Dealing with all things related to financials is annoying but it’s a must. Most of us are generally trying to live a regular life within our means, not anything absurd.

For my family and me, dealing with our finances is a big part of our lives. Making sure we have sufficient to provide for our children, and parents, pay the bills and occasionally (or rarely) splurge.

A few years ago I dealt with an absurd amount of credit card debt. It might not be significant for some but credit card spend for almost 8-10k is just crazy. This period was some of the most annoying few years of my life. Oddly enough, I came across Dave Ramsey in one of the Programming podcasts I was listening to. He was brought up due to his unapologetic nature in giving advice. I used to have an habit of getting recommendations for books through Podcasts. I ended up reading a bit more about Dave and came across a few YouTube videos of him. And even though his advice was mostly centred around the US audience. I found it very useful. Long story short, after a few extra side gigs I managed to get rid of all my debt. I wanted to share one key thing I picked up during this process.

Budgeting

Now, budgeting isn’t everyone’s cup of tea. It’s mostly because it’s a scary word, and sounds very restrictive. When I was focused on getting rid of my debt, I was using a simple spreadsheet to keep track of income and expenses. In general, the idea was to know where money was going each month.

When you search for budgeting there are 101 different ways you can do this. The most common one we are all used to is the envelope method. Basically keeping money aside in separate “envelopes” ie. Rent, Bills, Fun etc In addition you find things like Zero Dollar budgets and a more modern take on budgeting from Ramit Sethi the Conscious spending plan.

You can spend hours trying to figure out what’s the method that works for you. Or you can simply get started with one method and stick with it for a while.

Traditional Budgets

  • Generally uses the last month’s expenses as a baseline
  • Only newer expenses require you to justify (to yourself 🤪)
  • We allocate mostly based on historical spending patterns
  • It is very straightforward and simple The only downside is the dependency on historical spending.

Zero-Based Budgeting

The idea is to have zero left once you are done.

  • Every dollar should have a designated job where the expenses are justified, again to yourself.
  • Requires a bit of effort and time.
  • Spending allocation is very accurate and based on the current expenses

Conscious Spending Plan

  • Focus is based on must-haves (needs), nice-to-haves (wants) and paying yourself (savings/investments)
  • Paying yourself is non-negotiable The key highlight is the active focus on “Fun money” as Ramit puts it.
  • Basically, the goal is to optimise your spending money after Essentials and Savings.
  • Basically, you cut down on this you don’t want and spend on the things you do.

Regardless of the method you choose. Having a budget, and knowing what your money is doing is helpful.

Useful tooling

There are so many tools out there that will give you the basic functionality you need to get started.

Banking Apps

If you are in Australia and need to get started I find the Up Bank app to be a really good tool. It has the Envelope method baked into it IMO. And a few other great tools tbh.

And most other Bank apps, have similar features.

Spreadsheets

Excel / Google Sheets is so versatile you can use it for anything really. There are plenty of templates both free and paid (Etsy anyone?) even print-friendly.

With these templates, you can simply track Income vs Expenses or go into detail and log all your current expenses and tally.

You find a few templates below:

Mobile Budgeting Apps

There are so many apps in the personal finance space. Most of the apps these days come with Open banking integration where they can automatically import the transaction into the budgeting app.

Tools I have used

Up Bank app CBA Spending Tracker

Up Bank was my go-to budgeting tool for about 4 years. I switched to CBA when I got my mortgage, purely because I had my offset accounts. Otherwise, I would have continued to use Up.

CBA Spending Tracker is very limited in features. However, it’s enough if you don’t have too many spending categories. Gives you a good insight into overspending. One plus in the CBA app is that the investment product is backed into the same app. So paying yourself can be automated if you are investing in ETF etc.

YNAB

YNAB has a bit of a learning curve, but nothing that can’t be fixed by a few YouTube videos.

The biggest advantage I see is that you can manage multiple future expenses you are saving within a single bank account. Even though YNAB has Open banking integration it doesn’t support Australia. But there are a considerable amount of banks supported.

YNAB is also expensive costing about AUD $170 annually. It also requires you to make sure you have your transactions lodged to keep things in balance.

One thing I have noticed is that I am YNAB-poor. Since you’ve always allocated the funds (ie. Zero based) every time you look at your budget when an expense was unplanned, it needs to come off of something that was in the plan. This is a curse and blessing at times. I’ve had months in which I had fallen off the wagon and avoided looking at my budget 🫣

What next?

For the next 12-18 months, my plan is to continue to invest in YNAB. Regardless of whichever method I choose, consistency is something I need in this space to make sure we are tracking well for the long-term goals we’ve set.

Now, one key thing to remember is you can never budget yourself into becoming wealthy.