Confession: I’ve never written a budget, but that’s about to change…
Ok, confession time.
It's been 15 years now since I started my career as a finance and economics journalist. During that time, I've run the ruler over 15 federal budgets delivered by six different treasurers – plus a couple of mini-budgets, stimulus packages and state budgets, too.
Follow Jess’ 10-week overhaul of her personal budget to work out how you can trim any fat.Credit:Shutterstock
Without fail, I've subjected them all to rigorous evaluation and withering assessments of the likelihood the treasurer will follow through on the plan he's made.
But all along, it's been a case of do as I say, not as I do.
Indeed, for my entire life, I've never once attempted to follow the number one rule of personal finance: to write a budget and stick to it.
Until, that is, late last year when I walked into several banks attempting to get my first home loan.
"I'll just have to ask you a few questions about your living expenses," the loan assessment officer would begin. "Sure," I'd reply, thinking to myself: how hard could that be?
What followed, of course, was a barrage of questions about my outgoings for electricity, telephone, medical bills, eating out, transport, hair cuts, Ubers, shoelaces (it goes on, you get the picture), the most honest response to which would have been: "beats me".
Or perhaps, if I'm being really honest: "waaay too much".
Actually, who are we kidding? The correct answer was: both of the above.
My story has a happy ending. I got a loan. I bought a home that I love. However, I now find myself with a $760,000 mortgage to service on a single income and things are, well, a bit tight. It's all right. I earn a good income.
But it's time to get serious, particularly amid the latest ructions on global markets and predictions of recession.
Having applied the principles of economics and finance to all manner of areas, including weight loss and dating, I reckon it's time I tried applying them to the most obvious subject of all – money itself.
I'm not alone in my budgeting neglect. Surveys suggest just one or two out of every 10 Aussies really know what their monthly expenses are. That's despite listing your expenses and writing a budget being the first piece of advice you'll encounter in most personal finance books and, indeed, the government's own MoneySmart website.
Write a budget. Review it regularly. Stick to it. Simple, right? Except, it seems, it really isn't.
Some commentators say don't even bother, it's too complicated.
The Barefoot Investor, Scott Pape, says in his eponymous book that the advice to "get on a budget" is "dead wrong". "Using willpower to force yourself to stick to a rigid budget, day in day out, just doesn't work," Pape writes. Instead, he prefers to just use a rough rule of thumb that daily expenses will take up about 60 per cent of your take-home pay.
I love the Barefoot approach to finances. But I reckon there's more work to be done on tracking and minimising household expenses.
So, I've decided to spend the next 10 weeks overhauling my personal budget, listing out every expense and trying to get a better deal for each.
I appreciate that not everyone is a spreadsheet nerd like me. That's OK. I intend to do all the hard work, and I'll simply share the results with you. Play along at home with me, and by the new financial year, you too can have a list of all your expenses and the best ways to save on each.
Sounds fun, right?!
To get ready, I've trawled through the more than 700 household expenses listed by Aussie families who have participated in the Australian Bureau of Statistics' latest Household Expenditure Survey.
From Cheerios to toilet paper to gas bottles for the barbecue, I've allocated each into 10 categories, including housing, transport, food, health, utilities and lifestyle. For the next 10 weeks, I'll be trawling through each category, sifting, sorting and identifying potential savings in each.
You may think of me as a taller and blonder version of the Japanese tidying guru, Marie Kondo, whose methodology for ridding your home of clutter involves working through household items by category – starting with clothes and ending with sentimental items. The idea for each is to throw everything from one category into a big pile on the bed and keep only the items that "spark joy".
Kondo doesn't mention the contents of bank accounts and credit cards, but I reckon the same can be applied to personal finances.
And when it comes to household expenses to declutter, there's only one place to start. The data shows that the number one expense for most Aussie families is housing, be it a mortgage or rent.
I doubt that either sparks much joy for anyone, but finding some savings just might. So, this week I'll be giving my own mortgage a health check while also talking to experts about how everyone can get a better deal from their lender, or landlord.
I'll let you know how I get on next Sunday.
Follow Jess' journey on Instagram at @Jess_Irvine_pics or email her your favourite money saving tips to [email protected]
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