Ever felt your money had performed its own vanishing act by month’s end, no matter how much you tried to save? Trust us – you’re not alone. The problem is, much advice on how to save and budget seems tailor-made for the finance bros making six figures annually. For the rest of us, it’s easy to feel as if we’re just playing a perpetual game of catch-u.

But what if the secret to budgeting is to lead from your strengths?

In this episode, we’ll help you find the budgeting playbook that’s shaped around your lifestyle, philosophy, and personal rhythm. And because we like to keep it real, we also pull back the curtain on our personal budget techniques.

Plus, we've got a sneak peek for you of our upcoming episode with Emma from The Broke Generation . She’s lending us some of her out-of-the-box budgeting techniques that might just be the game changer you need.

Why even bother budgeting?

Why do people go on about budgeting? Think of it this way: you wouldn't embark on a cross-country drive without a map, would you?

Similarly, a budget is your financial roadmap. It's guiding you on where to speed up, slow down, or take a detour in your spending habits. A budget puts you firmly in the driver's seat, letting you decide where each dollar goes.

Here’s a breakdown of reasons why you may want to budget:

Seek financial clarity

Have you ever experienced that bewildering moment at the end of the month when you wonder: "Where did all my money go?". A budget gives you power— an unparalleled financial clarity of every dollar’s destination. Money doesn’t control your emotions, and you never get caught in that foggy maze of confusion and feeling of defeat.

Stay on track with your goals

We've all been there, dreamy-eyed, thinking about that European summer trip. But dreams remain dreams unless you have a strategy. When you budget, you set aside a portion of your cash for these aspirations. Before you know it, you’re sipping espresso by the Amalfi coast.

Practice smart spending

Smart spending isn’t about completely cutting out all the joys of life. It’s about understanding your values and priorities, so you can relish in the splurges later without the guilt.

Conquering the debt mountain

Think of debt as that annoying rock in your shoe. It's uncomfortable, slows you down, and it’s just downright aggravating. A budget helps you laser-focus on that debt. Not only are you unburdening yourself from the principal amount, but you're also sidestepping the interest costs. Money saved is money earned.

Building your financial safety net

Life’s unpredictable. One day you're surfing, the next you might be nursing a sprained ankle. Who wouldn’t love a safety net? By budgeting, you’re weaving a financial safety net to keep your life worry-free.

But this isn't just about dealing with the unexpected. You’re building towards financial independence . It’s a life where you call the shots, free from financial constraints.

The first step is to track your money

Every financial journey starts with a single step, and in the case of budgeting, it's tracking your money. Simply put, we’re talking about you gaining control of your finances and not the other way around. If you don’t know where your money's going, how can you decide where it should go?

So, how do you keep tabs on that cash flow? Well, there's no one-size-fits-all answer, but let’s skim through some methods:

• Use apps designed to do the heavy lifting for you
• Go for old-fashioned printouts of bank statements
• Pen down your spending in a journal – whether it’s a day, a week, or even a month’s worth
• List down your money movements in Excel

Now you might be asking: "What exactly should I be keeping tabs on?”. While seeing where your cash is going is fun (or eye-opening), what’s even more enlightening is understanding your financial picture.

Some important things to track are:

• Income - It’s not just your monthly salary. Combine everything – from your side hustle earnings, dividend payouts, to rental revenues. Put them all in a basket and that’s your true income (We’ve put together a guide on what to track in your investment portfolio in ( Episode 13 ).
• Expenses - From necessary expenditures like rent and utilities to those spontaneous shopping sprees, they all add up. It's crucial to know where your money is escaping to.
• Debt - We've all got some baggage, and sometimes, it's financial. Be it a home loan, credit card debt, the tempting 'Buy Now Pay Later' schemes, car loans, or even HECS/HELP. Knowing your debts allows you to plan their pay-offs.
• Net worth - While not mandatory, calculating your net worth is like getting a health check-up. But instead of your body, it's for your finances. Knowing the tally between what you own versus what you owe gives you a snapshot of your financial health.
  

