Budgeting - getting it all together

2 July 2008

Shelling peas from the Carl Larsen gallery

I'm not going to hide the truth, learning how to deal with money is difficult. It will require that you throw away those ideas you've probably lived with all your life that lead you to buy whatever you wanted. Modern life gave us the credit card and the notion that it was okay to immediately buy the things we used to save up for. I was well into my 30s before I got a credit card and could then buy what I wanted, when I wanted it. And not only that, I could also buy more of everything, as well as things I didn't need, and soon I had too much of everything. I kept buying, the shops and bank kept getting richer. I look back on that time now as a sickness, it was something like an addiction. I kept buying because it made me feel better, eventually I was shopped out and buying felt good for shorter and shorter periods. Eventually, buying was just a habit and what I bought didn't satisfy me at all.

I stopped cold turkey.

That's not an option for everyone. Some of you still need to shop because you're still building your lives, still have children to care for and are probably working, which requires a certain level of grooming and decent clothing. I want to encourage you to shop at op shops and garage sales and also swap clothes and shoes with your friends and family. Have a Saturday afternoon party where you invite everyone to bring five items of clothing or five pairs of shoes to swap. It doesn't matter about the cost of the item, if it fits and the other person wants to swap, deal done. You could also swap children's clothes and shoes, books, small appliances and all sorts of odds and ends.

But that is getting off the subject, that is un-shopping and this is budgeting. Before I get onto that though I want to encourage you to think about your need to shop, what you get from it, what it takes from you and if, like me, you are shopping for more than you need. If you are, I suggest you stop shopping altogether for a period of time and then go back to it when you have more control.

So, now that you've starting tracking your expenses you need to look at what you've got. Let's say you've been tracking for a month and you notice a pattern of coffees emerging. Most times you go out you buy a coffee costing $3. Do that four times a week and you've spent $12 on something you didn't need. Continue on for 48 weeks of the year and you'll be almost $600 out of pocket. That is $600 for coffee you didn't need or could have made at home. Imagine if someone came up to you in the street and said they'd give you $600 to stop drinking coffee at a coffee shop all year. You'd jump at the chance. What's that you say? You don't drink coffee. Well, make the coffee some small thing you do like - magazines, renting movies, newspapers, bottled water, buying lunch at work or whatever. It all adds up.

If you are buying that coffee and maybe a magazine and a rental movie each week, thrown in a couple of work lunches and some bottled water or Coke and you'd be looking at $2000 a year. If you are earning $50,000 a year, that $2,000 is quite a big chunk out of your pay.

But how do we get around the fact that we live in a modern world, we want to live well and sometimes that costs money? You reorganise your mind to accept the fact that you only buy what you have budgeted for.

I use a ziplock bag system for organising myself and our money. It works really well for me because when it comes to money I'm a bit of a dunderhead and I need to have a simple method that shows me clearly what I have to spend, and on what. Basically, we have two lots of money: one lot is for our fixed expenses like phone, electricity, gas, internet, rates, insurance bills, all that money stays in the bank. Our other money is cash money that we withdraw from the bank to buy our groceries, petrol, garden supplies, chook and dog food, etc. Here is the breakdown of our current budget, I've written in depth about it here:

(Per month)
Each bill is paid by direct debit when it comes in or kept in the bank until we need it

House and water rates 95.00
Insurance - house, car, health 225.00
Phone - Landline & Mobile 40.00
Internet 40.00
Electricity 53.00
Gas 15.00
Rego, tyres and maintenance 84.00
Vitamins 80.00
Clothes and shoes 20.00
Optical 25.00
TOTAL $677.00

Money withdrawn from bank and put in ziplocks

Aldi 125.00
IGA and markets 125.00
Chook and Dogs Foods 50.00
Bulk food/ flour 40.00
TOTAL $340.00

Petrol 150.00
TOTAL 150.00

Dental 20.00
Medical 25.00
Chemist 30.00
TOTAL $75.00

Garden Supplies 30.00
Pocket Money - HH & RH 80.00
Postage 15.00
TOTAL $125.00

TOTAL MONTHLY SPENDING $1367.00 or $342 a week or $49 a day

You will see that we have budgeted $80 a month for pocket money. We each get $40 a month to do whatever we want with. This is a little gesture that lets a bit of the pressure off. We can spend our money on what we love or we can save it - it's our own decision.

You will also see that we have no debt - so there are no mortgage or credit card payments. We try to live on the lowest amount we can and if we do that, the pay off for us is that we continue to live the lives we want to live. We don't have to go to work. Quite frankly we could both still work for pay if we wanted to. I still get offers to go back to my writing work, Hanno is still fit enough to work if he wanted to. We don't want to. We prefer to have the freedom of our days. We want to stay as we are.

Obviously your budget will look different to mine, but the structure of it could be the same. You will have certain bills that you know will come in every month or week that must be paid. If you set up a bill paying or have a direct payment system at your bank, this money can sit int he bank until the bill comes in and then it is paid directly from the bank. You don't have to touch the money at all. Then you need to make up a list of the cash expenses you have - you will withdraw this money from the bank each week, or each month, depending on your circumstances.

