OUTinPerth’s financial whiz kid, JM tells how to fix that budgeting stutter.
My father always said, ‘If you watch your pennies, the pounds look after themselves…’ This lore was repeated whenever I wished to purchase trinkets of little value. However, this advice would be the basis of what I consider to be a significant key to gaining control of one’s finances. That is to set a b… b…. b… BUDGET! I know… I almost choke on the word. Nevertheless, budgeting is one of the most practical ways of identifying where money is going and how it is being spent. By identifying your spending behaviour and the locations and objects your money is being spent on, one can then (theoretically) cut back!
While trying to decide whether to purchase a property in Port Hedland, I once sat down with a mate to discover whether if I purchased the house I could still move to England. It was interesting and downright scary to see where my money went and just how much I spent on shoes!
With my friend, I sat down and looked first at what was coming in, that is, my income. In my case, this consisted of: 1) net wage and 2) income from rental properties.
Once we knew how much was coming in, it was time (gasp) to look at what was going out…
Outgoing Expenditure
- Water bills
- Electricity bills
- Gas bills
- Rent
- Repayments for home loans
- Food
- Chocolate
- Chemicals – kitchen, toilet, bathroom (I’m obsessive about cleaning, so this was substantial)
- Eating out
- Coffee (The fact it has received its own area is the scary part)
- Clothes
- Shoes (These, like chocolate, quite obviously need their own section, and in my case, they probably need two.)
- Alcohol
- Presents
- Medication (Panadol, vitamins, not to mention the essentials – lube and condoms!)
On average I was drinking three coffees a day which, at $3.50 each, cost me about $315 over the course of a pay fortnight. This was only on my coffee and did not account for cake or paying for other people. Thus, coffee added up to a substantial portion of my earnings and reduced the amount I was able to save for my house and holiday and spend on shoes.
The day before laying out my budget I had been on a shoe shopping spree which included three pairs of shoes and an essential new polo (to complement the shoes). So, my friend suggested we add a new section to the budget called Sagittarian Expenditure to allow for any essential spontaneous purchases, like a kayak, or snorkelling equipment, or ski goggles, or a wet suit (some of the random things I had purchased).
This new category highlighted that I was spending almost all I was earning on silly things! I am not saying that I reverted to a Puritan life – that would never happen! However, being aware of how my money was being spent, I could better control it and make smarter spending decisions. For example, I started going to the gym, (which I pay for but hardly use) and work-out, rather than ‘de-stress shopping’ (often a workout in and of itself). In addition, I started having my morning coffee before leaving home, saving roughly $105 every month.
Even with a motivating goal, like an investment property and a move to England, I, like many of you, strenuously resisted when I was encouraged to sit down and write a b… b… budget. However, after being shamed into better budgeting, I have learned to keep track of my outgoing expenses, recording them over the week. I then sit down and see how I can best control my spending. While I might have lost the little impulsive spending money I had tentatively tried to justify, believing money was already set aside, I will now have money for that new property or big holiday. And I suppose that is part of growing up and being responsible.
Happy budgeting!