Traditional ways of budgeting

Budgeting, at its core, is deeply personal. While a friend may vouch for a particular method, it’s not everyone's cup of tea (or coffee, if you're like Tash). The key is understanding your financial habits, acknowledging your needs, and choosing a method that resonates.

1. Percentage-based budgeting

Remember when you were young, and you'd divide your pocket money? Some for snacks, some for that toy you've been eyeing, and if you're an early saver, a little into that piggy bank. That's basically what percentage-based budgeting is, but for adults.

Take the 50/30/20 method , for instance:

• 50% on needs (think: rent and utilities)
• 30% on wants (your favourite dine-out place or that concert ticket)
• 20% on savings, investments, or for paying off debt.

Sounds easy, right? And if you've heard of The Barefoot Investor, you'd know they have a buckets strategy similar to this method. The buckets strategy looks like this:

• 60% is your Blow Bucket for daily expenses
• 20% as your Fire Extinguisher Bucket
• 10% each for the Splurge and Smile Buckets
• A 9.5% kick into the Grow bucket for super
• And a special little place for MOJO

Pros: Great for beginners; super easy to automate.

Cons: It may be too rigid for people with variable incomes or unique financial goals.

2. Zero-based budgeting

Are you the person who prefers a more detailed approach to everything? Enter zero-based budgeting. The mantra here? "Every dollar gets a job." Whether that job is taking you on a Mediterranean cruise or just ensuring the lights stay on, your cash is accounted for. Fans of the YNAB (You Need A Budget) app might nod in agreement.

Pros: Detailed, comprehensive financial clarity.

Cons: Requires time; could make you more rigid than flexible with money matters.

3. Pay yourself first

Before you pay bills or splurge on that latest phone, you prioritise saving and investing. It’s a self-care ritual, but for your finances.

Pros: This ensures you’re always growing your wealth before thinking about expenses.

Cons: If you’re not fully tuned into your expenses, this method might find you tapping into savings to cover them.

4. Envelope budgeting

Do you prefer the pinch of handing over a crisp note, unlike the swiping of a card? There’s an actual method revolving around this. Allocate cash in different envelopes for separate expenses – that's it until the next budgeting period. It's the physical touch that can make you twice as thoughtful about letting go of your money.

Pros: The tangible connection with expenses helps in tracking spending patterns.

Cons: The hassle of cash in an increasingly digital world.

5. Sinking funds

Anticipating irregular expenses? That’s where the sinking fund method comes in handy. Unlike fixed percentages, you gauge the cost and save accordingly. They’re like saving up for a rainy day, but with specifics in mind.

Pros: Goal-oriented; highly tailored to personal needs.

Cons: Requires more initial setup and regular evaluations.

Sneak peek: budgeting with Emma from the Broke Generation

Do you get the feeling that traditional budgeting just isn't for you? In an upcoming episode of the Get Rich Slow Club podcast, we chat with Emma from the Broke Generation. In this session, she drops some creative takes on how to budget, save, and manage money. The takeaways highlight understanding yourself (including your money quirks) to cultivate a better relationship with budgeting.

An intuitive approach to saving

Remember the last diet you started? It felt good for a while until you hit a plateau or lost interest, right?

Emma brings up an important point. Not all methods work for everybody, just like not everyone gets that 'bikini body' after 12 weeks. Emma recommends understanding how you naturally function and moulding a money management method around that.

Have an intense focus on a particular thing for a short period? Emma's technique is to leverage that.

Here's how she does it: instead of spreading her monthly savings evenly, she'll save a significant chunk during her 'focused' week. During this time, she’ll cut back on discretionary expenses. Then, she'll ease up for the rest of the month. It's a way of saving up that follows your personal rhythm and without missing out on anything.

Rotate your budgeting routine

For instance, let’s say you aim to save $400 over 4 weeks. Instead of saving a standard $100 weekly, you could save $250 in the first week and just $50 for the next three weeks. This approach lets you splurge occasionally without straying from your saving goal.

The power of visualisation

If you're a visual person, consider creating a savings chart. Maybe you want to save $10,000 in total. Break this down into varied amounts that sum up to your goal and mark them off as you save. There's a certain joy in colouring or checking off those amounts.