An important element of this type of system, is to have an emergency fund (EF). Things go wrong. No matter how careful you are, there will be points along the way when, out of the blue, you'll need money for something unexpected. To cover these times, make one of your categories for saving an emergency fund. If you can cover your unexpected expenses with cash you have already put aside, you won't have to put such things on your credit card. We try to keep our emergency fund between $1,000 and $2,000, but it goes up and down all the time. The most important thing is to save for your emergencies and don't see your emergency fund as a little bank that you can borrow from. When it's in the EF, it stays there for a real emergency.

We try to keep under budget for everything during the month. Everything left over - if we budget for $100 but only spend $70 - on every category, that money goes into our emergency fund. That is how we save for emergencies. It is the incentive we need to try to stay under budget in every category, except our pocket money. Generally, we have about $100 month left over. That money is put into a special account for the EF.

It's not all straight forward, is it. Budgeting requires a lot from you. You'll need strength of character, commitment and determination to succeed. It's difficult, I'll be the first to tell you that, but if you get this right, if you can knuckle down, control yourself and your money and understand your motivation to buy, you will be able to live well on little, and really enjoy the life and the satisfaction you'll get by being independent and having enough. I know what 'enough' is for me, have you worked that out for yourself yet?

Tomorrow I'll continue with budgeting. I hope I haven't put too many of you off. It's an important subject.


  1. Hi Rhonda,
    I just LOVE you covering the subject of money and budgets!!
    You always have so much great information to share.
    We are debt free, except a small house payment and are working hard on that. I work hard to stretch the money my husband makes for us.
    Thanks for covering this subject...look forward to more.
    Blessings to you,
    p.s. Hugs to your "furbabies"

  2. Sticking to the budget can be so difficult at times, can't it? I have a budget set up for us but I can't seem to get back to it and work out the numbers at the end of the month to see where we've gone over or not...

    You've inspired me to tackle those numbers again and to stick to it!

  3. Rhonda,

    We are still debt free although we are still paying off our home. I have been adding "extra" each month to our payment. My husband I are learning alot about money in our Sunday School class. I just found out there are 1000 homes that are in forclosure in 3/4 of a mile from our church.

    I want to get our home paid off as soon as possible. Do you have any tips on this? How fast did you get your home paid off?

    I was also interested on how you came up with the number of how much money you need per week? Did you just divided everything by two? I have never looked into how much we needed or spent per week:) Very interesting:)



  4. Well, I'm back - even after yesterday's post when you informed the uncommitted "good bye,it was nice knowing you". I got really sad then, Rhonda because I KNOW I have a terrible relationship with money. Even though we garden, have chickens (chooks to you), raise our own meat - still we are penny wise, dollar foolish. So I have my little notebook and I'm still here. Don't say goodbye!

  5. I am new to your blog, so I'm not sure where to look for things. Have you written about how you came to have no mortgage? Will you tell me more about it or direct me to the post that tells about it? Your simple living idea sounds great, but it seems unrealistic for us to not have a mortgage payment right now...


  6. Hi Rhonda,
    I am one of your newbies :) and I must say that being a young woman with a young family, I was still living the way I was bought up. (show everyone how much money you have through your flashy things). I know now that this just doesn't work, with you showing me how to get my life on the right track, I am starting to feel as though I can live a great life with a lot less!. Your blogs have taught me a lot already. Keep up the great work, because althought you might not know it, you are changing a lot of lives for the better. Big Hugs

  7. As I am reading yesterday and today on July 1st and have committd today to tracking all money spent again I have to say thank you for providing such timly information to me you always seem to know where I am in life. Blessings on your road as you help all of us out here in cyber space.

  8. Hi Cathy. Good to hear you're working hard on reducing your house debt.

    Beulah, if you use ziplock bags, you don't need to go back to your budget to see you have money left over. That's the beuaty of this system - you actually see the money as it goes during the month. If ther is money left over, it's still in the bags when you get your following week/month's allocation.

    Renee, we paid our home off in eight years by making double payments and by putting spare money into extra payments. It's really tough doing this because it seems to take forever to come to the end of payments, but now that I look back on it, it didn't take long at all.

    I'll be writing about how we came up with our figures tomorrow.

    Don't be sad, Scrub Creek. YOU, my dear, are exactly the kind of person who will benefit from this. You sound a lot like me - we were keepig chooks, stockpiling, cooking from scratch all while we were spending like kings. You can turn your spending around. All it takes is the willingness to do it and the determination to not give up when things get tough. (And they will.)

    Hi Jess, welcome. As you can see above, we got rid of our mortgage quickly by increasing our payments.

    Hello Christine, welcome and thank you for your kind words. I hope you find the life you long for and I hope I can show you part of the way to get there.

  9. m going to post today about our new (financial) year's resolutions and new budget. After a weekend spent away from home, I am so happy to be back and inspired to look over our finances.

  10. Hi Rhonda

    I'm curious, with all the fresh food you eat and great diet, why do you spend $80 a month on vitamins? Sorry to be nosey, and I don't mean to be rude, it just stood out as a huge amount to me.


