Budgeting essential if you want to ditch money stress

Budgeting — ugh, it conjures up the worst of thoughts and so many people don’t do it.

When you reflect back on your environment growing up and your own money memories, one of the questions is, "What were some of the money behaviours or habits you witnessed?"

Well, I reckon I’m pretty safe in saying most of us never witnessed a budget. If you did, I want to hug your mum and dad or whoever it was who role-modelled this!

A budget or a spending plan is not just for businesses, it isn’t something only us "nerds" do, and it’s not something that only "brainy" or "rich"’ people do. Let’s start by ditching that narrative right here and now. A budget is for someone who is serious about upping their financial confidence and ditching the money stress.

It’s also for someone who wants to align their spending with their values and priorities. So come on, get over your theory on why budgets are a waste of time and just try it.

First, let’s revisit your values and priorities. Think back to your money memories and remember it’s OK not to have the same money priorities as the household you grew up in.

You’re not them, they’re not you, so make sure these are YOURS, not what you think they should be because of some other influence. Take some time to envision where you want to be financially in the next year, five years, or even 10 years. Whether it’s paying off debt, saving for regular holidays, or building an emergency fund, having clear, specific and achievable goals will serve as your guiding light throughout the budgeting process.

Income and expenses: What comes in, what goes out — they need to work together, right? And believe me, it’s pretty common in our world that what goes out is more than what comes in, which is why we’re here.

Now I personally like using an Excel spreadsheet; you might be a pen-and-paper type of person, or you might prefer to use an app, but it’s literally two columns. Start by listing all sources of income in one column. Make sure they are net amounts, the actual amount that hits your bank account, including your salary, side-hustle earnings and any other ways regular money comes into your account.

Also, make them all align with the same cycle — so if you’re paid fortnightly from your main job but your working for families comes in weekly, we need to all be on the same cycle. At the bottom, tally it up to a total amount (that’s why I love my Excel spreadsheet).

In the second column, list all your expenses, including fixed expenses like rent, home loan, power, internet, groceries, fuel and debt payments, as well as those irregular/discretionary expenses like movie tickets and eating out.

It needs to be comprehensive, and this snapshot will give you a clear picture of your financial landscape and help identify areas where you may need to cut back or reallocate funds. Add this column up — and hold your breath, close your eyes, hope for the best ... Nah, just kidding, chill out — it might not match and that’s OK. We don’t know what we don’t know, but now we know and we can start to take control.

Moving things around and making a conscious budget: With your income and expenses clearly defined and your spending habits tracked, it’s time to divvy up those dollars!

The goal is ensuring your income tally at the bottom of the column is more or the same as your expenses column. This may not be the case when you start out, but even if it is, this next step is just as important for you as it is for everyone else — and I don’t care if you make $500 a week or $5000 a week. Money confidence doesn’t discriminate, rich or poor. Spend some time colour-coding your expenses, starting by prioritising essential expenses — the ones you HAVE to have to live, like your rent/home loan, debt payments, power and insurance, ensuring they’re covered first at the top of your expenses column and colour-coded as ESSENTIAL.

Then, allocate funds to discretionary spending categories based on your financial goals and priorities. It might be regular holidays with the family, or spa days with your favourites, road trips with some mates, or focusing on building an emergency fund.

Remember, it’s all about balance and aligning your spending with your values. Be flexible and willing to adjust your budget as needed to accommodate changing circumstances or new financial goals. This won’t be your final copy — this is just the start of the journey.

Budgeting can be heavy and confusing stuff, especially if you’ve never done it before. Find a buddy and do it with them if it’s easier. Do it as a flat/family exercise or as a couple.

Grab your sister or best friend and decide to conquer this together. Just remember, your values and priorities are NOT the same as anyone else’s and you don’t have to justify them to anyone. It’s OK that they’re different. You’re winning already just by sitting down and starting this process.

Remember, budgeting is for anyone who wants to take control of their financial future. By creating a budget, you’re taking the first step towards financial confidence and peace of mind.

 - Becky Runga is a financial adviser (mortgages) at Mortgageme in Dunedin. She has launched a podcast entitled Broke to Brilliant, with the support of Mortgageme and OAR FM.