How do I go about creating a basic budget? Should I look at my budget spending over a week, a month, a year, or my pay period? When I've created budgets in the past I've gotten very granular, and then it seems like so much information it is difficult to find ways or places to cut back... How can this be simplified? And in terms of sticking to a budget, do you have any recommendations for how to do this?
Cybelle in Brisbane, Qld
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It is great that you would like to stick to a budget and unfortunately sometimes it does take a few attempts to get it right. The idea is to not over complicate things and make it realistic while also being achievable.
If you have a partner- you should both be on the same page about what you are both hoping to achieve and what your short, medium and long-term goals are. Once you identify this you can start setting yourself savings goals so that way the idea of budgeting has rewards along the way.
For example, a short-term goal may be saving for an end of year holiday, a medium-term goal could be upgrading the car and a long-term goal could be the purchase of a property. I find that clients are sticking to their budgets this way and it holds them accountable as not sticking to the budget will result in not achieving your goals.
Regarding how you should be planning this out - Everyone has their own way although in my opinion using your pay cycle to start off with is best as you know what money is coming in and you can then allocate money to rent/mortgage, bills, savings, lifestyle.
Saving money should take priority over your variable expenses and preferably putting this in an account which you don’t have online access to will make it harder to dip back into (remember, choose an amount that you are comfortable with saving and won’t be required for your expenses).
A budget should be realistic so if you are spending $400 month eating out, going to the movies once a fortnight, Friday night drinks and drink or smoke, why not look at spending $200 a month on eating out, go to the movies once a month as a treat, keep Friday night drinks for the odd occasion and cut down on buying that extra bottle of wine or pack of cigarettes during the week.
You should regularly check in to see if what you are actually spending matches up to your budget and this can be done through apps or tracking things yourself.
To recap, a budget should be realistic and should cover your fixed and variable expenses accurately in terms of what is realistic. Once you start hitting your short-term goals, you will be more inclined to keep this momentum going and continue the good habits you have picked up along the way and continue saving.
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