Theory vs. Practical

When I started telling a few friends about my blog I mentioned its purpose was not only write about my journey through motherhood but to discuss a topic that kinda comes naturally to me, money - well understanding how to manage it better.

I'm in no position to give financial advice (yet) but I know people in roles or jobs that do but I would never take any of their advice. Why? cause I know they don't practice what they preach. They're all text book and education, information you want/need to know but their lives does not reflect the advice they give. What I mean by this is, I know they've never made a risky financial decision in their life, so how do they know the practical application of what they say if they don't take it themselves.

This is why I usually seek advice or feedback from people who have done something I'm considering doing first before or even bothering seeing an "expert". The feedback from those who have "done it before" are invaluable because they have either succeed and or failed and will be able to give you advice to avoid the mistakes they made or take advantage of knowledge they've learnt. 

Admittedly since declaring that my blog will focus on the topic of money I've probably only blogged about it five times. There are many reasons as to why that is the case but the number one reason is, I write based on my personal journey with understanding and becoming better with money so I've taken the time and effort into these type of posts. 

Today I opened an email from a subscription I signed up to and the topic was 'How to Control Spending' written by Fred Schebesta, an Aussie entrepreneur (in my opinion) who focuses on Finance. 

What pleased me was reading the tips and advice he gave I too have covered in my past posts, well the same key messages. It's reassuring and validating to see the practical component I've applied in my life with money is the same as the theory these financial experts would've recommended. 

It reminds me, especially when I'm a stay at home mum, therefore at times seems like I have no control, that I'm doing something right. 

If you would like a copy of the email I received from Fred, email me and I'll be happy to forward it to you.

Budget P3 - Mointoring your budget

So you've identified all your income, expenses and you've determined and documented how much your life style costs you. Congratulations, you have established a blue print of where your money is being spent. No more wondering where your money goes to every month, you now have the answer.

But life likes to throw us curve balls and no matter how well we predict potential costs, our lives and circumstances may change. You may move to a new job/role and your income changes, you have an accident and need to purchase a new car, you decided to renovate that old bathroom, you start a business and is in its infant stages and have no financial backing therefore all costs are coming out of your own pocket, a medical situation occurs in your household and results in a large medical bill you need to pay for. Whatever those changes are you need to update your budget or blue print to reflect those changes.

So how do you track those changes onto your budget? As I mentioned previously a budget is only as good as the amount of detail it contains and needs to be reviewed regularly. I also mentioned in our household we review our budget on a weekly basis. We review what we spent the previous week, we do this using our online banking tools. We always opt to pay for all transactions electronically so we don't need to remember every exchange of money, our banks have done that work for us. So every week we review and document the transaction into our budget.

For every month we create a new spreadsheet (worksheet) with the same categories and items as we identified at the start of the budget process but we keep items blank until that transaction occurs. For example for the Car Liabilities category insurance, registration, green slip, pink slip and servicing would be empty until renewal period approaches. However a category that usually has a transaction every month (at least in our household) are Groceries, Transport, Entertainment and items such as petrol, health insurance, mortgage repayments etc.   

By regularly tracking what you have spent and comparing it to the budget you created at the start will allows you to monitor whether or not you are sticking to you budget, identify any regular spending you didn't account for at the start therefore may need to update your original budget and ultimately know where your money is going. 

So that's my tips on creating and monitoring your home budget. I know it can be very overwhelming and tedious especially at the start but once that initial process is over, as in you've gathered all the information together, the ongoing "monitoring" process gets easier.

I challenge you to really start understanding and tracking your spending via a budget and soon you'll notice how much better you get at saving it. Good luck and if you have any questions about any of the information I've provided, if you're stuck with putting your budget together and would like some help or would like an electronic spreadsheet / template to help you with your budget feel free to email me on gen.y.mum@gmail.com

Budget P1 - How to start

It's a brand new year. I personally tend to look at new years as a fresh new outlook, a new beginning, a starting point, an opportunity, make resolutions ... you get my drift.

The new year is also the time of year I update our home budget .... *yawn*. I know doing a budget, let along reading about one is as interesting as watching paint dry. But I challenge you to stay with me, continue reading and maybe you might find the motivation to do one properly or gain some tips to improve how you currently do your budgeting.

What is a budget? 
It's a document used to project future income and expenses.

Why put one together? 
So you can see where your money is coming from and know where it' all going.

How do you put a budget together?
Before you get overwhelmed by numbers, spreadsheets, document formats or the amount of detail it needs to have ... stop, take a step back and breath. The challenge of putting a detailed budget can be very daunting, depressing and hard but before you start here are my tips on how to ease the initial process:

• Get everyone who works and contributes to the cost of running the home together in a room and explain to them you want to put a detail budget together. Understanding the family budget is everyone's business, not just mum or dad. My parents had a friend whose husband died at a young age of fifty. He was healthy, full of life but unfortunately suffered a heart attack whist running on a treadmill. One of the biggest challenges she faced after his death was understanding who they owed money to and why. Her husband always looked after the finances, she never participated or tried to understand how he ran the family budget. Getting everyone involved is good money practice, makes everyone in the home accountable and by having everyone present whilst putting your budget together allows you to identify everything that needs to be included.
• Pre planning: before you start writing down figures, identify groups of spend and income. What I mean by this us start brain storming categories for your expenses. Some suggestions are: loans, credit cards, utilities, home expenses, car expenses, insurance, transport, entertainment, technology costs, memberships, education etc.  

Creating a Budget 

1) Identify all incomes. Obviously this would be salaries, wages, rental income from investment properties (or kids), repayments from personal loans to family members etc. Write these amounts down and the frequency you receive these amounts.

