How to get started budgeting if you can’t think of anything worse than budgeting.
by Molly Benjamin, Ladies Finance Club
I know, I know. ‘Budgeting’ is up there with calorie counting and tax returns in the list of ‘adult stuff I’d really rather not do, thanks’.
However, a budget is what lets you save for things you want and enjoy them guilt-free. It’s the key to becoming the fierce, financially savvy woman you always wanted to be.
But if the thought of it makes you want to run and hide, you’re not alone. So here’s a simple guide.
Step 1. Track your spending.
The key to getting a handle on your money is to work out where the hell it keeps going. This means having a warts-and-all look at your current habits.
Spend a month or two tracking every dollar that leaves your bank account. You can download a free budgeting app like Fupay so you don’t have to manually enter each transaction and it automatically categories your spending.
Now some people like manually tracking because it feels like an honest conversation every time you have to admit that you just spent $67 at Priceline but if you ‘aint got no time for that’ use an App!
This is also the step where you track your ongoing expenses like rent/mortgage, phone bills, insurance and all that boring stuff.
Together, this info will tell you how much it costs to be you, in terms of fixed costs (the boring stuff) and discretionary costs (your spending choices also called variable).
Step 2. Set your priorities.
Once you’ve got more clarity on where your cash is going, you’ll have a sense of where it feels right and where it seems, ahem, kinda ridiculous.
This is great because now you can think about your spending priorities. If you’re spending a lot on the gym and protein shakes, is that ok? Is fitness really important? Or are you just ‘donating’ to the gym for the benefit of a monthly spin class?
The thing is, your priorities are very personal to you and will be different to your family and friends. I love spending money on massages and facials but my friend doesn’t she prefers spending it on the gym and sports equipment.
I can’t have a personal trainer AND eyelash extensions. Maybe you can’t have expensive dinners AND new clothes every month. Or go on spontaneous weekends away and save for a deposit. But you can possibly have one of those things. Remember if you live fake rich now, you’ll live poor broke later.
So, work out what matters and what you’re willing to give up or trim back.
This doesn’t just apply to your discretionary spending – there are probably fixed costs you can reduce at this point. See if you can get a better deal on your phone plan, insurance, energy bills etc. LFC Members can check out the recent webinar we ran with Author of Kill Bills, Joel Gibson on the member’s hub!
Step 3. Automate the hell out of your money
Once your salary hits your bank account, it’s time to split it up via automatic transfers. The details are up to you, but broadly, aim for something like the 50/30/20 rule:
- A Financially Adulting account: 50% of your paycheck to living expenses (the boring but very necessary stuff).
- A Future Me account: 20% of your paycheck to growing your money whether that be investing or saving for a house.
- A Fun account: 30% of your paycheck on the fun stuff you like to splurge on such as entertainment, brunch, clothes, dinners out, holidays and beauty etc.
This is just a guide and you might want to change the percentages or create an additional account if you have a big goal like saving for a home or going on a holiday. (Fun fact: You can also rename your bank accounts and give them cute names that will make it harder to spend from ‘Future dream house fund’.
- An OMG account: This is where your emergency fund lives, for things like your car breaking down, losing your job, getting injured or whatever. If 2020 hasn’t convinced you of the need for this account, nothing will. Aim for at least 3 months’ worth of expenses and keep it in a separate bank account.
The key here is to remove as much decision-making as possible, so you need to exercise less willpower. #AutomationIsKey
You don’t need a complicated spreadsheet to get on top of your money; you just need to be clear about your priorities and goals and make sure you’re spending less than you earn. The rest is basically setting up a plan and sticking with it. Lady, you’ve got this!
This article has been sponsored by Fupay – live large and take charge!
(We only work with companies we really love and whose products we have tried and tested…so we know it’s good stuff and won’t cost you an arm….or your left foot)!