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Simplifying Life: Setting a budget

01 Jul 14
Megan
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On and off throughout my life I’ve played around with different ways of monitoring and managing my financial situation (i.e. having a budget). For most (if not all of my adult life) that situation has not just included me, but my husband as well.

This complicates things in some ways because we come from very different backgrounds. His family life was secure and his parents have always (as far as I’m aware) been financially secure, buying their own house early on and worked with a financial adviser to ensure they could retire early. He was always able to get what he needed plus more, and went on many family holiday overseas and interstate. On the other hand, my parents are separated and both had very little money and are still working as they don’t have much (if any super saved). We lived off hand-me-downs from cousins and family friends, and had to do without quite a lot.

We have very different values when it comes to money and what it means for us. To E, having a certain level of income is security and without that security there it is ‘impossible’ to consider planning any major expenses in the future. To me, money isn’t everything. I would prefer to have less money but greater health, family and community connection, and consider saving money even when it feels like there’s nothing to save.

Since I’ve been ill we’ve been living off one income and given that I’m not contributing financially I asked E if I could develop a budget for us. The problems I’ve found is that I would like to budget extra money towards having some savings and paying off our mortgage quicker (and I mean actually plan to save), as well as budget money for specific activities I know is going to cost us money. On the other hand, E sees this budget as a way of seeing what our essentials are and then he’d like the rest of the money to just be a ‘pool’ we can dip into for other expenses and use for whatever we like.

At this point I’ve put that conversation on hold. Certain things I’ve specifically added to the budget and others I’ve left out.

Why set a budget and stick to it?

Part of simplifying my life is simplifying levels of stress. On multiple occasions we’ve had to make decisions on whether to buy certain things because they were at a good price. These things are usually things we probably didn’t really need. Without a budget I stress out and over-think all the options. With a budget in place I can say yes if I know it fits in the budget and we need it, if we don’t need it or it doesn’t fit within the budget I can easily say no without the guilt.

Another reason is to be able to actually see where our money is going. Things like buying lunch at work every day is costing almost $3,000 a year!

When we’re aware of where our money is going we can make informed choices about where we can cut back and save.

I love to see the numbers changing (either debt going down or savings rising). By having a budget I can track the change monthly or yearly and actually see how we are doing financially.

Budgeting 101

If you haven’t set up a budget before here are some simple tips to get you started:

  1. Track your spending. If you don’t know where your money is going you can’t set up a budget. I suggest tracking your spending for a month before moving to the next step and continue to track for a few months after so you can average out your spending in each category.
  2. Use a template. The idea of setting up a budget excited me but also almost overwhelmed me. I didn’t know where to start or what to include. I found a very easy it use annual budget spreadsheet (that breaks it down into months and automatically tracks the outcome) in my Excel templates. There are also templates online and I’m sure you can find one that suits your needs.
  3. Complete the template and stick to it. Once you’ve written out you budget you’ll be able to see if you’re spending more than you’re earning and you’ll be able to identify areas you could cut back and set limits on. Decide on your approach to making sure you earn more than you spend and stick to it.
  4. Review regularly. I’m going to try monthly and annual reviews and see how that goes. Others do weekly or even daily reviews

Do you spend time reviewing your finances and setting financial goals?

How do you track your budget?

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  1. jpeggytaylor July 1, 2014 at 5:02 pm

    HA! having always lived on little, budgeting is what life is about it seems! I certainly agree saving regularly (even a very small amount) is a good habit to get into. I think unfortunately in this world money has assumed an overwhelming importance and I don’t think that is a positive thing. I value freedom, peace of mind, good health and living in harmony with our natural environment. I’m with you on this one Megan 🙂

    • Megan S July 2, 2014 at 4:44 pm

      Thanks, I definitely believe that valuing experiences and environment over money is best!

  2. Rosie July 1, 2014 at 7:33 pm

    Completely agree that having some kind of budget makes life less stressful, esp when you are trying to stretch what you already have. My problem is I’m pretty good at tracking what I spend, just no good at setting myself limits 😉

    • Megan S July 2, 2014 at 4:44 pm

      That’s something we all have to work on!

  3. Claire July 2, 2014 at 12:01 pm

    Relationships are damn tricky things! It’s so hard to compromise, especially when clarifying the conflict is difficult too.
    I’m very lucky in that I’m financially OK for now – I have all my needs met, and I’m a naturally frugal person, so apart from food (so expensive) and a few new (larger, sigh) clothes every now and then I have no major expenses. The only budgeting I do is making sure I have enough saved for the car rego and insurance!
    But I think that’s because I hope that I’ll recover soon and will be able to earn an income again – if I knew this was permanent, I’d be looking at budgeting for the future, but on a pension, that’s a pretty bleak outlook.
    I’ve written an article about money and chronic illness – it’s on a slightly different topic, but have a look and link back here in the comments if you like 🙂
    http://livebedocfs.wordpress.com/2014/06/18/money-healthwelfare-advocacy-and-dr-karl/

    • Megan S July 2, 2014 at 4:49 pm

      Thanks Clare, great post! I just commented on it. 🙂
      Sorry it’s a short comment but I’m struggling with the fog at the moment.

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