Sunday, August 29, 2010

Budgeting 501: How not to spend all your money on piss.

Well, blog readers, it's been a long time between drinks. I have lead a very hectic life and let this blog slide a bit. But.....I'm back!

So, since I last wrote here, I have made some even more anal decisions and have become "Budget Boy", the superhero of budgeting that not only wears his undies on the outside of his spandex, but has also donned a pink belt of some sort to signify that he is not all macho and still in touch with his feminine side. Yes, it is I.....BUDGET BOY!!!!

Last post about budgeting, I outlined how I use a simple MS Word table to keep track of my budget and how that had lead to me identifying where my money went (and noticeably, it was KFC). Why I'm not 130kg by now is still a mystery, but I'll leave that discussion for another day. I have subsequently graduated to a different system of budgeting. I now use an excel file.

HEALTH WARNING: Unless you like staring at an excel file for hours on end, do not do this sort of budgeting. I have warned you...

Here is a screen cap of the excel file (click for slightly larger pic):

I spend A LOT of time looking at this spreadsheet, somehow thinking a miraculous truth will jump out at me and all of a sudden I can retire! But alas no...

What this tool does allow me to do is to adjust my budget "on the fly" which is awesome, as, when I sell one of my investment properties, or my wage changes or whatever happens to me financially, I can just change the relevant number and all the calculated amounts change automatically.

I have left my car rego not blanked out, to show you as an example. You can see that I use $70/week on poluting the planet, and this works out to be $3640/year. I like to calculate everything relevant to a year, as it makes the equations easier to work out. For example, I get rental income monthly, but paid fortnightly, so by calculating yearly figures, it all "averages" out.

If you post a comment with your email, I can send you this file so you can have a play.

OK, now that I got that off my chest, let's get on with the REAL topic, and that is STRATEGIC BUDGETING, HOW TO BECOME ANAL LIKE ME.

Strategic budgeting is basically that, putting logical, strategic and methodical thinking behind your budgeting. Now that I've blown your mind by using those highly sophisticated words, all it really means is doing three things:

1. Have some financial related goals. This may be something like "I wan to go on a holiday overseas next year" or "I want to buy that shnazzy new Hyundai i45 in a few months" or "I wan tot be able to eat KFC whenever or wherever I want" or "pay off my credit card".

2. Get your goals and make them a money value. For example:

Overseas holiday: $10,000
Hyundai i45 deposit: $4000
KFC whenever I want: Disposable income of at least $400/fortnight.
Paying off credit card: $3245.65

3. Align your budget to meet these financial goals. It may mean balancing a few priority items in your budget, but ultimately, remember, THESE ARE YOUR GOALS. This is why you go to work each day, or front up at the Centerlink cue (or equivalent government unemployment benefits organisation in your country).

4. Watch it all "magically" happen.

For me, the term "strategic" really means two things. Having goals and finding ways to meet them in the shortest time possible.

That's all for this installment folks, good luck, I will try to write soon again. If you like these posts, please make a comment, positive or negative...