The ‘Joy Index’ of spending

Emma has a quick exercise for you. Print out your transactions, and for each non-essential one, rank its value or joy from 1-10. If you see a bunch of low numbers, well, that's your money leak. This trick can illuminate where you get the most value and where it might be best to cut back.

Budgeting is a journey of self-discovery and growth

There's no need to religiously stick to a set of spending habits. You just need to find balance and become conscious of where your money goes. Ana resonated with this approach, hinting that she too follows an intuitive method but has struggled with explaining it to others. With Emma's insights, it's clear: understanding oneself and what you value is the bedrock of successful budgeting.

Budgeting apps worth checking out

If we can track our steps, heart rate, and how many glasses of water we drink, why not track where our money's going? Budgeting apps serve as your financial heartbeat monitor, ensuring you're in the best fiscal shape. There's a lineup of apps changing how we view and manage our finances.

Frollo

Think of it as a financial detective. It meticulously sorts and categorises your expenses, allowing you to see where each penny goes.

Pocketsmith

Ever wished for a financial crystal ball? Pocketsmith might just be your ticket. It gives a forecast of your future finances based on your current patterns.

YNAB (You Need A Budget)

It's not just an app; it's a philosophy. Instead of just tracking, you’re giving every dollar a purpose.

Finder

Your personal financial assistant. Whether you're looking to compare insurances, credit cards, or just need daily deals, Finder's got your back.

WeMoney

While it leans towards being a spending tracker, WeMoney offers insights into where every cent goes, making you a smarter spender.

Up Bank

There’s another app we should mention. Up Bank is not just another face in the crowd. You can set goals, track progress, and feel that buzz of satisfaction as you watch your savings grow.

And here's a teaser for our community: Pearler is working on something exciting in the digital budgeting space as we speak. We are adding another string to our bow to help you reach financial independence with confidence.

How we budget

We've all heard the same advice on budgeting. Track every dollar. Allocate amounts to specific needs. But for some, traditional methods just don't stick. For others, they don't even make sense to begin with. So how do we personally handle our finances?

Tash’s instinctive approach

When you start your financial journey, it's pretty common to jot down every dollar spent. Sounds familiar? Tash did that too. But the conventional ways of budgeting never clicked for her.

Tash was once there too. She tracked every cent, but found that fluctuating income and unpredictable expenses threw her off course.

Over nearly a decade, she evolved her method to align more with the 'pay yourself first' principle. First, she puts money into investments and pays her mortgage. Bills? They're sorted via direct debits.

What remains after is her spending budget. From here, it's a mental scale for her. Some spending feels right, and some clearly feels like an overindulgence.

The genius here? Her system means that by the time she gets to discretionary spending, she's already taken care of her financial growth and obligations.

Ana’s budgeting story: from pen and paper to pixels

Ana began her journey similarly, writing down all expenses. But soon, she felt the need to digitise her tracking process. What's her method now? Get the app that resonates with you and let it be an extension of your financial thoughts.

Think of names like Mint, WeMoney, Trollo, and PocketSmith. These aren't just apps; they're financial assistants in your pocket. Ana could designate funds for investing and, at the same time, have a clear idea of her spending allowance.

Take action this week

Picture a river, always flowing and ever-changing. That's your budget – the amount isn’t something set in stone. However, as life evolves, so do your budgeting habits. The tools and strategies that work now might need a tweak or a shift in the future.

And that’s okay. Budgeting isn't about constriction; it's about flexibility and understanding. For now, here’s some 2-step budgeting homework you can follow to help you get started:

1. Know your monthly income and expenses. Dive deep, and you might find patterns you hadn’t noticed before.
2. Give a budgeting app a whirl. Find one that feels like a financial buddy rather than a stern accountant.

As always, there’s more insights and anecdotes to unearth in the full podcast episode. And if you're feeling social and looking to share your own budgeting tales, join us for a chat on our Instagram or Facebook group .

Happy investing!

Tash & Ana