Budgeting... it really is not like cleaning the toilet...

Photo Courtesy of Jodie Nicholson and used under a Creative Commons License

You know its funny the reactions I have seen whenever the topic "budgeting" comes up. Everyone agrees its a "good" thing, but everyone says its 'good' with a grimace. I suspect that for many the word "budgeting" is synonymous with "cleaning the toilet" - yes its good to do it but honestly, who actually wants to do it... and if we could, can't we just "pay" someone to do it?

In my case, however, every time I start seriously thinking about budgeting, its usually at the time when I can not afford to pay someone to do for me. And besides, I don't think I could ever be truly committed to do it...

And that's the key word - COMMITMENT. For a budget to work, I have to be committed to it every step of the way. I have to be committed to doing it, then sticking to it. Sometimes I think its the commitment aspect that is the scary/worst part of budgeting.

So how do I budget? Firstly, I give myself the big "self-talk". Self-talk always works for me. This is where I remind myself that budgeting is not limiting - its empowering. Its empowering because it allows me to spend my money according to my own priorities and values. Its empowering because it allows me to think about what's truly important to me and my family and then finance that accordingly.

This is the point I write down my priorities and values. Here's what I've got (in no particular order):

In order to live I need:

1. To only buy items that were produced without child-slavery and other forms of human exploitation - buying items which I know were produced by exploiting other people - especially little children - makes me feel sick inside and I do not want to have to live with that.

2. To pay for my children's education and associated expenses - aside from love and my time, this is the next best thing I can give my children. Included in this bracket are the learning activities that we all enjoy doing together (eg. memberships to particular places; bike riding (and associated expenses with that) etc etc).

3. To pay for a good home environment for my kids - this means all the expenses around living in an area that is relatively safe and are near their support network. It also includes the cost of providing them good food.

4. To pay for the means that enable me to have an income - this includes a car (unfortunately public transport means a 3 hour (return) commute every day for what is a 30 min drive (return)... and my work would not hire me if it meant I would be 1 hour 30 mins late and have to leave 1 hour 30 mins early.)

So once I've done that, here's what I do:

1. Add up all my bills and expenses for a year and divide it all into fortnightly instalments (I get paid fortnightly). This is the next "icky" part in budgeting. Partly because this is where I realise how much expenses or debt I really have. However, whenever I am tempted to add yet another expense in there, I go back to my list of values/priorities and if it doesn't fit then I term that item a LUXURY.

2. Now I add up all my Luxury expenses and divide it all into fortnightly instalments as well.

3. I then go to my work and inform them to divide my pay into two bank accounts - one account is my bill account and the other account is luxury/spending account.

And that's it! My budget is done. As bills come up, I just use the bill account. As "other" items come up I just use the luxury account (if there's anything in there).

Some other stuff that people may be interested in knowing:

- Almost all payroll/finance systems (as in the software) are able to divide and pay wages into two or more bank accounts. Find out if this facility is enabled in your work - it saves you from having to transfer money (and maybe paying a fee for it).

- my bank accounts are fee-free. I negotiated this with my bank a long long time ago.

- I no longer have a credit card. Almost everyone accepts EFTPOS these days - and there's always cash.

So there you go - that's how I budget. As you can see... it really is *not* like cleaning the toilet... well, maybe it is - but with budgeting, after you've washed away all the crap, you get so much more than just a clean throne... :P

Next time, I'll go into how I go about sticking to my budget...