Rhonda Jean, the author of the Down To Earth blog, has made a call-out to her readers to join her in another Biggest Kitchen Table, this time an audit, or stocktake, of our lives and goals on our path to simplicity.
The first topic for consideration was money and finances.
My control over my finances has made me so proud of myself. It might sound a silly thing to be proud of to those who have had their spending neat and sorted. For me, it was a big effort to stop spending as frivolously, wildly and with cheery abandon as I had been. I was a habitual consumer for immediate satisfaction and not looking to the bigger goals in my life I would need money for.
The way I took control was to create a budget and then set up my bank accounts.
Creating the Budget
I created my budget on an excel spreadsheet which looked like the equation below.
Fortnightly Income
minus expenses
I ensured that I listed all expenses calculated down to the fortnight figure even the annual ones like registration.
minus big savings
I then decided on a figure that I wanted to save from each pay and deducted it from the running total figure. This savings would be first and foremost a 'safety buffer', but also for our wedding and then later for a home deposit.
minus repayments
Previously we had bought a TV which we got on one of those 'pay nothing for 12 months' arrangements. I took the figure of how much I had to pay before the 12 months deadline and then divided that by the number of months remaining.
An interesting note: When we had to use my savings as a safety buffer, like when the car broke down and cost us $1000 to fix, we treated this as if it were a loan from my savings. I included a payback savings figure in the repayments section and included payments to replenish my savings.
minus small savings
The small savings showed an amount I wanted to put aside each pay towards some short term saving goal that would cost more than my allowance but less than our wedding.
minus food budget
Originally I budgeted for $200 of food a fortnight based on my previous grocery shopping experience. This has since been tightened up a great deal and my allowance relaxed a little.
remainder is allowance and small incidentals
Originally I set a fortnightly allowance of $100 which included any activity or purchase I wanted that wasn't groceries or incidentals like medication. I still aim to spend only $100 but since my food budget has tightened I've relaxed my allowance a little. When I get my kitten I expect my expenses will change and I'll have to reconsider my allowance figure.
So my forntightly income was broken down to the last $5 of how it was to be portioned out between my needs and wants... but it was all still just pixels on the screen. How was I going to put it in practice? How was I going to ensure that all those expenses, repayments, savings were going to the right place?
Electronic Envelopes
A popular way of sticking to a budget is to have different envelopes/jars/pouches labelled with one of the expenses of the budget. Money is portioned out to the envelopes and used when the bill/expense is due.
I've implemented a similar method but rather than using physical envelopes and dollars I've opted for an electronic envelope system.
My bank allows for a number of 'sub accounts' to be connected to a main account connected to two cards, an eftpos/ATM card and a debit card. I've created a sub account for small savings, another for bills, another for repayments and another for savings. When my pay comes into my main account I use online banking to shuffle money into the various accounts according to my budget.
The money that remains in my pay account is my spending allowance, incidentals and food budget.
Where possible I make payments on my eftpos card or the debit card used as a credit card. This way I can see where my money has been spent and track my spending habits. Cash has a tendency to disappear from my wallet without a trace.
Changes I want to make in the area of finances
We are currently so under-insured that it is not funny. We need to get health insurance and home contents insurance. This is going to require a reshuffling and tightening of the budget.
I currently owe my big savings account $300 for the latest repairs to our car. I want to pay this back as soon as possible.
I want to add into my budget a HECS (university government loan) repayment figure so at the end of each financial year I can make a bulk payment off my account and get the benefits of a discount on the amount owed and reduce the total amount when it comes time to be reindexed. (If you pay a lump sum of $500 or more, the government will reduce your debt by 10% of your payment).
Now that I have my half of the TV loan paid off, my next small savings project will be to buy a chook-pen and some laying hens.
Two kittens coming into our house soon will change my expenses slightly so I will have to rejig my budget for that.
I want to create a joint high-yield savings account with Rhys for our home deposit.
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