Personal Budget Part1 – How to create a budget & track your spending

If you’re like most Australian households, then you are more than likely living paycheck to paycheck along with that dreaded credit card debt! The very thought of creating a personal budget brings on a sinking feeling and a kind of guilt and shame…Yeah, you know exactly what I mean! But don’t worry, we are all in the same boat!

We all know we should have one, we all know that we need one and we all know the experts preach that we should have one!…. Then why do we put it off? Is it time? Is it not knowing where or what to do? Or is it the thought of being accountable? Accountable to ourselves, our partner, our friends and social lives? Or even our present and future selves? All these questions and thoughts that float within our self-conscious are the stories that we all tell ourselves….

But what if I told you it doesn’t have to take hours of your time up? That you can have that “Instagram” life? That it does not mean going without everything? That it’s relatively easy to set up and once established you can almost set and forget it?…. Sounds too good to be true? Sure is! But I’ll tell you it’s not going to be sexy and definitely contains traces of boring!  🙄

When it comes to your Personal Budget what comes first? Well firstly you need to decide exactly what it is that you would like to achieve. Now this is a personal journey; and only one that only you can decide! Some may like to simply pay off all their debt while others may like a new car or holiday? Others will be saving for their first home, others creating their wealth? Or even the thought of having a savings account so they simply don’t have to scrimp. Again only you can decide what you want to achieve…. Take a moment or two and decide “YOUR WHY” and write it down – did you know that people that write their goals down have a higher chance of achieving them? Also the goals seem to be achieved much more easily.

So now that you know your “why” let’s begin the journey!

Working in the Financial Planning industry I have seen many budgeting templates out in the world! But I have to say most are very lacklustre! The templates don’t have either enough capture/input space or completely opposite they are too confusing. At this point I want to point out the information provided is general in nature and provided as a guide only! All information does not take your personal circumstances into consideration and again is just a guide for you. Also I have no affiliation to any of the sources mentioned.

There are tools out there (on the interwebs) that I like and one such one is:

Personal Budget Template Number 1 – The extremely simple to use template

1/ Money Smart Budget by the federal government and ASIC (Australian Securities & Investments Commission). It’s extremely simple but can be limiting on what you can input. The Money Smart’s budget spreadsheet found here:

https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/budget-planner

BUT!… the one that I like to use is one that I personally built. Using a combination of others out there but lacking the various fields to truly customise where needed:

Personal Budget Template Number 2 – The more in-depth!! (I personally use this)

2/ Simply Altruism’s Budget Planner Spreadsheet found here:

Simply Altruism – Budget Planner

Simply Altruism Budget Planner_Personal Budgeting Part1 – How to create a budget and track your spending
Simply Altruism Budget Planner_Personal Budgeting Part1 – How to create a budget and track your spending

Going forward I’ll be referring to and using the Simply Altruism Budget Planner spreadsheet.

So let us begin your journey and I’ll guide you through what will seem like a minefield of information. Don’t worry, I know your anxiety levels are high right now and it will feel really daunting but there really is no need to worry. The spreadsheet is made up of different areas – it really is as simple as follow the bouncing ball and fill in the boxes  🙂

There are two types of information that you are going to need:

Income, in the form of Salary/Wages (can be after-tax – that way no need to calculate tax etc.) and any other income that is received into your household. Whether it would be from a rental, shares (dividends) or any other investment income you may have.

Expenses, these are any out of pocket bills, mortgages/rent, clothing, travel/car, insurances etc. Anything that is paid from you Salary/Wage to run the business “You Inc.” in your day to day life.

Completing your Budget: Section A – Income

You do not need to worry about calculating your tax as all you will need to enter is the “After Tax” or “Take Home” amounts. This is what you see in your bank account whether weekly, fortnightly or monthly. If you receive bonuses or overtime you can add that separately especially if it fluctuates. You can simply put an average in 😉

If you are unsure and only know your GROSS or before tax income is, or just want to double check what your annual salary/wages are, a great website is Pay Calculator by the Australian Taxation Office or ATO – link below:

https://www.paycalculator.com.au/

For our working example let’s take a retail store manager that is on $62,000 per annum with S.G (Super Guarantee) of 9.5% on top of salary. As per screenshot below, if Super is on top of your agreed salary do not click the box. If you are unsure how your Super has been negotiated then ask your employer, Payroll/HR Department. You can also refer to your payslip.

