I'm incredibly well practiced at writing an idealistic family budget but not so good at the realistic sort. And you have to be realistic when it comes to money for the family, don't you? Incidental expenses and financial surprises (of the not-so-cheery-kind) are guaranteed.
I've spent the last week preparing my accounts for my annual trip to the accountant and a quick scan of my bank statement revealed one rather confronting fact: when I'm busy and not entirely focussed on my budget I revert to frivolous spending habits. As soon as Percy arrived I opted for convenience at every opportunity and convenience is always the most expensive option. Alas, I feel like I'm back on track with added motivation and a sharp budgeting eye.
I like to think that the essence of simple living is living within your means; cultivating healthy and realistic spending and saving habits. And perhaps the first step to being realistic with money is to recognise exactly what your financial habits are. Me? I'm a spender who will transfer too much money into our saving account without thinking about the everyday expenses that will undoubtedly arise over the following week. Daniel? He's the saver who will research for months before buying something, will always buy second-hand or in the sales and is incredibly adept at going without. Together there's some balance there, I'm sure of it.
Our finances have changed significantly over the past few months, such is life in the freelance game. We have also had a few big expenses: a second car became an absolute necessity when Daniel's workload increased (there's only so long you can rely on the help of others) and we're paying for Poet's operation upfront (subsequently we've also increased our health cover to include hospital cover...the things you learn).
As for a realistic budget? You Need a Budget is a handy app for those who need some direction and ASIC recently launched the Women's Money Toolkit which asks you a series of questions and then offers a variety of helpful financial tools including a budget planner. It also links to Centrelink so you can keep on top of your family's entitlements.
But whilst apps and programs can be useful guides, there's also the bare bones, back to basics way of tracking how and where you spend your money. All that's required is a piece of paper, a pen and the discipline to write it all down. Indeed, if you want to know where all your money is going just document every single expense for a fortnight and the answer will be right in front of you.
So how do I create as budget that's both realistic and geared towards saving for our own home? I make a list of monthly expenses that includes rent, bills, extra-curricular activities, petrol and groceries. From there I allocate a certain amount for spontaneous spending each week and the rest goes into our savings account (at the end of the month when everything is accounted for). We recently moved all our money into a savings account that offers us a great interest rate as long as we deposit regularly and make no withdrawals. We have set up an automatic transfer each fortnight to make sure we're meeting the minimum deposit required - an invisible habit, so to speak, that is recommended by almost every financial guru out there.
Here's what we're also doing to make sure we squirrel away as much as possible:
- when we're home we'll often make our own coffee and when we're out we'll either sit in at our local cafe or take our keepcup (many cafe's will charge you less if you take your own reusable cup - good for the environment and your wallet).
- I've started Christmas shopping. Granted this may be a little premature but I figure that without the stress of last-minute shopping I'm more likely to spend wisely. A little purchase every fortnight ensures I'm not taking a significant amount out all at once - buying beautiful gifts here and there ensures I'm buying consciously and with awareness.
- I've stopped using paypass/paywave. Honestly, the ease of this payment method is a little frightening and whilst it's very handy when you have a baby on your hip and a wallet in your hand, it's not so great for your saving goals. Why? It may be different for your bank but I've found that the transaction doesn't show up immediately so it's difficult to keep track of how much I've spent. With this in mind, I do try to only spend cash where possible.
- we buy groceries online. I buy my fruit, vegetables, oil and sourdough from Nurtured Earth and the rest of my groceries from the supermarket. A grocery trip with a baby-in-tow is never fun and I find that I'm much less likely to overspend if I can keep track of it as I go. I'm also more likely to buy the essentials when they're on sale (it shows up on my account) even if I don't require them that week. My Groceries is a handy app that notifies you of weekly specials as you type your list (thanks for the tip, Leuke). Meal planning is essential for conscious grocery shopping and once a month I'll spend a few nights rustling up dinner with leftovers, pantry staples and pre-made meals that I've frozen to make sure little goes to waste.
- we switch our appliances off at the wall because electricity is one of our biggest expenses.
- we don't go without everything. This may be surprising but I don't think depriving yourself of all indulgences is healthy or beneficial in the long run. There's a lot to be said for saving for your future but enjoying the present is important, too. So yes, we spend money on the occasional cake with coffee, a bunch of flowers for the table, a take-away Indian, ice-cream cones and craft supplies.
- I refer back to my bank account and budget plan at least once a week to ensure we're not swaying from our intentions. Constant reminders are always necessary for spenders like me.
Now that we're halfway (and a bit) through the year, how is your family budget looking? Are you on track to meet your savings goals or have unexpected expenses got in the way? What is your failsafe advice to creating a realistic family budget?
This post follows on from an earlier discussion about the Cost of Living in 2015. I've also written this as an entry to Heritage Bank's Savvy Saver Awards which are determined by reader votes. I would be so appreciative of your support - just head over here, search for Practising Simplicity and vote. If you do so you could be in the running to win a $100 gift card