David Loses Money Tracking my adventures in making money without earning it

Learning to Budget

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I’ve traditionally been pretty bad with money. Throughout most of my 20s, it used to be a cycle of “hooray I got paid, time to buy all the things I want… oh crap now I’m totally pov until next payday.” Usually that, or variations of “oh crap, I forgot this bill was coming up.”

In June 2014, my friends and I went quarters in a discount 4-pack licence for You Need A Budget (YNAB) on Steam. Yes, on Steam. So it was sitting in my games list just under World Of Goo. It was a strange time. Anyway we all lived variations of the previous paragraph and wanted to get more control over what was going on in our lives. I’d tried Quicken, Mint, Excel spreadsheets and a few other budgeting apps before and they’d never worked for me, but YNAB purported to be different somehow.

It had a bit of a learning curve and there were a few false starts, but I was determined to get the hang of it. It took about 6 weeks until I started noticing an actual difference to my life and stress levels. After around 3 years I was completely out of debt* and the previously familiar background stress of “money” was not a thing in my mind anymore. I cannot emphasise enough how good that feels. I remember it constantly being an anxiety at the back of my mind, and these days it’s just… gone. Yes, I get paid much more than I used to, which allows me to be a lot looser with things these days, however I believe that knowing how to budget makes a gigantic difference to your life no matter your income. I am super fanatical and evangelical about You Need A Budget (it has changed my life) but regardless of how you do your budgeting, the idea all boils down to:

Know what you’ve got to work with.

It sounds super dumb and obvious, but I think once you have total visibility over your finances, the rest will gradually fall into place. Figure out what your income is, then figure out what all your expenses are. Group them together in categories. Also super important is figure out what all your future bills/expenses are and when they’re due. And don’t budget money you don’t have. That is, don’t start budgeting next month’s pay because you don’t have next month’s pay.

Also, make sure you’re realistic about your expenses. When you’re budgeting, especially when starting out, don’t be like “oh yes I am a responsible adult who eats at home all the time, and never goes out on expensive benders” when you’re clearly not – because what’ll happen is you’ll blow through what you allocated to yourself, get discouraged, decide budgeting is pointless, and give up. Then you’re back where you started. Just be realistic and don’t judge yourself.

Now hopefully all your money coming in is greater (or about equal) to all your money going out. If not then… ouch. The good news is that you should now know how much you’re spending on various things, which lets you fine-tune stuff and figure out where you can cut back or adjust things to get your finances under control. This can be painful, but don’t get discouraged – I swear the results are worth it. It’s kinda like starting exercise – it can be painful and suck and seem pointless, but after 6 weeks or so you’ll start noticing little differences here and there. Keep at it and before you know it you’ll be someone that nobody wants to talk to because you won’t shut the hell up about fitness (or in my case, budgeting).

Hopefully once you get your expenses below your income, then you have money left over! But! Don’t have money left over! Budget that cash into something you’re saving up for. I find that having money left over just encourages me to spend it on dumb garbage. Which there’s nothing wrong with, just if you’re buying dumb garbage make sure you’re doing it intentionally (have a “dumb garbage” category), not because you’re like “eh I didn’t know what else to do with it.”

* I have a credit card and a charge card – these are exclusively for chasing points though, and are both set up on direct debits for the the full amount each month, so while they’re technically “debt”, I don’t count them as I’m not spending money I don’t have. I don’t buy things unless I have budget money available**

** okay okay, I don’t buy things most of the time unless I have budget money available

My Routine

So this is the budgeting routine that I have been living for 7 years. It is definitely over the top, however it is such a habit now that this is like muscle memory for me.

Payday

I get paid once a month. It used to be once a fortnight, but I suspect our parent company’s payroll provider charges them per “run,” so they figured they could save money by paying us once a month. Anyway it doesn’t make a huge difference because I’m living my budget life, but I think if I was still living my old payday-to-payday lifestyle it’d be a struggle. Anyway the idea is the same, just the timeframe is different. If I’m getting paid fortnightly then I’m budgeting for the next 2 weeks, if I’m getting paid monthly then I’m budgeting for the next ~4 weeks.

So I get paid. Hooray! I update YNAB so my bank balance in it is the same as my actual bank balance. And then it’s budgeting time! I love it – it’s like dopamine hit galore and generally pretty easy these days as I’ve been doing it so long, but I’ll run through all my spending categories and fill them in. Most of these values usually don’t change month to month (rent, health insurance, laundry, cleaners, Netflix/Stan etc) so I don’t have to think much about them, just put in the same as what it was last month. I also allocate money each month to an “impulse buying” category and a “day/night out” category – this still lets me regularly be spontaneous and stupid while overall remaining in control of my money.

