If your parents were anything like mine you were shown nothing, but expected to execute everything perfectly. Handling money was one of those things that I was constantly reprimanded about, but never even shown how to do.
After eliminating some debt and a dive down the Barefoot Investor rabbit hole I'm here to tell you how I get my finances in order.
In a recent Rachel Hollis podcast she did a mid year check in. The idea has really stuck with me. Am I where I wanted to be? Are you? How are those new year’s resolutions going? Don't worry we've all still got six months! Imagine everything you could achieve in six months!
Here's what you want to do:
1. Hop online to your online bank portal.
2. Get your bank statements from January to now. If your bank doesn't do statements for that time period you can export your transactions list.
3. Download and print your statement/transactions. I like to print them because it really makes me pay attention to where my money went. It's also a sweet walk down memory lane of past coffee breaks, lunch dates and friend’s birthdays.
4. Get out your highlighters, coloured pencils, crayons or whatever in multiple colours.
Start assigning categories to your purchases.
Mine are:
- Groceries - anything bought for the house that isn't a home improvement, cleaner, decor or furniture
- Transport - public transport, petrol, tolls and rideshare services
- Random - charity donations, friends gifts, unknown purchases (guys, this process has shown me to always label my transactions)
- Forward bills - we have all our bills paid in advance so we’re not smacked with a huge amount all at once
- Eating out/ entertainment - pizza, movies, restaurants and gigs
- Medical/ car/ house/ bike - medical appointments, medicine, car insurance or maintenance, cleaning services or maintenance
5. Get highlighting!
Now that you have your six months of purchases categorised you can start putting them onto a spreadsheet. Any simple budget worksheet will do as long as it allows you to input your monthly income, monthly expenses and gives you a monthly net income (income minus expenses). I used this one.
Was there a month where your bills sky rocketed because you weren't putting any money aside for your car registration/ energy bill/ a random emergency?
Did you spend your summer out and about splashing cash on ice cream and waterparks and had a spike in your entertainment category?
In an effort to spend less did you take public transportation only to see it's actually had a negative effect on your wallet?
Make a note of specific months that you'll need to save for.
7. Find your averages
For each category you'll want to sum up how much you've spent in the last six months and then divide it by six to get your average.
8. Open a new budget spreadsheet
This time you want a budget spreadsheet based on your pay cycle. I absolutely love this spreadsheet because I can change the payment frequency based on the expense.
Have a think about how much money you want to save in the next six months. Where are you going to save this money from? Will you decrease your groceries amount? Will you go out less and have people over more? Could you bike to work instead of drive? Are there any bills you're paying for but don't use? I'm looking at you Foxtel and the gym.
That's it! The road might be long, but you're now in a much better place to start working towards financial security. I'd love to hear how you go with your mid year financial check in and let me know if this method worked for you.
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