“Anxiety is caused by a lack of control, organization, preparation, and action. —David Kekich
From whichever angle we have approached money over the years it either seemed to require too much effort. It took too much time to actually keep on top of things. I never ended up with a clear picture of how things looked without a lot of effort.
Budgeting for one person with one income is a different kettle of fish to funding four people from multiple income sources with no one person being in solitary control.
Over the past year, as I have spent time bringing our finances under control, I have borrowed many concepts from GTD and applied them our personal finances. The first step was to get a clear idea of the areas we spent money.
The problem I found with traditional budgeting tools, apps and spreadsheet is they put the information in ways that made it difficult to easily review in future.
Particularly when it came to automatic spending, money that just comes straight out of my account. About 5 years ago this was simple. It would be all be Direct Debits or Standing orders set up on our accounts. These days with PayPal, GoCardless and committed card payments like Netflix it was becoming increasing difficult to actually track what automated payments we were committed to.
When allocating these to the budget app or spreadsheet they would just disappear into Entertainment, Groceries or whatever category they appear in.
It also became difficult to priorities spending in this way or remember to review payments or subscriptions but over the last couple of months I believe we have cracked.
I believe the purpose of a budget is not track historical spending but to plan future spending and prioritize it, review it and ensure your money goes where you want it to be going and we are managing this with 15 minutes per week and with a 30 minute Money Date once a month.
We’ve managed this with a process I have called AVED.
Our budget consists of four simple categories now and within each of those there are some subcategories but we have kept it as simple as possible.
This has every payment that comes out of our bank automatically every month. Savings, TV, Life Insurance, Mortgage etc. If it comes out by Direct Debit, Automatic Card Payment, Paypal recurring payments or standing order then it is itemized in here. We have also set the amounts to clear historic debts from here so it is automated and deliberate.
We then review each one each quarter (it takes about 3 seconds per one) to ask ourselves is this still important. I then also have a bigger review for some on my GTD like reviewing my call package for my phone, reviewing gym membership and notes about when certain discounts come to an end.
We actually have a of this coming from one bank account that we share and we just put the amount required with some buffer into that account each month and it is automatically dealt with.
Variable Regular Expenditure:
This is anything variable like Groceries, Petrol, Entertainment (take out or cinema) and Coffee!
To keep things simple we have a separate joint account that a fixed amount goes into monthly. We have agreed an amount either can spend before notifying the other. Finally we get SMS alerts weekly with our balance on it and also when the balance drops below a certain amount.
We also use a credit card for this spending because of cashback or other incentives but this gets cleared monthly these days.
This has had to become something we take joint ownership over to be both intentional and awake to the money we spend and where it goes.
Expected Future Expenses
This is the slush fund, emergency money where we save a fixed amount each month to meat expenditure we know is coming but unsure when or how much. Car Servicing, Holidays etc. We haven’t broken it down to £50 for this and £75 for that but instead a fixed amount goes in and we don’t touch it.
This seems to be working quite well. Now a savings account is linked to our Variable account which we can move money to and from easily. We both have access to this and agree what it is to be used for and when.
This is the left over money. We try to clear out our Variable budget and Auto-Pilot account just leaving a small float to cover any overspends. Anything unspent is discretionary and we get to spend this as we like.
I want a new guitar, kids need new furniture and it will be from here this gets bought.