It’s the start of a new year and another budget overhaul. As I’m sure almost everyone was happy to leave 2020 in the past. Moving onto new opportunities and new goals to reach in 2021. One funny thing I saw in a meme though: this year reads out loud Twenty Twenty Won ! Don’t let that be the case. Make 2021 another year of goal chasing and achieving.
In the past couple days since New Years Day we have been critiquing our existing budget. Assessing it top to bottom, finding pitfalls in it that need to be rectified. We do this periodically to make sure our budget is driving us towards our financial goals. Your budget needs to be updated regularly. Over time our goals change and so must our budget to accommodate them.
Depending on how often you receive your primary income should determine whether your budget is weekly, fortnightly or monthly.
So where do I start with my budget overhaul…
What has changed for me financially?
To start off, late in 2020 I received a pay rise at my job. So my income increased. I knew my new year budget overhaul was coming up so for those couple months I enjoyed the extra cash and splurged over our Christmas break!
Back in November I also revisited my personal loan status. I had been making extra repayments onto my load for over 6 months and the principal of my loan was being smashed down. I am very proud of how much quicker I am paying off the debt. If I could revisit my 22 year old self I’d slap him across the face for getting this loan in the first place. Then slap my 25 year old self for refinancing it higher!
So what did I do with the loan?
I applied to refinance again. This time, I refinanced to the lower amount that I had paid off. I also refinanced to get a lower interest rate by making comparisons using Canstar. Now my minimum repayments are much, much lower. Yes, the loan term starts again but that doesn’t worry me as I minted to pay it off much earlier. Now with the minimum repayments around $60 cheaper a fortnight I can add that to the extra repayments that I have been contributing. Paying off the principal extremely faster and paying less interest overall.
One of my goals for the new year is to drastically increase traffic to our blog. We have loved every bit of sharing our frugal journey on here and want to continue by reaching more people. So that means paying Google to advertise. We are also doing more and more research into SEO (always open to any help btw!). But advertising seems like the next step. Why not anyway, it doesn’t cost much and I hope to one day gain a little income from sharing on our blog.
Second new expense, Gym membership. In recent months I’ve had a pretty sharp decline in my fitness and diet. I’m usually a very active person but I’ve found myself in a rut. So I’ve chosen to counteract that by signing up to a fresh new gym. The cost is $16 a week for a 24 hour 7 day a week facility. I actually did my first session there today and loved it!
I’m well aware that this is an absolutely unnecessary expense but to be honest, I want the atmosphere you just can’t replicate in a park. At least until I get my fitness back on track.
Breaking it all down
I need to know how much I have leftover after all my outgoings have well, out gone.
Fortnightly income (after tax) – fortnightly expenses.
This gives me my fortnightly spendings amount. In other words, my play money.
Most of the time I just use it to do maintenance around the house or use it for some sort of memorable experience for us if it involves money at all.
Splitting each expense into 3 categories:
- Needs – Necessities. This is the category that we must pay. Eg. Food, Electricity, Mortgage ect.
- Wants – The luxuries. Everything that we ‘want’ to have. Not necessary but hey, if we can afford it why not. We have to remember to enjoy ourselves. Eg. Gym, date nights, op shopping ect
- Savings – This one is my most important. Savings category I split into 3.
- 1. Regular savings into our emergency fund.
- 2. Contributions into our investment portfolio
- 3. Extra payments into debt
By splitting my expenses into categories I can then convert that figure into a percentage to see how much I am spending on each percentage wise. This will show me if I am splurging too much in the Wants category or not putting enough to the Savings category.
If I am following a 50/30/20 style budget then my percentages are as follows (or close to)
- Needs 50%
- Wants 30%
- Savings 20%
From experience I’ve found this quite difficult to follow unless you’re fresh out of school and haven’t made any money mistakes yet. Like getting a big personal loan for a new motorbike you’ll write off in a couple years.
My current percentages stand like this:
- Needs 58.17%
- Wants 21.44%
- Savings 20.38%
It ain’t perfect but I’m happy with it. Once I get a couple goals of mine ticked off in the near future I’ll be able to knock down that Wants category and add to the Savings category. Perhaps by my next quarterly budget overhaul.
Now I have my full list of expenses all listed. I know where my money is going to go each fortnight. Now I need to automate it.
Using my online banking I set up each expense to automatically be paid. I don’t want to touch it. I don’t want the temptation to.
Setting up takes a couple minutes but will also save plenty of time having to do this every pay.
Now I have my budget set for this quarter. I know how much I will earn (Any extra income in this time I automatically add to the Savings category). I know where my money must go and how I will put it to work. And lastly, I know how much I will have to play with for a bit of fun!
In my opinion budgeting shouldn’t mean going without. A budget overhaul is a good thing. Working within your means and towards your goals should be the intent of any budget. We can only do what our budget allows. Most of us have the intent to increase our income, or supplement it in some way. I’m working on mine as well. But never spend more than you earn, that’s just setting up to fail.
But for now I work with what I got. And I have to say, I’m happy doing so. If you’re constantly working towards the future you’re going to miss out on the now. Enjoy this time being frugal. It’s not about the destination, it’s all about the journey!