Budgeting & Saving
Two questions I often get asked.
How do I budget?
How can I save?
Tips from this article:
- Be realistic: Set yourself up for success.
- Find a budgeting tool that works for you: There are many budgeting apps and spreadsheets available. Experiment to find one you enjoy using.
- Automate your savings: Set up automatic transfers to your savings account so you are not tempted to spend that money.
One of the most asked questions I get is how do I budget? and how do I save when there is never any money left over at the end of the week.
Budgeting is a word that implies we are denying ourselves but that is not the case. It is more about being aware of where your money is going.
As with everything, the first step is to get started, if you wait for the right mindset, you know what happens!! Nothing. Action, mindset, mindset, action these two forces impact on each other constantly in both positive & negative ways. Collect the data to identify all your income and money outlaid for non-discretionary & discretionary spending.
Once this task is complete you will feel inspired, virtuous and wonder to yourself why it took you so long to get a handle on where your hard-earned money went each week.
Now what to do!
There is not a ‘one size fits all’ approach. It is not like following a recipe where you have a list of ingredients, a method and an outcome.
Explore and discover the best way for you to manage your money. Here are the most common methodologies.
- There are folks who are Excel devotees and there is nothing more exciting for them, than entering all the data, creating line graphs or pie charts, playing with the figures and creating ‘What If’ scenarios…. their nirvana. If this is you then open an Excel spreadsheet, create two columns for non-discretionary & discretionary and start inputting.
- 50-30-20 rule says that 50% of your after-tax income must be spent on needs and obligations that you have to meet, such as rent, utilities etc. The remaining half should then be split between 20% savings and debt repayment and 30% to your wants and entertainment. Depending on where you are in your life and your values, these %’s could change.
- If you are anything like me, I am a tad random so having a strict regime of tracking, monitoring & measuring, well it simply will not work for me. I have used the bucket system for decades. Each bucket is a separate account. [Thank you, Mr Barefoot for popularising this method.
GREEN ~ Automate 10% initially of your net income to your Future Financial Self account
YELLOW ~ Income & costs.
RED ~ Set up an emergency account ASAP! Sell something if you have to, and put between 3 to 6 months income into this account. The sense of security is priceless.
BLUE ~ account is your goals. You can have as many buckets as you require. I have had clients with a separate account for each one of their goals.
Apply a business mindset to your finances
‘Pay Yourself 10% – 20% FIRST.
This is a gem I learned from ‘The Richest Man in Babylon’ by George S Clason.
Automate!! Automate!! Automate!! Trust me you won’t miss it 😊
Let me ask you, ‘When you received your last pay rise of, let’s say 5% did your savings go up by 5%?’
The emotional aspect of Budgeting & Saving
We’ve covered the logical, how to do ‘budgeting’ previously, this article focuses more on the what & why we can sometimes get stuck and not do what we set out to do.
We can find so many excuses not to do our budget or start saving. But what is that really about?
It leads us to the Rules of the mind.
A set of 25 “rules of the mind” are attributed to Marisa Peer and Gil Boyne.
Marisa is the founder of RTT Rapid Transformational Therapy. As an RTT graduate, I soon realised the importance and the benefits of understanding these rules.
The rules of the mind explain how the mind works, and since our minds have control over both our emotions and our bodies, once we understand how the mind works, we can then use our minds to directly influence our emotions and bodies.
“The mind doesn’t like what is unfamiliar.” Remember its’ only function is to keep us alive on the planet for as long as possible, so it really likes what is familiar, familiar is safe! When it comes to changing a habit like doing a budget, initially there is resistance, a lot of resistance. Have you ever experienced the two conversations going on inside your head? That’s what I mean. Budget? You want to do a budget? You’ve never done a budget before!! Besides you have more important things to do like watching the next episode on Netflix…hahahaha!!
Budgeting can definitely feel tricky at first, but it gets easier with practice! The way your mind learns is through repetition. The more you do something the easier it gets. You may remember, the Mantra I use to walk to the Byron Lighthouse “The more I do this the easier it gets, the easier it gets the more I do it 😊. We are making the unfamiliar, familiar.
If you are in a loop of delaying or postponing doing your budget then you are in the throes of ‘Procrastination’. Often, we associate procrastination with being lazy but I disagree. Something is holding you back, keeping you stuck.
When you hear the word ‘budget’ what immediately comes to mind?
Do any of the below comments sound familiar to you?
It’s all too hard, won’t get it right, not good with numbers, it means denying myself, don’t have the time, lack of self-trust, don’t have the energy, don’t know how!!
Sounds painful doesn’t it?
Perhaps, you are on the Financial Roundabout? The more I earn, the more I spend, the more I need. We spend for a reason.
- Competitive Spender – must have what your mates have.
- Emotional spender – feel bad because you have no money and spend on credit to make yourself feel better.
Marketing companies are very good at making us think we must have the latest thing.
That is their job!
Another rule of the mind. “Your mind works to move you away from pain, and towards pleasure.”
Budgeting doesn’t have to be a chore! We must make it fun. The key to making budgeting fun is to find what works best for you. For me it was the buckets method. Experiment with different methods until you find a system that you enjoy.
I remember clearly the elation I felt when I realised, ‘Hey I’ve Got This!! Imagine how you will feel when you have a handle of your money and you are in control of your financial future.
Another Rule of the Mind: In a battle between emotion and logic, emotion always wins.
Here are some steps to get you started:
- Resourceful mindset: Be mindful of negative self-talk.
- Involve your family: If you have a partner or household, get them on board with the budgeting process.
- Be realistic: Don’t set yourself up for failure with an unrealistic budget. Start small and gradually make changes.
- Make it fun: Budgeting doesn’t have to be boring. Find a system that works for you and stick with it.
Remember, the most important thing is to get started. Even small changes can make a big difference in your financial wellbeing.
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It’s your money and your future.
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