 

Tip: For salaries only consider your post tax money this will assist in ensuring budget figures are correct. Your pay slip should indicate this amount, if you're not sure how to determine that from your pay slip it's the amount your employer deposits into your bank account at every pay day.

2) Once you've completed the identifying categories, its time to list items for each of the categories you've identified. Again, don't worry about the figures just yet, just brain storm all costs associated to each categories. Example:

Some categories may not have sub-items and that's okay too.

Tip: Really think hard about all the costs associated to each category before moving on to next category. The amount of expenses you identify will assist in ensuring the accuracy of your budget.

4) Once you've listed all known or obvious items associated to your categories start thinking about you and your family's life style and what you spend your time doing. Identify those day to day activities and start thinking about whether there are any costs involved. List all associated expenses involved in that activity onto your budget. Do you eat out a lot? Do you buy coffee or lunch everyday? Do your kids have extra curriculum activities? Do you have a hobby you regularly buy supplies for? An example would be gifts purchased for birthday events, its an expense we all fork out for but not a lot of people include it in their budget.

5) Once you have identified all items associated for each category, its time to start writing down the actual cost for each item. This process might take you a while, don't just guess the amount really source out the actual costs for these items. Find receipts, locate last year's budget or go to your online banking and find the transaction, given you used an electronic form of payment ie credit card, bpay or transfer. Again allocate the frequency of these expenses. For items that have a different amount each time and unknown frequency ignore for now and come back to it later on.

6) After you have written down the cost for the items you definitely know the cost of, go back to the items you are unsure of and make a calculated guess. What I mean by calculated is go back to previous transactions and review how much item usually cost you and frequency. For example putting a full tank of petrol for our car usually costs us $70 and we fill up an average of once a month so petrol I would allocate $70/monthly for this expense.

7) Include (if you haven't already) a "savings" item in your budget. You should treat your savings as an item in your budget, don't forget to pay your self! You work hard for your money you should invest in yourself. The amount you specify under this item is the amount of money you would like to save or currently saving every month.

Tip: You might want to make this a category in itself so you can have multiple saving items. For example you may want an item for holidays, children's education fund, emergencies, deposit for a home etc.


Next post I will provide info on how to collate all the information to allow you to see how much you're spending versus how much money coming in.

Why Am I Here

I’ve started to share this blog with some people. I originally started this blog with the intention of keeping it a secret but recently I changed my mind. Main reasons I decided to share my blog was so I could share my recent holiday experience with people. So many times people have asked me ‘tell me about your holiday’ or ‘what do you recommend to do at ...’ that I decided its time I write it all down somewhere and I can just refer people to that once place. No more thinking back to what I did, no more trying to remember that restaurant’s name or web site, no more trying to find that email – it’s all in one place there for people to read, forward to other friends or come back to.

I’ve come to realise recently the main reason why I think I started this blog was to share and educate. I’m not a teacher, I don’t claim to be an expert in anything but I am an example. For years I’ve been an example to many but my shyness (yes I’m shy!) and inability to accept accomplishments have stopped me from accepting that role and wearing it loud so everyone can know.

But that’s changed. What brought me out of my shell was reading a blog post by Paul Angone. (I won’t ramble on how insightful his blog and upcoming book is just check it out yourself). My fear of being embarrassed was probably holding me back from doing a lot of things like sharing my experience and knowledge of being an example.

So what am I an example of? What knowledge do I hold that I feel I can educate others with? The knowledge of being better with money.

I don’t claim to have a lot of it or know everything there is to know but I am an example. An example of how you can purchase your first home at the age of 24, an example of how you can pay off $35,000 of debt in 18 months, example of how someone with no experience can renovate a whole home on a budget, example of an everyday person be able to understand the differences between products financial institutions offer. Basically I want to share my story on how I was able to achieve these things so others can be an example too.

Some disclaimer and background stuff so I won’t get in trouble:

• I am not financial planner or advisor, I’m not trying to sell you anything. My posts are purely from what I’ve experienced, know and or research on a particular topic. So you’re probably thinking ‘why should I take any advice from you, you’re not even qualified’ Well that’s one of the main purposes of this blog, what differentiates it from finance blogs – I’m a living testimony that you don’t need to know everything about every topic that relates to finance but learn a few areas to help you make some good long term decisions.
• I’m not a millionaire nor do I claim following my tips and knowledge will make you one either. I work a 9am-5pm job Monday to Thursday (I have Friday’s off cause I’m a mum and I get to enjoy a weekday with my son). I’m not (good) debt free but I live a comfortable life, have savings and didn’t have to be completely frugal to achieve it.
• I share because I’ve been there. I've been blessed to have been guided and educated in the right money path quiet early, (knowledge I plan to share with you) but I’ve made bad calls and felt financial burden. As they say you don't appreciate the joy of success without knowing the pain of failure. 
• Presently, I’m not being paid for my posts. I’m not gaining any financial benefits for sharing or mentioning any particular company or product. However if that does change, I'll let you know.

My commitment:

• Break it down in lay man’s terms. The number one issue with money (and I think the big corporations do it on purpose) is the information is not easily understood by everyday people. If you walk away reading one of my post feeling equipped with new skills to improve how you manage your money now then I’ve achieved what I wanted to achieve.
• For each topic I post I will do my research and ensure information is relevant and correct. I will provide reference to where I sourced my material and where you can get more information.
• To get you better at money!

So watch this space, send me questions or topics relating to money that you want someone to explain to you and I will endeavour to dedicate a post on your topic.

Don’t worry, I am still planning to finish posts about my recent/last holiday and of course I still want to capture my experiences and emotions of a mum so there will still be a lot of that.

So that's why I'm here. I'm excited and have sooo much stuff coming out of my head I don't know where to start ... I can't wait to share my experiences and knowledge with you. I hope you're ready to get real with yourself and get ready to be better with money.