Pay Calculator Example using 2020 Figures
Pay Calculator Example using 2020 Figures

We can now compare the ATO calculations (ATO will always be correct!) vs what is received in our bank account. So go ahead and input the Salary of $50,213 per annum:

Simply Altruism Budget Planner Example 1_Personal Budgeting Part1 – How to create a budget and track your spending
Simply Altruism Budget Planner Example 1_Personal Budgeting Part1 – How to create a budget and track your spending

I will point out, at this stage that a budget is a guide! Complicated taxation is not included (unless in your own skill set). E.g. adding back Franking Credits from Shares followed by deducting any rental property expense and adding depreciation etc. This I would urge you to leave to the experts like your accountant. Your personal budget is simply to track your spending habits and put a plan in place for your surplus cash flow.

So go ahead and add you salary or wages (you can simply add your average pay if you are casual, even defaulting to weekly if that’s what you know/have going by your latest payslip). Don’t forget to add any other investment income or your partner’s income if completing a joint/household budget.

Completing your Budget: Section B – General Expenses

Here’s the thing I like about this particular spreadsheet – Like you, I quite often don’t have a clue exactly what a particular item or bill is costing me (cue gasping breath – whhhattt I hear you say). E.g. you may have signed up for a subscription? Or you live in a unit that pays Strata Fees? All you know is that it is deducted weekly, monthly or quarterly. As long as you have identified that it is a regular expense you can go to your banking statements (nowadays you can scroll through the pages on your phone) and simply input that into the spreadsheet.

Now here’s the kicker if you know you pay $86.68 per month for your gym membership and a couple of PT (Personal Training) sessions, then you simply go to the relevant section and enter the dollar amount in and change the “Frequency” drop down box to monthly. The spreadsheet will automatically calculate how much you spend yearly as per below:

Simply Altruism Budget Planner Example 2_Personal Budgeting Part1 – How to create a budget and track your spending
Simply Altruism Budget Planner Example 2_Personal Budgeting Part1 – How to create a budget and track your spending

Now you can repeat this process all the way down the subsections under General Expenses until you are at the end of the spreadsheet. Try to include as much as you can! Also when a particular tab is not suitable then why not use the “Other” column that is included. An example of this maybe that you may get a massage once a week for joint pain, so under Personal Care Expenses part 4 – You may type over the other writing Massage Therapy and enter in $40 per week? Again just an example.

Simply Altruism Budget Planner Example 3_Personal Budgeting Part1 – How to create a budget and track your spending
Simply Altruism Budget Planner Example 3_Personal Budgeting Part1 – How to create a budget and track your spending

Another method that a lot of experts talk about when it comes to tracking your expenses is: Keeping a note pad on you and write down every transaction you make. This will not only help you track your spending habits but also force you to take note of the type of spending that you are conducting. For example it may point out that you are spending too much on the kids at the checkout? (Damn those strategically placed $3 add-ons!!), or even those coffees during the day.

I will add that as we move into a “cashless” society with PayWave and Cashless Transfers on our phones/watches there will really be no need to hand write our spending habits… what does a bank note look like again? For this reason I like referring to my transaction history on my Banking App. But only you can decide what method will work best for you  🙂

Let’s recap! When filling in your expenses you are going to need to know: A/ the amount B/ the frequency.

Where can you find this information?

1/ The number 1 source is your banking statements – both online or written statements. These are great as they can often show a pattern of your spending/expenditure.

2/ Bill’s such as utilities, car rego/insurance etc. Also found via you banking statements, or through paper statements.

All up your initial personal budget may take an hour or two to complete. Once established you should find that it will only take you minutes to tweak every so often. It is a really is a good idea to skim over once a month just to ensure you are on track. Like anything in life the more you put in the more you get out!

So now you’ve created your very own personalised budget let’s look at Personal Budgeting Part 2 – Putting you budget into use: Saving for a house deposit

Don’t forget to visit our “Tips & Blog” page for further information on all things Real Estate! And why not download the FREE “The Property Buyers Guide App” while you’re at it 😉

Feel free to leave a comment and tell us how this article has helped you; we’d love to hear from you! :-) Do you have a suggestion on the next article? Or how to improve “The Property Buyers Guide” App?