Sounds desperate I know, but the truth is budgeting is for your life! To stay out of debt, to know whats going on with your finances, and to have savings for lovely things and fun trips.
You can find my mission statement & disclosure here
So budgeting is important
In order to get started with your not so hard budget you need to collect all your bills, utility bills, contracts, loans, vehicle repayments, mortgages, etc…hopefully you have these all together in a file or even in an old shoe box. If they are all neatly filed wonderful! It will make starting your budget now that much easier.
Write down all your expenses, you will have two types, fixed expenses and variable expenses. I like to keep these apart, it makes it much easier as we go along.
Fixed expenses are those that remain the same every month and cannot be canceled on a whim. For example, rent, insurance, car payments, medical aid, Pension funds, Life insurance, cell phone contracts, gym contracts, etc….
Variable expenses are those that change monthly, hopefully only slightly, however it is very easy for these to spiral out of control. For example, food, petrol, Netflix, Wifi, cleaning products, make up, clothes shopping, etc….
These are the places where with a little effort you can save ~ especially if your expenses are the same as your income or even more than your income. Make little notes as you go, where you know you have problem areas. Be HONEST with yourself…we all have a certain thing, or things, we splurge on!
Deduct all your expenses from your income. Scary I know! My heart always seems to stop when I see just how expensive life is! It is so frustrating to see that all your hard work only covers the cost of living. Wouldn’t it be nice to command the elegance’s of life? Without being stuck in a mire of debt! It most certainly would! Hence the budget!
Now you can see your financial situation clearly. There are three possible results to the sum you just made.
#1 Your income is more than your expenses and you have money left over.
#2 Your expenses are the same as your income
#3 Your expenses are more than your income
Obviously you want result one, or to get to result one. Now we can look at each expense individually, it’s important to do this even if your expenses are less than your income. It might surprise you that you don’t use all the things that you are paying for.
Notes – on variable expenses
This is where those notes on your variable expenses will come in handy. For example we realized that we were paying high fees for both internet and Dstv, but we weren’t using even a quarter of our available data. Having internet access was more important to us than keeping the Dstv, so we cancelled the Dstv subscription and got Netflix instead, which is significantly less a month, and has great shows too. We now have almost the full Dstv subscription fee available to us every month (Dstv fee – Netflix fee) and we use more of the Wifi that we were already paying for. It might seem like a small change in the face of the cost of living but every little bit helps!
Take the time to go through your list of variable expenses, look for things you are paying for but not using to advantage, like our Dstv and internet, and then find alternatives that will give you better value personally and cost you less each month. There will be multiple ways that you can minimize or even completely cancel some of your expenses. Look for duplicates or waste, and try to eliminate them, these are a few things we did to save money every month.
Have two tv subscriptions? Cancel one!
Organize your closet, discard, mend, get bad fits altered (and then set a challenge for no clothes shopping for three months) I liked this one!
If you want to read about it you can find it here.
Try and order your cleaning products in bulk. Make sure this will actually cost less then they do currently.
Meal Plan! Seriously its shocking how much we wasted before we started doing this.
Setting our buffer was quite simple, we thought of the worst thing that could happen to us, that wouldn’t be covered by medical aid or insurance and set the buffer at that. In our case the buffer is the cost of living for 1 month, ideally we would like to have at least a 2 month buffer, but it is quite a substantial amount, and its what we have been able to manage so far. So for now our minimum buffer is 1 month of expenses. We don’t stop saving when our buffer is full; we still put our savings aside every month. We just never go under the buffer line unless it’s an emergency.
Savings and spending money!
We need to be saving enough to cover emergencies and have enough spending money to feel like we can enjoy the month ahead of us! A difficult balance, and hard to contemplate. Especially when you have just worked so hard to reduce your expenses and free up money. However, its really important to start saving a buffer amount to protect you from unexpected expenses. Trust me these have a way of popping up, no matter how well you plan! …and normally just when you aren’t too plump in the pocket. I drove through a pothole and popped both of my left wheels, and it was terrible, it was the end of the month I didn’t have the all important buffer in place, and it made that month difficult to say the least! So since that evening I believe wholeheartedly in the buffer!
Spending money! Yay! Your spending money will be the money left after all your expenses have been paid, and savings towards your buffer have been put away. After restructuring your budget and removing unnecessary expenses you should have freed up some spending money! Its a wonderful feeling to be able to go out and treat yourself without feeling worried that you are overspending, because you know that all your expenses are already covered and you are spending “free” money.
Record your budget and stick to it!
The fixed expenses on your budget can’t be changed and the savings shouldn’t be changed, savings are important to your future plans and goals. A holiday, buying your first home, studying, remember savings are important. However, your budget should be flexible to an extent. There is always a little bit of wiggle room in your variable expenses. My husbands birthday is in May, so in May I try to decrease on one of my variable expenses, usually my make up or my food budget (decreasing the food budget means less wine) I hope he knows how much I love him! Then I can use the freed up money to throw him a wonderful party!!!
I love a good party! To the point where I usually chuck the budget out of the window, much to my husbands frustration! So I had to come up with a way to throw fabulous parties, without breaking the bank! This is it Throwing a great party on a budget
Now that you have all your budgeting ducks in a row it’s important to remember that your budget is a tool! It works for you, or it gets chucked and re done. You can skim it each month and decide what important events are coming up and where you can decrease a little bit on expenses to free up more money, if you need it, for the event. If you don’t have something special, in a specific month you can leave your budget to do its job and live your month free of budgeting worries!
Good luck with setting up your new budget and remember, everyone’s circumstances and way of life are unique. Your budget must work for you! If you want to use my free budget template, you can get it here!