Setting a Budget

If you go to any bookstore you’ll find heaps of investment books, nearly everyone will have instructions on how to do a budget, just flick through a couple.

Most will tell you to take a pen and paper with you everywhere for at least a month and record every penny you spend. Then go through previous bills and record approx the next time these will be due.

There are a couple of things to start you off[exhappy]

Hi Mattb
I have recently re-done the whole budget thing, this time not as half hearted as some other times.
I have to say it took me a lot of work to get it up and running – late nights for about 3 weeks – but now that I have a system working it only takes about 10mins every 2-3days to keep up.
I actually used some software in the form of a very detailed spreadsheet, and I love it because I don’t have to do any adding up, just type in the numbers and watch all the work get done.
I got the software as part of a course I am doing called Crown Biblical Financial Study. email me if you would like to know more about the course, I think it is available Aus wide.
Good luck with it. Stick with it. After all, controlling spending is the foundation of wealth.

He is no fool who gives what he cannot keep to gain what he cannot lose. – Jim Elliot

Matt,

Are you familiar with Excel? If so this is an excellent tool for setting up your budget. About 18 months ago I set up a very detailed annual budget (FY not CY) setting out all our income & expenses including housekeeping, entertainment, fuel, start of school expenses, club memberships etc etc. Budget is set up on cashflow basis (eg. expense incurred May, payment due June, appears in budget in June). Starting point was to pull out all our bills from the previous year and start plugging them into the spreadsheet according to due date and adding a bit extra to allow for inflation. Because both partner and I have variable incomes I dedicated a worksheet to calculating our incomes based on hours worked each day, total for pay week less salary sacrifice, tax, student loans etc. So if we take a day off or have a holiday, I simply revise our hours worked and the effect flows right through the budget. Also put in school holidays as we incur extra daycare expenses during school holidays so the budget is adjusted accordingly. I then set up a worksheet for IP’s listing all expenses and rental income, depreciation etc so that we can see the net position. Finally I linked this all through to another worksheet which calculates income tax payable. Income and IP deductions are automatically linked, I just update other deductions as necessary. Hence at any time I can see exactly what our position is before and after tax. Beauty of this system is that I can now do all sorts of “what if” analysis. Last FY for instance, I discovered that by taking holidays in June before the end of financial year, rather than July and thus reducing our taxable income to a certain level we saved enough on tax, student loans, medicare levy surcharge and also became eligible for some FTB. So much so we took the last 8 weeks of the FY off and had a nice long holiday as we would virtually have been working for the taxman otherwise. Without the budget, I never would have realised. Handy hint: ATO website provides formula’s for calculation income tax payable, weekly/fortnightly/monthly PAYG withholdings, HEC/FSS withholdings etc.

Flatout