The age old... budget

These days, you’d be hard pressed to find either a personal finance book or a personal finance blog that doesn’t advocate the use of a budget. I wholeheartedly agree; a budget is definitely needed! I’ve done my fair share of experimenting with budgets and thought I would post about the different methods I have used and why they did or did not work for me.

No Budget

For a while, I experimented with the “no budget” budget. I am not a very frivolous person. Sure, I like to treat myself as much as the next person, but I don’t have a problem with spending, spending, spending. I plan big purchases or save up for shopping sprees (which even then are only around $100). So with this “no budget” budget, I would basically wait until the night before pay day and any money left over from the previous pay that I hadn’t spent would be transferred into my savings account. This worked best when I was in high school and working part time at a supermarket. I didn’t have a lot of expenses. When I got my licence, I was given the use of my dad’s old car. This was mainly because my parents didn’t want to drive me to school anymore (there wasn’t a bus to my school anywhere near my house). Petrol became a new expense, but even that wasn’t very much. Until I graduated, I was still fed by my parents and was only required to pay what I realise now was a very small amount of board (though at the time I thought it was HUGE). I didn’t go out very often as I was either working, playing sport or spending time at home. I’m not a huge party person, preferring to go out to dinner with some friends and enjoy my night. That’s starting to get more popular with my peer group but when I was sixteen; all anyone wanted to do was party. So this too saved me some money. I managed to save quite a lot of money pretty quickly, especially given how little I really earnt.

This didn’t work as well when I moved away to uni and actually had expenses. Now, truth be told, if I was truly frugal then I would be able to spend almost nothing! I don’t pay for university (my job covers it), I am on a compulsory housing and food plan that gets taken out of my pay before I even see it. I have full medical and dental cover, I have free gym membership and I am required to wear a uniform of sorts to work. So really, apart from toiletries and some casual and going out clothes, what else do I have to spend my money on? Great question! But I’m a twenty one year old girl; I always find something I want/need. So this “no budget” budget began to see me not saving any money and thus, I was forced to abandon it.

Cash Only (the Envelope System)

For my twenty first birthday, my younger brother and sister bought me a beautiful Oroton purse. For any males out there reading, this is probably no big deal to you but I’m sure all the ladies will understand when I say, I LOVE this purse! It’s beautiful! It’s very plain and simple (much like me), but I love it and feel important and classy every time I pull it out!

This purse has four spaces in it where you can put cash. This helped me to create my cash only budget. Some other people call this the envelope system but I didn’t technically use envelopes so to me, it’s just the cash only budget.

The idea was that each pay day, I would withdraw $200, or four $50 notes. Each of these fifties would be placed into one of the four sections of my purse. One section would be for groceries, one for petrol, one for clothing and one for miscellaneous (including eating out). This worked pretty well. I never used the full amount except for maybe miscellaneous so I would merely carry the amount over. I don’t drive my car that often as I live one campus so my petrol bill was never very high. If there was money left over from that, I would usually move it into the clothing section which meant I could splurge on something for more than $50.

I don’t really remember every running out of money, so maybe it was actually a really good system. I would basically leave around $150 “cushion” money in my bank account just in case and move it into savings the night before pay day. Maybe I should go back to this system.

Strict Budgeting

For a while, I tried to allocate money to each thing that I thought I would spend on. For example, I would allocate $30 to groceries, $30 to phone credit etc. This made it hard to have fun as you don’t always predict opportunities to have fun, so you don’t always budget them. Mostly, I just found that I would spend over in certain categories but because I spent under in others, it didn’t really matter. I didn’t really like this form of budgeting.

Free Flowing- the one I am currently using

Currently, I move $300 a pay onto my Visa Debit card. I then use this for everything needed. This covers eating out, my mobile phone, groceries, toiletries and petrol. If I have particularly low expenses, I might be able to buy some new clothes or underwear.

I don’t mind this system but it makes it hard to save up for bigger purchases that don’t fall under my usual spending. For example, as mentioned in a previous post, my running shoes are quite expensive. I need to save for these but don’t have a specific ING account (where I do all my best saving) for running shoes.

My Solution

I think I’m going to do a mixture of the cash only system and the free flowing budget. I will continue to transfer that $300, withdraw $200 of cash and the $100 that is left in there can go toward saving up for something- like my running shoes. We’ll see how this works out, starting from next pay!

I waited a whole week!

I went shopping last week for something for my computer. I had to go into a clothes shop I'd never shopped in as my sister (who lives in another state) wanted me to look at a dress she was thinking of buying. She wanted me to approve it for her, so I headed in and took a look at it.

