Adulting: Budgeting

Remember when 5c used to get a few lollies in the store? 5c doesn't get you feck all anymore... Your teeth says you don't need any more fecking lollies anymore. Your bank account agrees.

Budgeting sounds like such a bad, unwanted word that could easily provoke the rolling of the eyes of cynics and those who struggle with the responsibilities of adulthood. However, all attitudes aside, it’s necessary. Budgets aren’t just for businesses.

So where does one start? First, assess what one’s income is and what one’s expenditures and financial obligations are. Financial obligations, such as loans and rent, must be met as a priority and ideally banks and rental agencies prefer that repayments and rents be automatically deducted from the account that pay goes in to in an effort to ensure that they’re going to get what they’re owed.

Expenditures must be split into two categories: essentials and luxuries. Essentials are food, fuel, phone bill, insurance and other bills (like medical, mechanical, car rego and incidentals like birthday or Christmas presents for immediate family or partner). Luxuries are alcohol (yes, seriously), unnecessary clothes, unnecessary things, beauty products and treatments, take away, lunches and dinners out, concerts, recreational drugs (if you’re that way inclined) etc. You get my drift. If you can easily live without it, if it’s not necessary to your survival as a human in the modern world then it is a luxury.

I’m not saying luxuries should be ruled out completely, however, they must be reined in. They are luxuries after all. Massive budget restrictions of my own means I recently missed out on the ballet and the opera coming to town. I was devastated but feelings should not get in the way of priorities. Self-control is key, letting yourself have small luxuries means you don’t feel like you’re entirely missing out. I allow myself $40 a fortnight. This caters to a pay day lunch with colleagues and anything else that may crop up in the fortnight I might want to enjoy.

Earlier in the year, 35-year-old millionaire Tim Gurner (who also happens to just scrape in as a millennial himself) pissed off a lot of fellow millennials by saying that millennials have too big an issue with wasteful spending to be able to crack the home buyer’s market. What he used to get his point across was avocados and take away coffees. He has a point, these things add up and could mean an extra $50 per week saved, though people then hated him for dissing avocado consumption, never mind that he was only using them as an example. The message he was trying to put it out was that it’s all about sacrifice.

My own self-control hasn’t always had a stellar record. For example, a month ago I bought a handheld GPS for $150. I am still copping it on the chin and have not financially recovered from making that purchase one month later. This is exacerbated by the fact that my exorbitant tax bill (which keeps a dole bludger on a stolen bicycle idle on the job market for an entire month) and my council rates have both come in at the same time.

Hello? Are you still there? I know this is insanely boring, however, it is insanely important.

There’s a financial guru out there on the interwebs called David Ramsey (Google him and his methods and you’ll be able to find people willing to share their own experience). He makes big bucks teaching people how to manage their money. I was frugal and on a budget before I came across him, however, he has some clever ways of getting people to curb their spending and lifestyles. One method, which has been adopted by a friend of mine, uses an envelope system. I track all my expenses in a notebook, his envelope system puts an emotional twist on it.

Once your automatic deductions are taken from your account on pay day, withdraw what’s left, leaving behind $20-$30 to save, and put it in a variety of envelopes. Each envelope is allocated an amount and a purpose e.g.: $200 for groceries in one envelope, $160 for fuel in another envelope. This means that at any time that money is spent on a non-allocated purpose there’s the emotional set back of having to hand over that cash rather than mindlessly swiping this and pay-waving that. The intention is that you cringe and feel guilty about spending on something that isn’t a necessity… and it works. I like my notebook because I stare at the cost of something I’ve bought that I might not necessarily have needed and tears well in my eyes because I’m less likely to save that fortnight.

If your expenses are more than your income then the budget needs to be looked at it in minute detail. Are you trying to afford a lifestyle when you can barely afford life? Knowing my tax bill and council rates were coming I cancelled my pet insurance for Dog and stopped the extra repayments I was making on my home loan. I was informed about my employer’s deal with Microsoft for their Home Use Program and applied that so I could cancel my Microsoft Office subscription. Doing these three things meant $90 less in expenses per month. If you do go over budget, carry that figure across to the next fortnight by deducting it from your budget. Avoid writing it off by saying “I’ll do better next fortnight” because no, if you give yourself that rein, it will become an unhealthy financial habit and all this won’t be worth it.

It will hurt taking a good, hard look at your own expenses if you know there are a few too many times where you’ve been careless (did you really need that fishing rod?). Though it especially helps if you have a goal to work towards like paying off the car, saving for a holiday or saving for a house deposit. Once those goals have been achieved, set another goal. The forming of a diamond cannot be achieved without extreme pressure, a financial goal cannot be achieved without the same rigorous efforts.