It is the start of the year and so it is time for those darn New Years resolutions.  Exercise more?  Drink less?  Lose weight?   All noble options but none of these are it for me this year.  (Mind you, I could probably do with all three!!!)   However, this year my New Year’s resolution is to develop a budget for the Money household.  What?!!?  I hear you gasp, surely with a name like ‘Money Mummy’ budgeting is second nature?  Well, actually no.  It is not to say I haven’t thought about it, but this year is the time to actually do it.  So this is how I have gone about making my family budget from scratch……

The first step to developing your budget is to figure out what you spend.   There are lots of ways of doing this from writing it all down, to using an app on your phone or keeping all your receipts in a plastic bag.  In our case most of our transactions are done on card (either credit or debit), so I simply downloaded 3 months of transactions from internet banking into Excel and put each month on a separate sheet.  I then used Excel’s ‘sort’ function to put similar transactions from each month together and added them up.

Next I went to the MoneySmart website and downloaded the Excel version of their budget planner (see it here).  MoneySmart is run by the government.  The budget planner is very comprehensive and the best part is it is free!!!  This planner allows you to figure out exactly what you earn then gives you all the main categories you need to sort out your spending.   From there I just filled in how much we earned and how much we spent in every category that was relevant to us, using the data downloaded from internet banking.  For variable expenses (those that change from month to month), such as the supermarket shopping, I looked at how much was spent on each of the 3 months, then took an average.   For expenses that occur once a year, I simply put the annual figure into the planner and it calculated the monthly amount.  Really simple.

Once all the numbers were in, we discovered that we were spending more than we were earning!  Ouch!  Not by a huge amount but it is still not where we want to be.  So the hubby and I sat down and discussed what changes we thought we needed to make to get us back on track.  You can’t argue with the numbers so having them in front of us was a great tool to open up honest, frank and factual discussions on money.

We decided to choose four areas to focus on which we think will make the greatest impact to our financial position.  These were:

  1. Cash:  through the budgeting process we figured out we were spending a lot of cash, which is difficult to track.  Instead of tracking that spend, we decided to give ourselves a limited weekly cash budget, substantially less than we are currently spending and see how that works.
  2. We spend far too much on takeaway and eating out.  We have decided to limit ourselves to one takeaway meal per week and one meal outside the home on weekends.  This hopefully will do our bank balance and our waistlines some good!
  3. We are going to review our grocery spend and look for ways to reduce our expenditure.  Ideas on how we will do this will be outlined in a future post.
  4. We are spending a lot on utilities, particularly electricity.  I went some way to rectifying this when I changed provider late last year (read about it here) but now we are all going to focus on usage.

Creating a budget was a far easier process that I ever expected.  Though, I will admit at times it was quite confronting, especially when I figured out how much we were spending on eating out!!!  However, knowledge is power and I feel it is better to actually know where our money is going.   An additional benefit is that having the numbers in front of us meant Mr Money and I had a great platform on which to base our money discussion and make joint decisions about our money issues.  This process has certainly put us on the same page money-wise and has given us the facts about what we actually spend.

Now we know where we are at and what we want to do about it, it is time to follow through with action.  A budget is not a static thing to be left in the corner.  Every month I will be checking our spending and seeing how we are going and talking it through with Mr Money.  I expect given we have just started there will be a fair degree of ‘tweaking’ involved in the coming months, but I will keep you all informed on how we go.

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The information contained in this post is general in nature and does not constitute financial advice.  Please see your financial advisor for advice specific to your individual circumstances.