By Emily from Balanced Budgeting

We are very excited to share this post from Emily at Balanced Budgeting who kindly gave us permission to repost this. 
You can find Balanced Budgeting here and on Instagram

Budgeting is something I’m crazy passionate about (if you couldn’t already tell, considering I made this my business so I can budget all day, every day). But for some, they either don’t know how or just plain hate doing it. If you’re the latter, this is not the blog post for you just head straight here and let me do it for you.

But if you don’t know how then this is how I create a basic budget! Now I’m not about to spill the secret recipe to my business but this is a good stepping-off point.

First, you need to get all your bank statements for the past month and go through all your transactions and sort them into descriptive categories along with the total spent on each category.
For example:

  • Utility bills $100
  • Groceries $400
  • Food $80
  • Salary $4000
  • Rent/Mortgage $1500
  • Clothes $200
  • Personal/Beauty $300
  • Loans $300
  • Savings $800 etc.

Now you want to split all of the categories into 5 larger categories:

  1. Income – money that came into your account (salary, child support, etc)
  2. Savings – money that you’re putting aside for a financial goal (if you’re doing any saving)
  3. Fixed expense – an expense that doesn’t change amount (personal loan, credit card minimum payment, rent, etc)
  4. Variable expense – an expense that changes in amount regularly (groceries, utility bills)
  5. Splurge – something that you don’t HAVE to pay and that isn’t part of your regular spending (for example if you have takeaway once a week and you want to keep doing that I would budget that in as a variable expense)

Then you want to add all the transactions together for each separate category so it should look something like this:

  • Income: $4000

  • Savings: $800

  • Fixed Expense: $1800

  • Variable Expense: $800

  • Splurge: $200

Next, you want to add all your expenses together (not including any savings or splurge) and subtract it from your income. For example: Income: $4000 – Expenses: $2600 = $1400

What you have left is what you’re able to save or splurge without making any changes. Now that you’ve done this, you’ll have a rough idea of how your budget is looking and you’ll have some feelings about this but this is where we make our changes (if they’re necessary! You may be really happy with what you’ve uncovered and that’s great!)

I know what a lot of you will be saying, how much should I be saving?

It’s usually recommended to save about 20% of your income towards your goals but that’s a personal preference, some people split splurge and save down the middle so you get the best of both worlds, for example, $600 towards saving and $600 towards splurge. Now that we’ve split things into categories you should have an idea of how much you splurge currently and you’ll be able to see how possible your savings goals are, so if you’re not happy with your splurge number it’s time to cut things or adjust things.

This is REALLY up to what you hope to achieve and what’s important to you. I’m super passionate about keeping things that are important in your budget, otherwise, you’re just not going to stick to it. So filter out what’s important to you and what’s not, I’ve kept a weekly takeaway night for my family and my hairdresser appointment every 8 weeks.

So the things that aren’t important to you, can you cut it completely? Or just reduce it?

Once you’ve made your changes and set your goals this is where you get to put it in a proper budget template so to help with that I’ve made a printable budget sheet (yay!) even if you don’t use it you can use it as a guide to what your budget should look like, click here to download.

Then last but certainly not least, whatever each category is divide it by the frequency you get paid for example:

  • if you get paid monthly you don’t need to change a thing

  • if you get paid fortnightly you want to multiply each expense by 12 then divide it by 26 (fortnights in a year)

  • weekly is the same (x 12) but divided by 52 (weeks in a year)

And that is the amount each payday you need to put toward each thing. I’m definitely the kind of person that likes to have multiple accounts for each of the 5 main categories (sometimes more for each saving goal) but this may not be your thing. Some people like working with just cash but whatever it is I would definitely have your “splurge” money separate from the rest, this is the amount you can do whatever you want with each month.

And that’s it! If your expenses seem a bit high keep your eyes peeled over the next couple of weeks for a new blog with quick ways to reduce expenses without too much fuss!

So tell me, how did you go? Were you happy or unhappy with what you learnt about your financial situation?