Budgets. The annoying thing everyone says we should do, but we either get wrong or can’t find the motivation to stick to it more than a week. I recently wrote about my feelings (all the feels) towards budgets (Read: “4 habits to hashtag budget goals”), and it really made me open up about how I approached (and still approach) my budget today. It all starts with habits and I let you in on the main four that will lead you to hashtag budget goals. The same 4 habits that led me to buying my first home and saving over $50,000.
But this blog is different. It’s different because I’m going to reveal the secret techniques I use to keep my budget habits in check and keep my money working for me, not the other way around. The truth is, over the last 7 years my budget has evolved from – “holy sh*t, must pay off this debt until it hurts”, to “I need an emergency fund, stat” to “save, save, save and a little spend”, to finally “wow, should we go to NYC, you wanna buy an investment property?” Your budget is a beautifully evolving masterpiece, so applying a template to your life simply won’t work. Put the template down!
These secrets, my secrets, were found through painful trial and error, and absolute desperation when I hit my financial rock bottom. They haven’t come easy so I’m not giving them up lightly! I’m sharing them with you, so you don’t have to go through the years of money torment I did trying to find the sweet spot we all dream about!
This isn’t a quick fix or one-size-fits-all, but I can almost guarantee that these budgeting secrets, along with your new-found budgeting habits will set you up for success.
SECRET 1 – I cut up my credit cards. All of them.
SECRET 2 – I simplified my money into three criteria (similar to the Barefoot Investor) – 1. Saving, 2. Spending, 3. Sacred
SECRET 3 – I closed my 10,000 unnecessary bank accounts and kept 3 – my Westpac Choice account for my Spending, my Westpac eSaver for my Saving and my ING account for my Sacred. Again, keeping it really simple. (At one point I had 7 accounts. SEVEN!)
SECRET 4 – 20% of my income goes to my Saving – This is what we call the ‘emergency fund’, the safety net we all need to lower our blood pressure if we can’t work, or like me, can’t find work for 9 months! The common thought is that we should have at least 3-6 months of living expenses in our emergency fund. If you can get to 12 months, you have successfully built your own income insurance plan!
SECRET 5 – 10% of my income goes to my Sacred – This is the sweet spot, the future, the house plans, the investment plans. And today we’re calling it the Sacred cash, because your future is sacred.
SECRET 6 – 70% of my income goes to my Spending – I use 60% of our income for every day expenses and 10% of our income for play money. The play money is my favourite. It’s the cash that my husband can’t question, comment or complain about. It’s my right to buy whatever I want! And any surplus goes right back into the Saving stash.
SECRET 7 – *The Exception Secret* If you have bad debt, you know – the ugly kind, like credit cards, personal loans and car loans, these need your attention. You need (like I did), to pay it off until it hurts. This may mean sacrificing some of your Saving stash and Play Money, and that’s ok. Keep reminding yourself, it’s not forever. Once you’re debt free, your savings will soar!
SECRET 8 – I deleted any spreadsheet, fancy workbook, online template and kept it simple. I used an A4 sheet of paper on the kitchen counter to write all my expenses down and calculated my Spending stash. By hand. It came out just under 60% of my income – winning! The point is, you don’t need fancy formulas to save money and pay off debt. It’s only a distraction.
SECRET 9 – I conducted regular account audits to make sure my ‘sign up’ frenzy wasn’t coming back to bite me. I regularly found payments taken out from previous gyms and stores ‘by accident’ that I had to request refunds for or beg to have the subscription cancelled. Make sure you’re the only one handling your money.
SECRET 10 – If I couldn’t pay for it in cash, I couldn’t afford it and I didn’t buy it. Credit is not the answer.
When you simplify your budget to focus on paying off debt and sticking to your three stashes, you’re guaranteed to succeed.
Heck, if I can stick to it, anyone can!
Fearless Female Traders