Then I go through and allocate cash towards all my annual bills. YNAB lets you set a “due by” date for a category which makes this really easy. So I have rego due in October – the rego part will likely be around $330 based on what I got hit with last year, and the CTP part of it will be around $500. Now, because I have had the due dates set on these categories since last October, it means I’ve been allocating about $27 and $36 to them respectively each month, so their totals are now almost at $330/$500. Then in a few weeks when the bills come in for them I am not shitting myself figuring out how I’m going to pay them, I’m just going to pay them and not even feel the hit to my finances from them. It is THE BEST. I do this for all my annual bills – from Amazon Prime to my exorbitant Amex annual fee. Bill day comes around and the reaction is “eh” instead of “ah crap.”

This is the greatness of budgeting – the total removal of stress attached to bills and things, because you’d already anticipated and prepared for them ages ago.

Once I’ve budgeted all the annual stuff then it’s time to figure out to do with the leftover money. The past year or so all I’ve been doing is throwing it all into investments because we’ve been mostly prohibited from leaving the house, but generally this is where things like holidays, 3D printers, new computers, or whatever aspirational goals I currently have would go. For example, I decided a month or so ago that I’d try and get my pilot’s licence (wow they’re not cheap), so there’s a new category I’ve created to save towards that.

Once I’ve finished allocating all that I usually just sit there for a bit and be like “wow, look at how majestic this is, I am the greatest” then get on with my life.

Daily

Every day at some point I will log into my internet banking and charge/credit card accounts to see if there’s any transactions in there that I didn’t initiate myself. I don’t mean I’m checking for card fraud, but more I’m checking to see if there were any recurring charges. If so, then I update YNAB so it’s all in there. I’ll also try and keep the cleared/uncleared status of transactions in sync so YNAB is identical with that too. I am totally aware that this is overkill, however it’s just part of my habit. Also I occasionally get dividends or piddly interest payments, so I update those (then immediately budget the money somewhere, usually into “impulse buying” or holiday categories).

Whenever I Buy Anything

YNAB has a mobile app that syncs to everything. Whenever I buy anything, I just reflexively open the app on my phone and quickly enter the transaction in there. Usually takes me less than 10 seconds.

Randomly

Sometimes I’ll just open my budget and look at it and be like damn I’m good, then maybe bask in the glory of it for a few minutes.

In Summary

My budgeting routine might be a bit over-the-top, but even if it is, it still takes me barely any time. We’re talking a few seconds here and there each day to log transactions on my phone when I buy things, a minute or so a day to skim over my bank accounts, and maybe 15 minutes a month when I get paid. I have been sticking to this routine for over 7 years now and it’s the second best thing I’ve ever done for myself (the first is seeing a shrink, which yes, I have a budget category for).

Being Stupid

Having a budget doesn’t magically stop me from occasionally blowing out categories – for instance, I recently spent ~$600 crowdfunding a “smart” chessboard despite my budget not having space for it, and I fully intend to blow out my investing category this month due to Aussie Broadband unexpectedly announcing a share purchase plan that ends next week ($4 a share vs the current price of $5 seems like a good deal). If I was smarter I would’ve had more money set aside for unexpected expenses ahead of time, but instead I’m going to deal with YNAB nagging me that I’ve overspent for a week or so.

So yeah. While not ideal, it is inevitable that you will get hit with an unexpected bill, or you’ll really want something that is only on sale today, or there’ll be some other unexpected time-sensitive purchase. These things happen. You’ve got a few options, in order of most responsible to lease responsible:

  1. Just don’t get it.
  2. Make use of your “unexpected expenses” category (lol I don’t have this).
  3. Reallocate money from elsewhere – do I pull out from my car repairs category, or maybe I can skimp slightly on groceries this week?
  4. Blow a hole in your budget.

The thing with option #4 is you really don’t want to go there. It’ll be hanging over your head until next payday, and when you do get paid, you’re going to have less money to allocate to everything. It’s never pretty, and always brings that feeling of background anxiety back into my mind. Sometimes it’s unavoidable though. The trick is to make sure you get back on track as soon as possible, instead of letting it spiral or become a regular thing. If you’re blowing holes in your budget every month, it’s usually a sign that you’re not allocating to categories in a way that matches with your reality.

All Up

While most of the above describes my use of YNAB, I don’t think the principles are exclusive to YNAB. You should be able to apply them no matter what you’re using to figure out your budget. I’d really, incredibly strongly recommend YNAB though (imagine me looking all crazy eyed and grabbing you by the collar and telling you it’s great).

Budgeting can be really tedious and painful, especially when you start out. But if you stick with it long enough you’ll find it makes a measurable difference to your life and mental health. Learning how to do it properly really is one of the best things that you can do for yourself, and it really should be hammered into kids in high school. I could’ve avoided so much money-related stress and drama in my 20s if I’d just had better personal finance skills then.

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David Loses Money Tracking my adventures in making money without earning it

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