I discovered this was actually a very nice shop. Its prices were mid-range and I saw some things I really liked. I saw one top in particular for $60. I really like it. It was classy and could be used as business attire, going out with some friends to a nice restaurant or even heading out for some cocktails. I really loved it.

However, I just looked as I am, as always, trying to save money. I figured I'd think about it and if I really wanted it, I could come back sometime this week and buy it. Well, it has been on my mind the entire time and I just know it will nicely complement my wardrobe. I think $60 is a reasonable price, especially given how much use I will get out of it and how classic it is, I'll be able to wear it for many years to come.

Impulse buying can kill any budget. However, sometimes you do see something and you just instantly have to have it! I think this waiting thing is quite helpful. It made me realise exactly how much I wanted it, it allowed me to ensure I had the money to buy it and it also gave me something to look forward to.

So this afternoon, when I head out to help my friend with something, I am going to purchase the top. I've even planned when I'm going to wear it first! On Thursday night I'm heading out to dinner to celebrate a friend's birthday and I'll be looking glamorous in my new top!

I'm Tagging Myself!

I love these little quiz things so I thought I'd tag myself to fill one out!

1. What were you doing ten years ago?

Ten years ago I was eleven years old and in grade six. I lived in Darwin and that year I went to Bali with my family. Lots of fun!

2. Five items on today's "to do" list.

1. Vacuum my dispicable floor. It has been way too long!

2. Wash the dishes.

3. Email my grandmother.

4. Go to bed early as I didn't get enough sleep last night.

5. Do my situps and pushups!

3. What snacks do you enjoy?

Microwave popcorn, sultanas and Curly Wurley's.

4. What would you do if you were a billionaire?

Pay off my parent's debts, buy myself and all my siblings a house, buy my little brother a car, pay off mine and my sister's car, travel around the world with my mum and sister, donate to charity and invest the rest for retirement.

5. Where do you want to live when you grow up?

Probably the Gold Coast but I would like to live for at least a year in America and London.

I'm not going to tag anyone as I don't know how that works and I don't think I have any other bloggers following me. But that was fun!

Blog Envy

I am having some major blog envy! Not only are other blogs amazingly helpful and insightful, but people read them! I have no idea what to write! My life is very dull, I don't really spend a lot of money so what am I supposed to write about? And what is the point of writing if no one is going to read it!

I am positively green with envy!

Wish Lists

I like to write myself a wish list of smaller things that I am saving for (i.e. not a down payment, overseas trip or new car). Sometimes it's as something small as some new undergarments or something as big... actually there is never anything very big on there. Currently, everything on there is around $50-$80. There is one expensive thing on there, my running shoes.

I don't think I have ever spent more than $50 on a pair of shoes. I just did not get that female gene! I like nice shoes but I don't like spending a lot of money on them. However, my running shoes are an exception. I run a lot. I also have knee problems from my childhood days of playing competitive tennis. This means that in order to avoid knee pain, I need to wear a certain type of running shoe which costs around $250. My current ones are looking a little worse for wear but I'm trying to make them last as I save for my next pair. Also, as I bought this pair in September last year, I need to wait until the end of the financial year so I can also claim my new pair on tax. That's right, I get to claim this ridiculously expensive shoes on tax, so that makes things slightly better.

I think it's so important to save for an emergency fund, for a down payment if that is what you desire, for travelling if you love it as much as I do and just for savings in general. But I also think it's important to save for smaller things that you can't afford to buy each week. I get a great deal of pleasure when I cross something off my wish list. I admit, mostly it contains clothes but every so often it has something else on there which I don't need, but really, really want!

Does anyone else use the wish list system?

Getting an Education

I know that many people, all over the world have achieved great success, wealth and happiness with little or no education. I am not one of those people and never will be. Due to my upbringing, I place a great deal of importance on education.

Neither of my parents finished high school and yet, they are both very successful and live comfortably. However, maybe because they didn't complete their educations, they always encouraged my siblings and I to try hard at school and, if it was our desire, to go on to university.

My older brother completed a year of his degree and then joined the Navy. Uni was not for him. This means that I will be the first member of my family to graduate from university (have I mentioned there are only six months to go!) My sister is half-way through her second year of a teaching degree and loves it. My younger brother is undecided but is leaning toward attending the same university I am at or following my older brother into the Armed Forces.

So despite the importance I place on education in my own situation, it's not the same for everybody. My older brother is one of the wealthiest 23 years olds I have ever met and yet, he never completed a degree. However, my sister and I will be getting our degrees and couldn't imagine entering the working world without them.

