Week 1 February 2019 - Budget like a boss
If you’re like most people, you probably know that feeling of getting to the end of a pay cycle (or even looking at your payment summary at tax time) and wondering, “Where did all of my money go?” Even with the best of budgets, it can sometimes seem like money flows through our hands like sand.One of the common reasons is because of spending leaks.
Think of spending leaks like a dripping tap. The drip, drip, drip may seem like a small amount one drip at a time, but if you put a bucket underneath you realise how quickly it fills up with water.
In the same way, if we make spontaneous purchases - a takeaway coffee here, a magazine there, or perhaps a ‘pick-me-up’ chocolate when paying for petrol - or if we regularly overspend on planned expenses - a few extra items in the grocery shop, or extra data on the phone plan - then those extra amounts will siphon our cashflow leaving our bank accounts much lower (or credit cars much higher) than we expect.
Once we are aware of our spending leaks, there are two key ways of managing them:
Plug them: making the conscious choice to change your behaviour so that you don’t spend. You could do this by cutting things out all together (e.g. no more magazines) or replacing the item in a different way (e.g. borrowing the magazine from the library).
Plan them: making the conscious choice to include the spending in your budget. Depending on the nature of your spending leak, you could add an extra line in your budget (e.g. a dedicated amount to buying magazines) or increase the amount allocated to existing expenses (e.g. including an amount to buy magazines in your grocery budget).
This week’s task is to analyse your spending diary over the past week, identify your spending leaks, and think about how you want to manage them. Watch the clip, download the resources, and don’t forget to keep tracking your spending - the longer you keep your spending diary, the better your planning will be.