Breaking Down Personal Budgeting

Recently I have had a number of people reach out to me seeking help getting their personal finances in order. These chats generally start with budgeting which inevitably moves to identifying and increasing discretionary income.

So first things first. For budgeting to be successful, you have to be committed and diligent in addressing the shortcomings of where your money is spent. There are a number of ways to do this but I find completing a detailed Budget Planner the most effective.

It is normal practice to save (or spend), whatever money we have at the end of our pay cycle. That is we pay our taxes, mortgage or rent, fuel, utilities, groceries, credit card and at the end of it, if there is anything left, we bank it or splurge it on a frivolous whim as the next payday approaches.

When you work with a budget, the trick is to identify where the money is going at the beginning of the period, pay yourself first, then the mortgage, utilities, groceries etc.

This is not a new concept. It’s very well explained in many books but the one that comes to mind is a book by George S Clason, ‘The richest man in Babylon’. This book was first published in 1926 and is still relevant today. I recommend it highly, so much so that I provide it as a gift to new clients who want to teach these concepts to their children!

A Budget is a living document. Once you have completed it, you can…

Identify areas where you can trim your expenses resulting in increasing the money you pay yourself. Identify and refine, rinse and repeat!

The idea is, rather than splurging it on a treat, to perhaps direct it towards your mortgage, deposit on a home, a new car or holiday! Its that simple. It’s the easiest way of getting ahead and out of the rat race.

The key point here is that it only works when you are ruthless in where you cut your spending and militant in sticking to your plan. It works much in the same way as a diet. You are not supposed to eat the cake at the end of a good week.

The big trick is, once you are out of debt, have money in your mojo account and you are comfortably living within your means, start to make your discretionary income work for you. There are numerous ways to do this. Invest in yourself through a course, improve your skills so you can demand a higher salary, start a business or invest in assets that create a passive income.

IF you find that you cannot live without your latte at 8:45 every morning ($4.50 a day or $22.50 a week) you need to come to the realisation that you are working on someone else’s financial plan and acknowledge that it is at the expense of your own.

This quote by Tim Jackson sums this up perfectly.

‘We are constantly persuaded to spend money we don’t have, on things we don’t need, to create impressions that won’t last, for people we don’t know’.

If you can manage the change to your daily habits, the only decision you need to make is, what am I going to do with that extra $22.50 in my pocket each week. What sort of holiday does $1,170 buy you? How sooner does that help pay off my credit card? What does it do to my mortgage and the length of the loan? You can find out here.

The choice is yours. Have the coffee every morning at 8:45, contributing to the owner of Coffees R Us wealth accumulation plan, Or put $1,170 towards your dream holiday… your mortgage… your deposit for your first home… Or a dirty weekend away without the kids!

Here is a link to show you how small changes compound to significant results. There is a reason why Warren Buffet says that

“Compounding is the eighth wonder of the world!”

So here are some general ideas and tips to make budgeting work for you;

  1. Have a goal
  2. Take ownership
  3. Be committed


  1. It’s ALL about the 1%-ers.
  2. Look to reducing your utilities by turning off lights, take shorter showers…
  3. Look for sales at the supermarket, farmers days or farm grow your own veggies.

Alternatively, if you cant cut your spending, then find ways to increase your income;

  1. Sell stuff you don’t need or use
  2. Get a lodger or boarder, maybe even an international student.
  3. Get your teenage kids paying board.
  4. A second job
  5. Find higher paying employment
  6. Downsize

If you have any questions I am more than happy to provide general advice via the enquiries form.

Happy saving!


Daniel Twentyman B.Bus.(Eco) Dip.F.S.(FP) Financial Planner – Authorised Representative