Budget Tips from an Accountant

Do you automatically turn off when you hear the words saving and budgeting because it just doesn’t happen for you, or it doesn’t happen as quickly as you’d like? Then this post is one for you, I am going to share some of my top Budget Tips – straight from the accountants mouth.

I thought I’d take a leaf out of Laura’s book and do a couple of posts which a directly related to my career (while I am also a Personal Trainer, this is a very new qualification for me and something I am working my way into. I have been in the accounting scene for almost 10 years now!). Boom! I can give advice on both your health and your wealth, that’s pretty cool I reckon!

First up I am going to give you some budget tips from an accountant.

First things first,  why are you setting a budget? What is the desired end result? Clearly either saving money or not getting in to debt is generally the reason but why exactly, what is your specific goal? Are you sick and tired of holding out to pay day each week, are you relying on credit cards or other forms of debt to get you through? Perhaps you have a big goal to save for, travel, a house or even a wedding or bringing some mini-me’s into this world.

• When budgeting your goal needs to be SUPER CLEAR so you know what is and isn’t important and what to take out of your budget without life sucking! Click to Tweet

Now that you know why you are setting your budget you need to know how much you have to ‘play with’, how much do you bring in each pay period in the hand (by in the hand, I mean how much actually hits your bank account, after student loan, kiwisaver and any other deductions). For the purposes of creating a budget I would be inclined not to include things such as overtime that vary from pay period to pay period or sideline hustles/businesses you have going on. Only include the income you can guarantee will come in each week (okay so jobs are not guaranteed, but you know what I mean here right?!).

• When preparing a budget you need to know exactly how much income you have each pay period and DO NOT count uncertain income! Click to Tweet

What are your bare minimum expenses? I do not count make-up or partying as a bare minimum expense (sorry to be harsh but we will see what we can work in a bit later in this post, you don’t have to give everything up!). By bare minimum expenses I mean the expenses you HAVE to incur to live. Rent, power, food (okay I know a lot of the world get’s by without power but work with me here) are all considered bare minimum expenses. If you need to fuel your car or buy train tickets to get to your job each day then include these as well. Let’s also go ahead and include any debt repayment in the bare minimum as well as the sooner you get those out-of-the-way (if you are paying interest) the sooner you will have more money you can put aside for your goal.

• When preparing a budget you need to know your BARE MINIMUM EXPENSES first, the things you NEED not WANT!Click to Tweet

Now that you have these three things I want you to go ahead and open a spreadsheet or get out a notebook if you like to not be reliant on technology (the accountant in me loves spreadsheets – especially since you can save them to dropbox and open them anywhere!).

Put your monthly income at the top (I find working monthly works well) – if you get paid weekly take your in the hand income * 52 / 12 to get your monthly income.  (Because 4 * your weekly pay will leave you short some months!). and then underneath start listing your expenses. Start with your bare minimum expenses and make sure you make them on a monthly basis. Ie. Rent is $150 per week * 52 weeks of the year / 12 months = $650 per month.

For things like power I recommend taking your latest bill (as it should have been one of the highest since it was a wintery month!) and rounding that up, for example our last power bill was $135 so I’d round it to $140 then divide by two as there are two of us that pay the power bill so my share would be $70.

When it comes to budgeting for food I would suggest looking at your last four weeks worth of groceries, adding them together (including any little miscellaneous shops) and then divide by four to get a weekly amount, and then round-up a bit. For example say the last four weeks were $100, $160, $140 & $135, I would get $133.75 so I would round-up to $140 per week to budget for food. Once again if there is more than one of you and you are contributing equally then divide by two so in this example would be $70 per week.

• Round up your expenses when budgeting to give yourself some wiggle room! Click to Tweet

The reason I have said to round-up the above figures is that it gives you a little bit of wiggle room, if this month’s power bill comes in at $10 over budget but last month was under you have most likely already spent last months leftovers (something we will work on changing though, right?!), having that buffer there in both the food and powder helps makes things a little bit easier.

Now you need to start thinking about the things that you do kind of need and can’t really compromise on, these things might be your cellphone, having internet at your flat and going out for dinner once per week with friends. Included in here might be some your not negotiables that you discovered in creating your roadmap for life. For me this is my cellphone, the internet at our apartment, buying my lunch once a week and going out for dinner with my love at least once a fortnight. I’m not talking about getting your nails done every week or going out for dinner 5 times per week as that is excessive and not required to live and to be honest if you’re not willing to compromise on it then you don’t want your original goal that we talked about at the beginning of this post enough! That is why it is best to be super clear about your goal in the beginning! Add these items to your budget and see what number you have left over.

You will also need to make sure you include items that do not occur every week or month such as car and contents insurance, WOF, registration for your vehicle, doctors and dentists appointments etc, I would suggest working out how much these generally cost you a year, then divide by 12 to get a monthly figure then round-up a little to give yourself a bit of a contingency.

Depending on your circumstances this number may either shock or surprise you. If there is pretty much nothing left over you may need to revisit the things you ‘kind of need’ and see if you have included anything that are just ‘wants’ in this list.

If there is money left over but that isn’t reflecting your actual bank account of late then this is where you need to do a bit of further analysis on your finances. If your spreadsheet says you should have $500 left in your bank each month but you struggle to pay the power bill then something isn’t adding up! Your either under budgeting, kidding yourself on what you spend your money on or not including something in your calculations.

A good trick here is to look back at the past couple of months bank statements and track which categories you expenditure falls into. Tally up the essentials (rent, power, food – supermarket shops only!), and then tally the rest into food, clothes, movies, make-up, [insert other category that covers stuff you purchase] etc. Add up each category individually and see what you spent your money on.  I recommend doing it for a couple of months as often you will look at one month and dismiss it as not being a typical month, then you can look at the second month and sometimes you begin to realise that you do eat out a lot more than you thought, or the sneaky trips to the cafe are all adding up.

This is where you can have a think about where you can cut back so that you can meet your budget, or alter your budget so that it is a bit more realistic. Obviously it depends on your goal and circumstances as to how aggressive you are with your budget. If at this point you are struggling to see how you can make things work you may need to seek some advice to look at your personal circumstances.

A great FREE tool for budgeting is the budget calculator over on Sorted.org.nz – seriously, they make it really easy for you to plug-in the numbers and did I mention it’s FREE?! I’m not even getting paid to mention them, I genuinely think it’s a great service and more people should make use of it!

I have so many more things I could say about budgeting and saving but I will leave it there for today as this post is already quite long! Please do comment and let me know your thoughts on this post!!

Do you use a budget or just wing it? If you use a budget do you manage to stay on budget?  Please do comment, I’d love to know your thoughts!