Treat yourself. Don't cut out coffee. Forget trying to save a set percentage of your wage.
This is all refreshing budgeting advice from Kristina Plimer, author of The Wealth Tutorm, and contrary to what we are often told.
"Forget everything anyone has ever told you about how to budget and what to cut out," Plimer told The Huffington Post Australia.
"Firstly you need to write down everything you spend money on, to the cent. From that list work out what fits into the categories of 'essentials', 'sanity savers' (where the emotional return is worth the dollar value) and 'desirables' (emotional return is questionable in regards to dollar value, but is nice to have if you can manage it)."
Next Plimer suggested asking yourself if the the essentials and sanity savers equaled less than your income. If so then you could choose to spend some of the remainder on desirables and put some in savings.
"If the essentials and sanity savers equal more than your income then ou need to re-evaluate what is an essential, sanity savers or desirables. For example, a roof over your head is an essential, a large apartment with view may not be. A coffee once a week may be a sanity saver, two every day may be a desirable," Plimer said.
When creating your budget Plimer advised to never listen to someone else’s judgement of what you should cut out.
This is either going to be based on their opinion of what they are brought up to believe or is going to be aligned with their values in life
As long as you are living to your own values and not sacrificing your future, it is nobody else’s business what you spend your money on.
In regards to budgeting by dividing your income into percentages, Plimer said that method was not the best approach.
"I do not believe in working to a set percentage, primarily because the more you earn, the more you can save," Plimer said.
"Someone on a Centrelink income will have a very different saving capacity than someone on a $200k income. The main thing is to live within your means, maximise your income and savings, and have a little fun along the way."
Have debt? make sure you address that when planning your budget.
"The general rule of thumb is if it is bad debt (e.g. credit card debt), pay it off first. This is because the interest you would pay on the debt will generally far surpass the interest you would earn on the savings," Plimer said.
Plimer emphasises the importance of writing down all your expenses and daily spendings before starting a budget as they best way to identify where you can cut some easy corners.
"The first exercise of writing down where you spend all your money is imperative," Plimer said.
"Until this point, you can only hazard a guess as to what you spend on what. It may surprise you that once you have completed this exercise, you may find that you actually spend a lot more on the desirables than you originally thought.
"This is because your brain does not release the same amount of pleasure endorphins as when you buy a sanity saver, and you take little note of the event, sometimes even forgetting the event entirely, hence the term ‘money slips through my fingers’."
"These 'desirables' are precisely the things that we can cut back on without affecting our enjoyment of our lifestyles that much, and we often find that we spend and can save a lot more on these things than originally thought.
"The sanity savers are the things you must keep within your budget, albeit maybe at a smaller amount, because without these you will feel like you are sacrificing your lifestyle and end up miserable."
At the end of the day your budget needs to be realistic.
"Trying to stick to a 'normal' budget, with no sanity savers or treats, is like trying to stick to the cabbage soup diet for twenty years -- it's no fun, you will be miserable and it just wont work," Plimer said.
"In order to stay on solid budgeting grounds you need to build your sanity savers into your budget. You may not have them everyday, but you most definitely need to incorporate them somewhere. Even better, make them a reward for achieving a budget milestone."
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