Budgetting doesn’t come naturally to most of us. For those of you who struggle (like me) here are some tips on budgetting that have helped me.
Budgeting your spending can be really hard. It’s not something that comes naturally to most of us. And so, I wanted to give you some tips on budgeting your spending. These things have worked for me and they may or may not work for you. Hey, I’m Ryan from onproperty.com.au, helping you find positive cash flow property.
One of the things that people tell me that consistently holds them back from investing in property is they don’t have the ability to save a deposit or they don’t have a big enough deposit and they’re in that process. Budgeting and saving a deposit can be really hard. So that’s why I wanted to create this episode to just give you guys an idea of how we do it, which is far from perfect, but it may suit you.
The reason that i wanted to share this is because a lot of people out there will lay out one particular way of budgeting and say that, “this is the best way to do it”. Most of the time, it’s you set your weekly budget or monthly budget or whatever it is. You section it off into little portions so you’ve got $20 for entertainment. You’ve got $10 for coffee. You know, you’ve got $50 for groceries, whatever it may be. $50 for grocery is not much when you have 3 children, you tell me.
Especially one who’s gluten and dairy-free and you have to spend $9 on a loaf of bread to buy nice gluten-free bread. Anyway, most of them just teach that and say that that’s the way to do it. Me and my wife tried that. We even tried putting cash in separate envelopes for each individual thing, like entertainment, coffee, etcetera, and it was just so painful to deal with. It just didn’t suit us at all. So we found something that suits us and I through it’ll be helpful to share these with you.
First thing I’d like to say is that if you’re trying to save a deposit or if you’re trying to pay off debt, I do believe that there is great value in doing that first. So when you get paid, whether it be weekly, fortnightly, monthly, whatever it is, take a portion of your money first and put it towards savings or take a portion of your money first and put it towards paying off debt before you start living out the week, before you start spending money. And then, once you’ve done that – so you’ve saved or you’ve paid off debt – it’s then your goal and your task to try and live off the rest or to try and make more money so you can afford to live off the rest.
So that is an option, to actually try and make more money so that you can afford to live more comfortably even though you’re saving. So this is something that we consistently do – is that every week, when we get paid, some money goes aside towards savings and things like that and then we have to live off the rest.
So let me just start with that. So, the thing that we have found was helpful for us is basically, the first step we did was to calculate all our regular monthly expenses. So, we’ve got things that we have to pay every week, like rent for our house. We’ve got things like our phone bills, internet, insurances, all of that sort of stuff. We pay that stuff monthly. So, basically, we calculated how much we had to pay monthly in terms of those bills. And we then worked out, “Okay, how much do we have left over that we want to spend each week?”
So we earn X amount, we’ve got these monthly expenses, and then it’s kind of a balancing act for us between how much do we want to save or use to reduce debt versus how much do we want to put towards our lifestyle and things like that. But once we got the monthly expenses out of the way and they’re kind of taken care of out of the pay, then comes the working out how much we have to spend weekly. And we found it really useful to set a fixed weekly amount of money that we have to spend. And so, each week, we get X amount of dollars in order to spend on our life.
Now, this is after all the regular bills have been paid. So our phone bill’s been paid, our rent’s been paid, our internet’s been paid, all that sort of stuff has already been paid. And whatever is left over is stuff that we have to spend on things like groceries, coffee, eating out, going on dates, buying furniture or rugs or whatever it may be. And so, we have a set, fixed weekly amount that we have.
But rather than do what most people recommend is that we divvy that up, is we are flexible in terms of how we spend that money. And we have found that we need to be flexible because we’re not the type of people that can say, “I’m only going to spend $20 eating out this week.” because we might have one night where we’re just not feeling up to cooking, and so we want to eat out. And so, we’re happy spend more eating out that week and we’ll then buy less groceries or we won’t go out for dinner as a family or something like that because we got take away one night. Do you know what I mean? So, we got X amount of money.
Sometimes we spend more money on groceries for the week. Sometimes we spend it on beauty products for my wife. Sometimes we’ll buy a TV for me. I play an old game and I need an old TV so sometimes I’ll go out and spend $50 on a TV or something like that.
And so, what that allows us to do is live our lives the way that we want. We have some flexibility to how we spend our money. We don’t feel trapped by our budget, but we know what the ceiling is. We know what we have to spend and we need to be careful to stay within that range. So, we’ve found that very useful to us. There’s an app on your iPhone – I can’t remember what it’s actually called.
It looks like a little wallet and it says “spending” on my home screen. I don’t remember what it’s called, but that allows us to input different transactions on different categories. So we can go ahead and put in an expense. I kind of wish I linked this up to the computer to show you. But we can put an amount in.
Let’s say we spent $20 on eating out and entertainment. I hope you can see that. We use that and then each week, it tracks it and we can go back and we can look how much was spent, what was spent money on. How much are we spending on coffee? And then we can review, “Okay, maybe we should be spending less on coffee each week and we can save $20 here or there, etc., etc.”
So, that’s what we do. We have a set weekly budget. We spend it on whatever we want, but we track it so we can look back and say, “Okay, what are we spending money on?” And so, then when it comes time to reset the budget, we’ve got a better idea of what we’re actually spending our money on.
We also found it very useful to look at our finances daily. We find that when we’re not looking at our finances regularly – daily is probably over top, maybe every couple of days – but we find if we’re not tracking it, not looking at it closely, then we’ll go over our budget quite easily. So if we’re not paying attention, we’re not being conscious of it, then we forget about it and we overspend. So, keeping track of our finances daily is very important.
We also found that communicating with each other about the money is really important as well. So, for example, if I want to spend money on something that week, then I need to talk to my wife about that so that she can adjust what she’s spending. Because we find that if we don’t talk to each other, we both look at the budget and see there’s X amount of dollars left, “Oh, I can afford to spend $50 or $100 here.” but then, she’s thinking the same thing and she does the same thing. She buys clothes, generally it’s for the kids.
I might buy something, I don’t even know what I spend my money on sometimes. But you know, I might buy a new hard drive or something or some headphones or something like that. Yeah, so if we’re not communicating and we don’t know what each other is doing, then we’ll tend to overspend. So very important that we communicate with each other about what the week looks like, what we want to spend our money on and come to a compromise and agreement on what we spend our money on. And so, communicating with each other is really important.
That’s the process that we use. You can try it. It may work for you. There’s a lot of people out there who tell you how you should budget – you should do this, you should do that, you should follow this exact formula. I’m not going to say that because I think everyone’s different in the way that we all approach money is different. Some people love being structured and having that structure to their lives. For us, we don’t.
We can’t handle that. We feel like it just makes our lives of a poorer quality. You can tell from us, we’ve moved like 14 times, or something in the last 7 years since we’ve been married. So we like to be spontaneous and to do things and to feel trapped down by our budget doesn’t help us. So this way, we monitor our spending, but we don’t feel trapped by it.
So it may work for you, it may not. I wish you the best in your budgeting. I hope that this has been insightful to you. And I want to leave you with one last thought. And that is, you can have anything you want, but you can’t everything you want. So, I’ll say it again, you can have anything you want, but you can’t everything you want.
So if there’s something that you really, really want, you can probably have that, but you may need to sacrifice other things to have it. So try and find out what’s really important to you so that you can get the things that you really want and be willing to sacrifice the things that aren’t as important to you when it comes to your budgeting so you can save and move towards your goal of buying investment property.
I wish you the absolute best. This is it for me. Until next time, stay positive.