One of the most important benefits of being a generally organized person should be that we have our budgets under control.  Do you? 

What is it that will make us not have to worry about money?  It’s easy really, in theory.  Like most things, it’s about decision making, and if you’ve made the best possible decisions and followed them, you should be able to relax, knowing that you’re doing what you need to be doing with your money.

To stop worrying about debts, you simply sit down and work out what you are able and willing to do – with help if necessary from a financial adviser – and make a plan.  You then stick to the plan and forget about it.  Ta da, debt worries finished.

But of course, sticking to your plan can be difficult to do.  And that’s where the guilt and worry comes in.

Unexpected bills just seem to keep turning up, and that can throw the best plans right out the window.

In order to eliminate the ‘unexpected bills’ phenomenon and make a budget that really works, we need to know EXACTLY where our money is going, and what expenses we can expect.  This is not as simple as it seems.  This is the preparation work that makes a really good budget.  It can take quite a bit of time to get all this information together accurately, especially if you’re starting from scratch.  Even if you have this information already, it may not have been updated for a while as prices have increased and your income has changed.

There are a number of different ways you can record your spending, and I’m not in a position to recommend any at the moment – I use a book keeping software package that’s a bit outdated at the moment, and it has some limitations, but it has gotten me into the habit of recording my spending in categories, which I have done successfully for the last 10 years. 

Whether you record your spending with pen/pencil and paper or on your computer, what matters is that you are able to get a realistic picture of where your money goes. 

If you are starting from nowhere, you need to gather up all the paid bills, receipts, cheque stubs and bank statements you can lay your hands on and use those to put together something to start with.  To get a good average for all your categories, try to go back at least 12 months.  Start with the basics: mortgage or rent, gas, electricity, telephone, internet, cell/mobile phone, food, clothing, insurance, car expenses, entertainment etc.

To build up a very simple picture, you end up with a summary of your last 12 months income and spending, and from this you can make a simple budget, with your expense categories listed vertically, followed by columns showing the weekly, fortnightly, monthly and yearly amounts allocated to each one.  If you do this in an Excel spreadsheet it can do the adding up for you – otherwise make sure you’ve got a ruler, pencils, sharpener and eraser, and plenty of paper – and time.  Some bills are paid weekly, like food and fuel, others monthly, quarterly, yearly etc. 

So how do you set aside money for expenses which come up quarterly when you get paid weekly, fortnightly or monthly? 

- Keep track of your account balances – they must be accurate and up to date all the time.
- Whatever account you use to pay most of your bills, whether it’s a cheque account, or as is more common these days, a credit card account, work out exactly how much you need to transfer to that account each pay day.
- Keep very close track, on a weekly or even daily basis, of your discretionary expenses, like groceries, entertainment, clothes etc – all the stuff where the amount is within your control.

There are two main parts to getting control of your budget.

One is making one that works in the first place.  So, when you add up all your bills and compare it with your income, and can see (as is so common) that you are spending more than you earn, you know you need to cut it back somewhere.  If you don’t do this, you will continue to accumulate debt, and are not going to get ahead.  This is no good.  We want a nice buffer zone, a nice feeling of security, a nice feeling of achievement at having been able to plan ahead and achieve something for ourselves.  We need to allow for all those boring things like car maintenance, possible home repairs, unexpected medical bills – if you don’t end up needing the amount you allocated for home repairs this year, the money is still there.  It’s still yours.  You can put the excess towards debt reduction or savings.  Decision time.  Face up to it.  Really see it and accept it.  Then ask yourself what matters to you the most.

When the first part is sorted, then we need to follow the budget we’ve made.  This means that we know how much we’ve spent on each category compared with what we have allocated, and know when it’s time to say no, stop, and wait.  To do this, you really need to know what you can spend and have spent on a daily basis.  If you do your grocery shopping weekly, you need to make sure you have enough money left over for extra milk and bread if needed.  You need to learn not to spend whatever money you can access just because it is there.  If there is money in your bank account or available on your credit cards, that is because you have kept it in reserve intentionally.  You know that money is allocated to something, or has been paid towards debt reduction, or is your ‘minimum balance buffer zone’.

Managing money is an emotional thing, especially when we don’t have much to work with.  We’re surrounded by marketing every day, in lots of little ways we don’t even notice.  Money is tied up with how we feel about ourselves.  The simple act of getting your budget under control, and working towards debt reduction and savings and investments, is extremely empowering.

Making a conscious decision, in advance, about what we want to do with our money is healthier for us than being reactionary and impulsive.  Every time we wait for someone to sell us something instead of planning and researching it ourselves, every time we grab something impulsively without thinking it through, because the ad sucked us in or it looked pretty in the shop, we’re giving away our power.  The power to choose is a luxury we have that we often don’t bother to use, but the more we do, the better we will feel.

This is why we do simple things like eat and prepare a detailed list before going out for groceries, look over our power bills and phone bills and see if they’re going up or down or staying stable, go through our wardrobe to assess what we actually need and set a budget before going clothes shopping, and getting new quotes for our insurance once in a while.

Like everything in your life that you want to be more organized about, managing your budget is about creating new habits.  Every little positive habit you manage to establish is a step towards where you want to be, and makes your life that little bit easier. 

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