What does everyone else think about the importance of education?

Fortnightly Budget

So I got paid today! Yay! I get paid every two weeks, so this budget is obviously until I get paid again in two weeks. I know most Americans seem to be paid monthly, but in Australia, the majority of people are paid fortnightly (do you guys call is bi-weekly?). Due to the nature of my job and university (they're linked), my rent, utilities and meal fund are all non-negotiable and come straight out of my paycheck. As I can't reduce these even if I wanted to and as I never see the money, I haven't included them here. I also contribute 10% to my superannuation each fortnight which I also haven't included, again, because I don't see it.

So here goes!

Fixed Expenses

Mortgage Payment $180

Car Payment $170

Total $350

Savings

Car Fund

(to cover insurance, rego and maintenance) $70

God-Daughter's Fund

(to give to her on her 18th birthday) $5

Emergency Fund $250

Total Savings $325

Discretionary

Everything

(groceries, eating out, mobile phone etc.) $300

Graduation Bill

(paying it now to get a head start) $50

Total Discretionary $350

How does that look? Any gaps? Anything I'm spending too much on?

Plans Have Changed

So, my plans have changed! For anyone out there who is reading this, you might remember that I had plans to purchase a property at the beginning of 2010 with my brother. As I am definitely not cash rich, we were going to use the equity in one of my parent's investment properties as the deposit. My brother has a lot of cash but I'm not comfortable borrowing from him.

My parents have decided to do some renovations on their house. They will look fantastic and significantly increase the value on the place. They got the quote yesterday and it's going to cost somewhere between $70 000-$100 000. How are they planning to pay for it? By selling that investment property.

My mum guiltily called me this morning but of course, I completely understand and would never ask them to forgo their dreams for mine. It just means that I will have to put the purchase of property on hold for a bit longer!

So that's just a quick update! Comment if you're reading!

Roadmap to Wealth

I am a HUGE fan of Meg's blog at http://wealthisgood.blogspot.com. I really enjoy reading it each day or week and I have learnt a great deal from it. One of her earlier posts was entitled 'My Roadmap to Wealth.' In this, she used a number of headings to detail where she was going on her road to wealth. I'm going to use the same headings here today to show anyone out there (is there anyone?), just where I would like to go! Thanks Meg for the inspiration!

Education

1. Receive a Bachelor's Degree in something that will be both interesting and useful to me. Six months to go!

2. Complete a law degree via correspondence whilst working full time.

3. Whilst working full time, volunteer for every course possible ensuring that I am as qualified as I possibly can be.

Security

1. Pay off my car as soon as possible to lessen my monthly burden.

2. Do not acquire anymore consumer debt.

3. Build an emergency fund of $1500 and a back-up emergency fund of approximately $10 000.

4. Continue to contribute 10% (highest amount allowed) to my superannuation account (similar to a 401k I believe- basically this is Australia's version of retirement savings).

5. Own a home to live in. Though my job will require me to relocate every 2-3 years, I still plan to buy a home to live in next year and once I relocate, it will become an investment property.

Giving

1. Find a preferred charity to contribute to each fortnight. I have been meaning to research this for a long time but am yet to actually do it!

Income

1. Have a steady, fulfilling job that pays well. I've already achieved this, yay!

2. Continue to buy property that can later be used as passive income.

3. Continue to invest in shares that can later be used as passive income.

Assets

1. Own five properties (still mortgaged) by the time I am 30. I currently own one and am 21 years old.

2. Build my share portfolio up to around $50 000.

Fun!

1. Ensure that I am always saving for something that may not necessarily improve my life (i.e not a need) but that I really, really want!

3. Travel overseas at least every three years.

Well that's my roadmap to wealth. I am sure it is a work in progress and will change over the next few years, especially once I graduate from university. What does everyone think?

Study Break

I'm taking a much needed study break and thought I would update. I don't actually think anyone reads this but you never know.

Last October, around the time we were getting our pay rises, it turns out that pay made an error and forgot to take out my monthly deduction for food. I am required to pay for my food whether I eat it or not, sort of like a meal plan at many universities I suppose. As I knew I was getting a pay rise around this time, I didn't notice that they had stopped taking money out for my meals. In February this year, this error was brought to my attention. Despite it not being my fault, I was required to pay the money back, over $2000! They simply took an extra $150 out of my paycheck each fortnight until the debt was paid.

On Thursday, I will pay a further $22 toward that debt and then, it is all paid off! I will have another $150 coming my way each pay. This is very exciting for me.

