Budgeting Tips for People Who Hate Budgeting

posted in: Finance, Life | 0

by Lonni Aylett

This is not an article about buying less coffee or taking your lunch to work every day. Promise. But if the word “budget” makes you yawn, squirm or feel defensive, I hope a few tips might inspire you to give budgeting another go.

When done well, budgeting can be an empowering process. It makes you feel more in control of your finances and clearer about what you want to achieve and how to get there. It doesn’t need to take a lot of time or be overly-complicated.

As a financial planner, I see people retiring regularly. The funny thing is, the people with the largest nest eggs are not the ones who earned the most over their working lives. They’re the ones who saved the most and have best harnessed their financial resources. Budgeting is a huge opportunity to “punch above your weight” in the savings stakes. A great tool to ensure you use your money wisely and retire more comfortably than others who earn more than you.

When it comes to budgeting tools and software, just find one that works for you. Some people use specific budgeting programs, some use Excel, others use a notepad and paper. Everyone’s mind works a little differently, and whatever you use make sure it’s a help, not a hindrance.

Don’t overcomplicate it

A lot of budgeting software allows you to import transactions from your bank, sort them into categories, analyse spending patterns etc. It’s helpful initially to examine what you are spending money on to eliminate waste, but tracking individual transactions is time-consuming and for most people, not sustainable.

Instead, I set budgets for regular, predictable expenses such as mortgage, utility bills and childcare, and a budget also for savings, investment, holidays, home maintenance etc. These expenses get allocated and set aside first, so they are never neglected. No more worrying that you won’t have the funds available for rego and car insurance due in the same month.

All the funds left over are placed in a spending account used for discretionary expenses (those where you have some flexibility with how much you spend and when). These can be tracked as a whole category, rather than broken down as $50 here and $90 there. So a typical budget might have $500 per week left over for groceries, haircuts, coffee etc. You can’t overspend on these because once the cash is gone for the week, it’s gone.

Trying to track every last dollar of discretionary spending is just setting yourself up to fail.

Review your budget regularly

Once a month works for me. If you leave it too long between budgeting sessions, you’ll forget what your goals are and why it isn’t a good idea to buy the Thermomix on 6 months interest free.

Be realistic

Don’t get caught up trying to reduce your spending by setting unrealistic goals – $50 a week on groceries? Probably not going to happen.

Budgeting is a lot like dieting. If you starve yourself, you’ll just find yourself in the fridge at midnight eating the kids’ cheese sticks. Make it ambitious, but realistic. Better off saving $50 a week than aiming for $500, then losing the plot and saving nothing because you feel depressed by all the restrictions.

Take the easy wins

Concentrate on some easy wins, such a reducing your mortgage rate (all you have to do is ask, really!), re-evaluating your phone plan, shopping around for insurance. It will free up wiggle-room so you don’t have to set those unrealistic goals.

Make one tough decision

Try to make at least one tough decision when you sit down to evaluate your budget, but make it a recurring, rather than one-off saving. Do you need Foxtel and Netflix?

Loyalty doesn’t pay

Never accept an insurance bill and pay it without shopping around. CTP renewals are often HUNDREDS of dollars more expensive than what the same company charges a new customer, and multi-policy discounts on car, home and contents insurance are only helpful if the individual policies are competitive. They’re probably not.

Getting an insurance quote takes a matter of minutes, and the savings you can make could equate to the best hourly rate you’ve made in your life.

Set goals and celebrate when you achieve them.

In the pursuit of ambitious long-term goals, don’t forget to set some short-term goals as well. And set a reward for achieving them too – it will make sticking to the budget in the long-term more likely.

Be on the same page as your partner

Money matters can be a considerable source of stress in relationships. When you and your spouse can’t agree on a budget (or even whether to budget), then it makes it harder to simply make ends meet, let alone achieve significant financial goals. Like everything in relationships, communication is vital, and getting to the source of any disagreements can be very helpful. Some couples need help from a third party (be it a counsellor or financial planner) in this area to nut out differences in opinion, values and habits that cause conflict over finances in their relationship.

Find some external motivation

If naturally you’re a spender instead of a saver, finding some external motivation to meet your budget can be really helpful. Ask a friend (or better still, someone you want to impress) to ask you regularly how your budget is going. I include savings goals in financial plans, and reviewing those goals is an important part of my annual review meetings with clients.

 

If you need more help…

If these tips sound good but you just don’t know where to start, I’d love to help. Contact me on 0403 344 816 for more info or to make an appointment.

Lonni Aylett is a local mum of 4 and a financial adviser at Ord Minnett Financial Planning.

She has a passion for helping young families (often on tight budgets) achieve their financial goals and values the long-term relationships she builds with clients through the different stages of life.

Her office is in the Sydney CBD but she lives in Ryde and does local home visits in the evenings. Her number is 0403 344 816.

Lonni Aylett is a Representative of Ord Minnett Ltd (AFS licence 237121) and Ord Minnett Financial Planning Pty Limited (AFSL237122).

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