Thursday, 8 March 2012

Organising - Financials

Just a quick post on how we organise our finances to support our focus on saving rather than spending:
  • When Hubs gets paid mid-month, his whole salary including overtime and expenses goes straight into savings.
  • When I get paid at the end of the month I leave a budgeted amount in the account for all the household bills for the month. 
  • Bills are set up to be paid by automatic debit transfer and we've arranged a fixed monthly payment for them all with the suppliers, so we know how much bills expenditure is going to be each month. I have a worksheet in Mission Control to keep track of this expenditure.
  • I transfer a fixed some each month to another account which covers food, diesel and general household expenses. This includes going out for lunch at the weekend and a weekly takeaway treat plus some home and entertainment treat money too. The budget for these is also documented in my Mission Control worksheet.
  • If we buy anything during the month that doesn't constitute "normal" household expenditure I transfer funds from savings to cover it.
  • We have a monthly savings target so any expenditure in the above category eats away at that target - so we're careful not to let the target be compromised. Our annual savings target and progress against that target is also documented in Mission Control.
  • All the banking's done online and automated where possible. 
  • We try to limit the cash expenditure as much as possible and use debit cards - that way its easier to track what we're spending our money on. Cash spending is hidden spending.
  • For a while I tracked savings against specific goals and allocated a sum of money to the goal each month (e.g. kitchen reno, new car) but decided that it was easier to account for our finances as a whole and put required items into priority order, only allowing the expenditure for an item to go ahead when we had the funds saved to pay for it cash.
Not spending money and challenging ourselves to not spend and save a bit more is actually a lot of fun - you just have to keep your eye on your long-term goal - sometimes easier said than done when the lure of pretty stuff assails you at the shopping centre!!

We started this when our long-term goal was to pay off our mortgage - we set ourselves a 2 year timescale to achieve this and actually managed it in 19 months!! This was also 11 years ahead of the scheduled completion date for the mortgage - Yay!! I know we were really fortunate to be able to achieve this and it included a lot of sacrifices which I'm sure if we'd had children we would have thought twice about - IT WAS TOUGH!! I would not recommend it to the faint of heart!!

Once the mortgage was paid off we were determined that our old spend happy ways would not creep back in again. We reassessed our budget so it wasn't as brutal as when putting everything available towards the mortgage and decided to put all the extra funds away for savings initially for some home remodelling projects and longer-term for an early retirement plan (we want to retire at least 10 years before the statutory pension age). 

When we paid off the mortgage we had zero debt but also zero savings, not even an emergency fund which was a scarey position to be in (although great to have the security of knowing the house was paid for). Now 5 years on our savings are looking a lot more healthy and we still have zero debt.

 Do you set yourselves a budget? How well do you stick to it? Do you have savings goals? How do you stop yourselves from the lure of the pretty stuff? Do you suffer from "keeping up with the Jones's?

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