My Annual Family Budgeting Method - How I Got Started

A few years ago, our home spending got a bit ridiculous so the change was needed to better manage our finances.?

This was the first step in this important journey - acknowledging that we should have a home budget.?

Having a home budget should be standard practice regardless of age, marital status or living conditions.?

It’s a great habit to start young.

I wish I had understood this when I was younger…but I can't live in the past.

I live, learn and teach.

So let's go into how I got started.

1. Go through income and expenses over the last 12 months

The first step was to look at my bank transactions over the last 12 months.?

This foundational work took time but was very important.?

It enabled me to see our annual spending (without budgeting) and gave us information on where our money was spent.

It also provided clarity on our monthly income.

We were lucky that we used a Neobank (online bank only). I could easily and quickly categorise expenses and filter the period to 12 months.?

As a result of this, we would get a simple screen showing us our annual costs.

We added these costs to a spreadsheet.

If you do not have a bank app that allows you to do this, you’ll have to download your transactions from your online account, create a spreadsheet and manually update it.

This will take MUCH more time.?

A cheat to get around this is to purchase a basic plan in Xero and QuickBook and link your personal bank account(s). You can then create rules to match transactions quickly.?

Your accountant should be able to help with this.

Again this is not the quickest way to do things, but it's quicker and easier than going through a banking CSV file.

Now you should have a spreadsheet of your income and expenses for the year.?

1. Split the costs over the year

Now that you have your annual expenses, you can divide the cost by 12 to get an approximate spend per month on things like food, eating out, clothes, car etc.

You now know how much you spend a month on living essentials.?

1. Create your budgets

This is where my wife and I sat down and looked at our monthly expenses to determine if we were overspending in any categories.?

We discussed where we could cut expenses and allocate a budget for each month.

1. Create a list of new costs

The next step is to add new costs.?

For example, our kids wanted to start swimming lessons so we added that to the budget.

Any holidays that you want in the year should be added here.?

These costs can be a lump sum in the month you will pay for your holiday or you can save money every month.

If you do not know how much your holiday will cost, you could either:

• Do a quick Google search
• Look at the previous year's holiday cost in Step 1.?

Any investments and savings should be budgeted.

Here I include treats for my wife - spa days etc.

Now - price these extra costs.?

Congratulations - Now you have a budget.

1. Earnings 2024

Ok, so now we are at the part that makes everything work and if you fail at this point, everything else crumbles…

Let's look at income.

Does your monthly income cover your budget?

If it does then…great.

If it doesn’t then you need to either:

For Business Owners

• extract more money from your business
• work out whether any of your costs can be directly paid by your business - this is something your accountant can help with
• spend less
• reassess your budget

For Employees

• earn more money
• Work more hours
• Get a pay rise
• Earn from a 2nd job or side business
• spend less
• reassess your budget

1. Monitor budgets and income

We monitor our monthly budgets weekly to ensure we have enough money to cover the monthly expenses.?

We sit down for a few minutes at 6pm on a Saturday and go through our weekly expenses and budgets.

And..that's it folks.?