One of the great things about having a regular income is that it has allowed me to start a decent budget for the first time in years. Before 2016 I was on contracts, a casual, constantly reapplying for my own job – all things which throw a spanner in the works of budgeting regularly.
At least it threw a spanner in the works for me. Maybe others cope with that stuff better than I do.
Like everything I write about finance, I’m not a qualified financial adviser. I’m writing about my personal experiences only. Due your due diligence, preferably with someone qualified who can look at your personal situation.
How I Budget In 2018
I have a multiple pronged approach to budgeting. Or multiple account approach? Basically, I like seeing things separately and I like having some things seperate for practical reasons.
My Main Bank Account
This is where I get paid my salary. When I get paid, I sit down and pay any bill that isn’t a direct debit from this account. For me, these are bills such as:
I PrePay Bills
I don’t wait for bills like electricity to come in to pay them. I BPay money onto them each pay period. I prefer it this way. The other way I’ve done it in the past is to put the money aside in a seperate account. I didn’t like that as much. Maybe it could earn a little interest if it was in the right bank account, but for me, right now, BPaying in advance makes me feel comfortable. And it’s also great when you get an electricity bill with either very little owing or in credit! Nice boost to financial morale.
Very very much a personal preference here. The other advantage I could see to putting the money aside in a bank account is having the cash on hand for an emergency; after all, you can usually negotiate payment plans for bills if an emergency has happened.
Some bills can’t be pre-paid. Things like car servicing or new tires are a bit hard to predict. I find these harder to put money away for, as I don’t want to put them in the direct debit account or have them throwing off how much I have in my emergency fund account. I have calculate the amounts that needs to be put aside for these bills each pay period, but I kind of wish they had their own bank account. For now they go into my emergency fund bank account (more on that below), but as a seperate transfer amount with it’s own note/description to differentiate it from my emergency fund. It basically means manually adding up what I have for occasional bills vs my emergency fund, but that’s how it is for now until I find a way I like better.
The Direct Debit Account
One of my bank accounts is set aside for any payment that is automatic. For me, this includes bills such as:
- Many insurances
- Personal loan repayment
- Car registration
I don’t like having a direct debit coming out of an account that is attached to a debit card/EFTPOS card of any kind. It makes me too cautious and concerned about if I’m spending money that I need to save.
It takes a while to set up a direct debit only account so that you’re funding the right bills at the right time. In doing this, takes some extra cash to pay current bills while putting money away for future bills, but now that I’ve got it set up, it seems to be working really smoothly.
Because I hate and don’t trust direct debits and have had them screw me over before, I usually throw an extra $10 per pay into that account. Just in case I’ve miscalculated anything. It’ll build to be a small buffer over time. Or I’ll stop doing it when I feel 90% confident that the timings work out. As I said, I don’t like direct debits, but it seems to be the way most people want you to pay.
In the past few months, when I was doing my big signing up for insurances, I took advantage of the “first month free” type of offers and still put the premium amount in the direct debit account. Seeing as I didn’t sign up for any insurance I couldn’t afford, it was an easy way of making a small buffer at someone else’s expense.
As you may have seen in this blog post, I have multiple ways I save. They’re small, but they make me feel comfortable. Apart from having my bills organised as above, I have three small savings.
- An emergency fund
- A travel fund
- An envelope system emergency fund
They’re all pretty straightforward.
The emergency fund is in at a seperate bank to my above bills/salary. I put a small amount, $10-20 per pay, into it. It won’t be the “ideal” 3-6 months of savings any time soon, but even $10-20 adds up at a decent enough rate. Anything is better than nothing, in my book.
The travel fund is similar to the emergency fund. It’s at a seperate bank, in a fee-free account. I fund it about $10 per pay. Again, I won’t be traveling overseas any time soon, but a start is a start.
My envelope system is my only emergency fund based on cash. After ANZ shut down my account just before Christmas and pay day in 2016 (and then were unhelpful assholes in fixing their mistake), a cash emergency system is essential to me. I have envelopes for:
- Vala’s medication (goal $90)
- Appliance breakdown (goal $300)
- Medical eg prescription (goal $20)
- Food (goal $50)
- Fuel/transport (goal $30)
I fund these irregularly, as it’s irregular that I have coins. I fund them only in gold coins, as anything smaller is too heavy for envelops and too annoying to count. $2 coins go in the envelopes with “big” amounts and $1 coins go in the envelops with “small” amounts.
I feel like I say this a lot in any post about money, but so, so much of this is personal preference and comfort levels. What I do may not work for you. Maybe one part of it will work for you. Or all of it. Or none of it.
How do you budget? Do you like different accounts/places to keep thing like I do or are you an “all in one pot” kind of person?