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!