You can call it a budget if you like but that makes me think of another word that we don’t love – Diet. It sends chills down our spines and we avoid it by doing anything else we can think of, maybe even preparing our tax return – well maybe not that far! When we work out what we spend, we do need to set aside money for the fun things in life so I prefer to be more positive and call it your ‘Spending Plan’.
You’ve heard it all before from so many finance ‘gurus’ – write down what you spend and earn. Yes, sorry, I am going to tell you the same things … but give you the motivation to do it. Think about this. If you want to travel to a friends’ home on the other side of the city, you put their address in your GPS or plan clearly how to get there. If you didn’t do this, you know that you will get lost and end up somewhere else. A ‘Spending Plan’ is the same. It’s a vital first step to knowing what you want out of life and having a plan no matter what you earn. I’ve seen people earning $20,000 who are better off financially than people earning $200,000. Hard to believe but true.
What’s the best way to do a ‘Spending Plan’? I suggest that you grab a drink and sit down somewhere quiet with a spreadsheet, like the one on www.moneysmart.gov.au to work out what you spend. You will see that it splits your spending into several different categories which is vital to make sure this is worth the effort. Phil Gard is the Financial Wellbeing expert for Active & Thriving and owner of Map My Future. For individualised financial wellbeing coaching Phil can be contacted directly.