  11. Just wanted to jump in and say how I paid off my house. At first I doubled my mortgage payment and that worked for a while. Then, I realized I had no emergency fund and finances were getting tighter. So I started and emergency fund and made sure I had at least $1000. in it. Then on to save money in my savings account or cd's for paying off the house. Finally, over many years I had enough. I could have bought many things as I had 1 tv and my used car was 8 years old. But I paid off the house and I'm now debt free. I have a 10 year old car that still runs well and 1 TV and as gas prices/groceries climb it helps to be debt free. Now, I'm paying off a credit card that was up to $7,000. and now has $800. Soon I will save for retirement (or not working away from home) as it is just around the corner.

  12. Hi Rhonda,
    I'm enjoying your posts on budgeting even though I'm something of a budget diva myself. I just wanted to pass on this comment my daughter made some years ago. She was attempting to pay off her student and computer loan and couldn't see how she'd ever get out of debt. We sat down and itemised all her fixed expenses even those that seemed quite trivial. Like you I encouraged her to draw money from the bank once a week so that she wasn't spending so much on bank charges. Bank charges often slip by us and can be quite substantial. After about three months she commented on how she felt that she had control on her money, that she could see that she'd be able to pay off the loan and that she always had money in her bank account come pay day.
    I just thought I'd post this to encourage those new to budgeting that being debt free is possible.

  13. Thank you Rhonda, We are working on this and will be able to be debt free (except mortgage) with an emergency fund by Christmas. It is hard work. Our home has not sold so we are looking at plan b. Selling stuff and working on a better goal system to increase our retirement and the kids college fund as well.

  14. This is my first post here. Thank you. We are currently working on being debt free. It will take a few years, we have a house payment that will take at least 15 years to pay off. Our credit cards are paid off though. We are in the process of decluttering and simplfying our life. I came across your post about a week ago. Have enjoyed it. Thank you.

  15. Thank you for this post. I got a lot of great ideas. We are trying to push our numbers lower and lower. I posted my budget and totals on my blog today. Thank yo ufor the motivation! :)

  16. Great post Rhonda, a timely reminder for all of us. We are going to be debt free by Christmas 2009 (except the mortgages). I am on maternity leave this year so can't make much head way clearing debt yet. We use the envelope strategy too and we have halved our expenditure in the last few months. Looking forward to more ideas, thanks for your inspirational posts

  17. Hi Rhonda. I noticed a different photo on the home page. I wondered if I could ask a personal question, do you dye your hair? I am 42 and quite gray and spend about $150 every 6 weeks on cutting and dying it so I don't look so old. I am becomingly increasingly worried about the chemicals I use on my hair. I know there are organic dyes and wondered your thoughts on the subject. Apologies if you feel my question is cheeky! Regards K

  18. I get paid this week and I am going to start doing all of these things.
    I can't wait! thanks so much!

  19. Hello Rhonda Jean--
    Though I do not comment, I do read your blog on a regular basis. I just love it here!
    I have a little something for you over at my place to thank you.

  20. I really appreciate the time you took to share all that!

    My dh and I are probably the most frugal people we know (in person, not on blogs). We're on a pretty limited income, which is fixed, with the exception of occasional computer work I do for an online company. Though that money is good when I get it, it's sporadic, and therefore cannot be counted on.

    We are already doing alot of the things you suggested, but I can see room for improvement. You are doing some things we hadn't considered (primarily, the savings plan and budgeting our 'play' money).

    After you've finished your posts on this, I'm going to print off much of it to share with Hubby, so we can make some changes. :-)

  21. Hi Lou, it is a large amount. When I wrote 'vitamens' I meant emu oil, which we both take for the Omega oils, Q10 and a few other odds and ends.

    Celt, welcome. I dyed my hair when I was younger but when I started going grey, I stopped. I want to look my age. For some reason my photos hide the grey. I still have a lot of brown, but I also have a lot of grey, specially over my temples. It's kind of salt and pepper all over but greyer at the front. I think there are a lot of harmful chemicals in hair dye. Have you tried Henna? It's a natural product.

  22. Hi anajz, welcome. Thanks for your kind words and the award.

  23. We've been budgeting for a long time but only in the last 8 months have we been living frugally and really sticking to our goals. We are renters even though the bank has qualified us for a large mortgage (real estate is insane here) but it's too much debt to take on. So we rent, which we can do for less than half the cost of a mortgage. And we save our money and wait for the inevitable (and now fast approaching) downturn in the market. IMHO most people take on way too much mortgage under the often-mistaken belief that it is better than renting (economically speaking). It often isn't if you are willing to wait a few more years to buy. It is hard to be a renter because there is a stigma about it (like you haven't "made it" if you haven't bought). But you can't let emotions get in the way of smart money-management.

  24. great post, just one question though, what's a Chemist? I mean I know what Chemistry is but that definition doesn't seem to fit.

  25. Hi Lindsay, the chemist is the pharmacy (drug store).

  26. How wonderful. This is clear and effective and I am going to apply this. Thank you.

  27. One of the best things a mother like me can do is budgeting. I want and need that skill.


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