maybe check out the Savings Guide Budget Spreadsheet.

If you don’t need bells and whistles (or don’t like giving up passwords to your bank accounts, which is a fair concern) maybe Excel is the simplest way to enter your financial details in your computer.

Make a note of when bills need to be paid. It’s not necessarily a pleasant experience just before bed, but if you haven’t gotten to it earlier in the day, now is the time to pay the bills that are due.

25 minutes before bed

Comparing my expenditure with my budget, and making the necessary alterations. Again, online tools are great in that you can automatically make changes, instead of the scribbling that are required with pen and paper.

Knowing your finances intimately is key to improving them. Making sure you’ve checked your budget reflects your actual day-to-day financial dealings will mean your budget is realistic and there are no lurking nasty surprises.

20 minutes before bed

If you find some savings between what you’ve budgeted and what you’ve spent, save them.

Put spare coins in a piggy bank, a surprise $50 into your savings account or pay off a little bit of your credit card.

This doesn’t have to be a part of every day, but constant reminders that you are making advances will keep you determined and motivated.

15 minutes before bed

Get up and move about. Check that your appliances are off, not on stand by, and save yourself on electricity costs. Turn appliances you don’t use often off at the wall, and disconnect the cord.

Make the preparations for the next day; they may seem trivial now, but will save you having to make emergency purchases. It’s the little things- like bottling and refrigerating your own water. If you never have time to make lunch in the morning, then make it the night before so all you have to do is grab it and run in the morning.

10 minutes before bed

Now is the time to find some Zen. You may scoff, but research about the benefits of ten minutes of mediation a day shows that it reduces your stress and makes you healthier, all of which ups your happiness levels. On top of which, it’s the perfect way to drift into the land of sleep.

What are the benefits for your finances of meditation?

It’s free and it helps you to make decisions, free of the usual distractions of stress and anxiety. If you want more reasons, this is a good list.

And on that note, off to bed I go!

What are you daily money rituals?