Any ideas on what I should do with this extra $150?

Ooops

My diet is going down the drain- both my actual diet and my money diet! I'm three days out from my first of five exams so I'm stressing, eating and spending! As such, I'll be out for a week or so- not that I have any readers, but just in case!

Cheap Furniture!

My mother called me yesterday to ask me if I would like her to buy me some furniture- that I would pay her back for of course. Where my parents live there is some sort of second hand furniture store that they go to quite a bit. A lot of the stuff is from closed down hotels or businesses.

Basically, for $135, my mum was going to buy me a TV stand, two bedside tables, a desk and chair, a chest of drawers and a small, round dining/kitchen table. It's all wooden and apparently quite solid. I don't like the light colour of the wood but can either stain it or paint it.

So if I want her to, my mother is going to go and buy them for me on Saturday. I'm pretty sure I want them but is it too early? I won't have a home to put them in until next year (I'm still living in a dorm room). Any thoughts out there?

It's worth it!

As a twenty one year old, it's sometimes hard to plan and try to set myself up for the future. I am surrounded by other people who frivolously spend their money on alcohol, food and the latest fashion. Oh how I wish I could afford those things!

The Australian government recently gave $900 to low income earners (under $100 000) as part of the stimulus package. Usually, my frugal self would have saved that money. However, I had been saving for so long and was in such desperate need of some warm winter clothing (it's winter in Australia right now) that I went shopping instead. I also used it to buy some plane tickets home to visit my family, but most of it went on some new, warm, winter clothing. I tried to be smart about it, buying things that would last and would not go out of fashion but it was still a very weird feeling for me.

I just don't haphazardly spend my money like that. If I want something, I usually have to save up for it. It felt good to not have to save for months to be able to keep myself warm this winter, but I was also wracked with an enormous amount of guilt!

Does anyone else feel this way? My peers are able to do this every payday, but not me. Like I said in a previous post, I get $250 to last me for everything for two weeks! Most people around me don't save and I don't know of anyone else at my university with a mortgage. So while it's sometimes hard to resist the temptation, I think it's definitely worth it and I hope it will be ten years from now!

Eating Out... it'll be the end of me!

Just went out and had a delicious Chinese dinner. $21 down the drain but it was oh so yummy! Definitely need to stop eating out so much!

My Budget... or lack thereof

I have tried every budgeting method under the sun! I used to allocate every cent that I earnt, however, I found that a little too strict. I have recently decided to allocate $250 a fortnight (I get paid every two weeks) to live on. With that, I can do whatever I want. It has to feed me and put petrol in my car, but other than that, I can do whatever I want with it.

This is my first pay doing this and so far it is working well. I visited some family a couple of hours away from me on the weekend, so I did have to spend a bit more money than usual on petrol. But other than that, I think it's working.

I allocate money to savings before I even see it which for me, works out well. At the moment, most of my savings is going toward paying my brother off. However, he isn't desperate for the money so I'm thinking of talking to him and reallocating most of my savings toward my new home fund so that we can successfully buy one at the beginning of next year!

I allocate some to my car fund (to cover rego, insurance and any needed maintenance), my emergency fund (ridiculously small right now) and $5 a fortnight to a fund for my God-daughter so I can give her some money when she turns eighteen.

So does it sound like I'm handling my money okay? It's hard to know sometimes, fingers crossed I am!

First Post

Hi and welcome to my blog! I have been reading personal finance blogs for around a year and a half now. On one or two occasions I have commented but for the most part, I've just read and read and read, taking in as much information as I possibly can.

I am very interested in personal finance and setting myself up for the future. I am a twenty one year old woman from Australia about to enter my final semester (yes!) of university. I earn around $42 000 a year and am guaranteed a full time job come graduation. I will also graduate with no student loan debt. In my first year of uni, I went thirds in an investment property with my parents and my brother, and thus have a mortgage debt. Around four months ago, I bought (and financed) a car of which I do not regret. Last year I travelled to Vietnam and over Christmas spent three weeks in Europe- both of which I was able to do without going into debt. My brother and I invested $10 000 in shares at the beginning of the year, of which I borrowed my half from him. I have paid some of it back and still owe him $2500.

This is basically my financial standing in a nutshell. After I graduate, I am moving to begin my career. Once I get there, my brother and I plan to purchase our second property. It will be an investment for him however, I will live in it as we both pay off the mortgage. The reason behind this blog is to motivate me to save for my new home, manage my money correctly and learn a bunch of things along the way!

Please read and comment!