6. No system
I call this the ‘out of control’ budget.
We all know there are some things in life you have no control over but some people have not worked out that many expenses are predictable and controllable! If you have a forward looking plan to follow you are well placed to take control. If you are looking backwards (No. 4) you are merely reminiscing.
Most people’s cost of living is determined by their income. A successful budget follows a system that clearly isolates the cost of living from income and not only shows what it costs you to pay your expenses, but also shows you how to pay them.
I have a saying that goes like this;
Control what IS controllable and the uncontrollable stuff won’t be able to cause you so much grief.
The system I use breaks expenses down into three groups.
1. Regular Expenses that fall due on a repeating predictable cycle that is no longer than 12 months. There is a truck load of expenses that fit into this category. With a bit of clever maths the system will find the lowest point in the year and ensure that your planned bank balance will not be in the red on that date.
It is a simple rewind from there to calculate what your daily bank account targets are in advance to keep you safe and on top of your bills from the present, to that lowest point and on throughout the entire yearly cycle ready to start again this time next year.
2. Long Term Expenses that are Semi-Predictable on a 10 year rotating cycle.
This makes replacing White Goods, Computer Equipment, Furniture, Car tyres and batteries and so on a piece of cake!
3. Once in a Life Time and Unpredictable Expenses make up the last of the 3 expense types in the system.
All three need to be planned in a different way but once they have been processed it is easy to make sure they all work efficiently together.
In 5 minutes a week it is possible to take control of all these expenses and have so little stress it is hard to remember what it was like not having a system and living with the stress!
If you feel like you need to finally get organised and put a good system in place, look no further than http://simplybudgets.com.au/simplybudgets/
If you already have this covered give yourself a big tick for number 6!
If you missed the earlier installments in this mini series they can be found here on my blog.
The 10 reasons why people get it wrong when it comes to managing money has been taken from one lesson in my Simple Wealth Steps course. Simple Wealth Steps is a 12 month guided learning program that helps you get focused and clear about what you need to do to achieve success with money.