My simple budget + guide
I’ve never been a good saver. However, it wasn’t until last year that I realised why – I’d never really been taught how to save money. I’ve found that saving isn’t simply chucking some dollars into a bank account. For me, it has required a change of mindset when it comes to how I allocate and use my money. Of course I didn’t know any of this until I sat down with Google and tried to understand money, particularly my money, better.
Quick note: I know that some people can’t work and that if you do, everyone earns differently. What I can do with my money isn’t always possible for other people. This guide is simply the steps I took to set up a budget and how I tried to keep track of my spending.
What’s the best money advice you’ve ever been given? I feel like, as Kiwis, we’re severely lacking in knowledge when it comes to our finances. We know that we should save, that we should have a budget, that we should plan for our retirements, but how do we go about it? I, for one, had no idea. However, it turns out that having nothing in the bank (of knowledge) is not a terrible place to start.
Starting with nothing – your budget
I realised I needed a budget after two incidents – 1) I had to urgently see a doctor and a dentist within the same two weeks, and 2) I read some scary news articles about how much you should have saved by the time you’re 30 in order to have a comfortable retirement. The first one took a big chunk out of that month’s disposable income and I started worrying about unexpected medical costs. I’ve had good health so far but you never know if that’s going to change.
As for retirement, suffice to say I did not have the savings that the news articles said I should have by now. They gave two lifestyle budgets for retirement – absolute basics and a ‘choices’ budget, which allows you to visit a restaurant or cafe every so often. We know now that superannuation in NZ is unlikely to cover all of our living costs, so it was scary to think that if I didn’t save anything now, my elder years were probably going to be pretty grim.*
So, I hopped on Google, like any good millennial, and asked the basic questions – ‘intro to budgeting,’ ‘budget template,’ and ‘how to budget.’ This is what I learned.
1. Start with a budget template
When you have no idea where to start, start with a template.
Some of the budget templates I found online were really detailed or included categories that weren’t relevant to my life (i.e. kids). I ended up choosing a template that covered the basics and was easy to follow. I could add or take away categories once I better understood where my money was going.
Here is a budget template based on the one I’ve used successfully in the past. Feel free to copy it into a new spreadsheet and to change the categories to suit your personal circumstances.
2. Track your expenses for a month
The first step towards creating an accurate and usable budget was to understand how I was currently spending my money. Otherwise any sums I put against a category in my spreadsheet was going to be a wild guess and, probably, wildly inaccurate.
I almost exclusively use my EFTPOS card and internet banking for payments, both online and off, so it was easy to refer back to my banking app to see what I had spent money on over the month. At the end of the month, I reviewed all of my expenses through my banking app and added them to what I decided was the appropriate category in my budget spreadsheet (e.g. movie tickets went into ‘entertainment’). You might decide it’s easier to review your expenses and add the amounts to your spreadsheet on a more regular basis, like daily or weekly.
With all the numbers in front of me, I could now see how I was currently spending my money and how much I realistically needed to budget for each category going forward. If I thought I should reduce how much I was spending in one area, I would budget less in the next monthly spreadsheet. Each month was a new page in my spreadsheet because I used to get paid monthly.
Now came the task of splitting up my pay check and sticking to my budget.
3. Sticking to your budget
The best money advice I’ve ever received is that every dollar should have a specific job. This blog post from You Need a Budget outlines what this means and why it’s so useful to do.
For me, ensuring that every dollar of my monthly pay check had a job meant that I was less tempted to ‘assign’ that dollar elsewhere. If I ran out of funds for clothes, then I needed to decide pretty carefully where that money was going to come from. It was often easier to go without than to take money away from another category.
Now, there are two tricky parts of budgeting – sticking to it and tracking your expenses. I chose to keep it simple and used only:
My bank’s mobile app
My monthly budget in a Google spreadsheet, and
The MoneySmart TrackMySPEND app by ASIC (The Australian Securities and Investment Commission)
The TrackMySPEND app is exactly what it says on the box – you use it to input your monthly salary and how much you’ve budgeted for each category, and then you add each expense as it comes up. As long as you remember to add expenses as you go, the app makes it really easy to see how much money you have left in a category and how much you’ve spent so far. For me, I don’t need much more than this, but there are other apps like YNAB (You Need A Budget) that have added automation and analytics.
How I use banking accounts to help me stick to my budget
In the beginning, I really struggled to know how much money I had left in each category of my budget. One key way I manage to stick to my budget (usually) is by having multiple bank accounts through my banking app.
I have a total of 15 bank accounts going right now. These include:
Dynamic (everyday use)
Emergency (savings
Entertainment
Gifts
Groceries
Health (medical)
Serious saver (savings)
Wedding
Clothes etc.
Christmas (savings)
Holiday (savings)
Sundries (essentially misc)
I recently added accounts for ‘Business funds’ and ‘Taxes’ to help me manage my freelance illustration and design projects, and I also have an account that my mum has access to so I can send her money (like a good Asian daughter).
Each bank account roughly links up with a category in my budget. On pay day, I immediately transfer the budgeted amounts to the corresponding bank account. Everything else gets left in my Dynamic account, which is connected to my EFTPOS card. Whenever I spend money on something like groceries or entertainment, I transfer the money from the appropriate bank account straight to my Dynamic account to top it back up.
Assigning every dollar a job and utilising multiple bank accounts has significantly reduced the chances of me spending beyond my means.
4. Track your expenses (again)
After a month of spending according to your new budget, it’s important to go back and go over your true expenses to see how you went. I went over my budget and expenses on a monthly basis because that’s when I got paid, but I recommend doing them weekly or bi-monthly, depending on your pay cycle.
During these budget reviews, I essentially did Step 2 of this guide again. That’s why the draft budget template I shared earlier has two columns – one for your budgeted amount and another for how much you really spent. These reviews gave me insights into my spending and if I needed to make adjustments to my budget. Budgets are not static and you should update yours as you need to.
In summary, this is what I do each month:
Use multiple bank accounts and banking app to see how much money I have left to spend.
Use TrackMySPEND app to make me manually input expenses to help keep me mindful of my spending.
Do a final monthly review using my budgeting spreadsheet. Through my banking app, I go over my expenses and manually add up how much I spent in each category and what the damage is for that month.
Final thoughts
Spend within your means
I got really suckered into the idea that I still had money because I had savings. I realised later though that that’s a pretty risky way to approach your finances. It’s even worse if you’re treating loans or debt like expendable income. Sometimes this can’t be avoided, but if you can, please do! Ideally, your budget and expenses shouldn’t exceed your salary, and savings should be completely separate from the money that you use day-to-day.
I hope you found this guide useful. I wish we had been taught better financial literacy in school, I think it would have helped us a lot going forward.
But what about you – Do you budget? If yes, how do you manage your expenses and keep track of your spending? What do you struggle with when it comes to budgeting? I’d genuinely love to know!
*I’m not trying to scare anyone, but this is the unfortunate reality right now. Many of us can’t work, don’t earn enough or have too many expenses, so it can be next to impossible to put money into savings. We should all care about inequality, job security and the government policies that affect us.
