Budgeting and managing your money can be really quite difficult. I found it really difficult
for a number of years, even just wrapping my head around what kind of bills I had and
how to best manage my money, what I need to focus on and what I need to automate. So in
this episode I want to share with you exactly how I managed my money. So we're going to
look at how I create a budget for the year. We're going to talk about how I have a weekly
discretionary spending fund and basically look at how I manage my different bank accounts
as well as saving accounts and what I'm trying to achieve. So this will be an insight into
how I've found works for me to manage my money. But this may help for you as well. If you've
been struggling with budgeting and trying to work out a system that works for you, you
might be able to steal some of these ideas.
Hey, I'm Ryan from on-property dot com dot. A U helping you achieve financial freedom.
And in order to achieve financial freedom, you do need to get your budget. In order us.
Okay, so let's jump on the computer and we're going to look through the way that I organize
my bank accounts and we're also going to look through how I actually go about setting a
budget for a year, so I have a spreadsheet where I put the figures in for the big bills
for a year and that helps me to really manage things. So I just want to say from the outset
that this is just one way of doing things. I tried a whole bunch of different ways to
budget over the years. I really struggled with a lot of them are not very good at budgeting.
This one I found works for me for the primary reason that it automates a lot of the decision
making.
It automates saving for all of those bills that come up during the year. Everything from
your regular monthly bills like phone bills, internet, car insurance, stuff like that,
as well as saving for those bigger bills that come up less frequently. We're talking car
registration, we're talking health insurance. For me, it's private schooling as well because
my kids go to a Montessori school here in Sydney now, so it really automates all of
that so I don't need to think about it and then I can just focus on how much money am
I spending each week and then I can focus on my business and earning extra money. So
let's go ahead and jump on the computer now and how, look at how I arrange my bank accounts.
I will just say before we jump into it, I am recording and my mum's house today, so
you'll see the kitchen in the background.
It's a little bit messy, but check out this view of Cronulla. Absolutely awesome. Mum's
got the best place and I think it goes without saying that this is not to be considered financial
advice. This is how I manage my bank accounts. What you do is up to you and seek professional
advice if you do need help. Okay, so here we're looking at my bank accounts. All right,
we've got the two bank accounts up the top, the pot and everyday spending and I've blocked
off how much is in them for privacy reasons as well as the account details because I know
so many of you out there, it will send me millions of dollars if you know them jokes.
Obviously no one's going to do that. But just for privacy reasons, I've closed those out.
So I worked two main bank accounts that actually have cards attached to them.
So these ones I can actually go out and I can spend money on, I can pay bills on. And
then I have online savings accounts as well, which you can see here. Splurge, holidays,
happiness, fire hydrant, big bill savings, and the thousand dollar project, which we'll
talk about all of those as well. So basically the way that it works is that all of my income
goes into the pot. So I call it the pot because it's like a big stirring pot. Everything goes
in there and everything kind of comes out of there as well. So my income, which gets
paid weekly from my business, goes into the pot from the part, I then have automatic payments
set up to send money where it needs to go. So automatically each week money goes from
the pot into the everyday spending account. So that everyday spending account is where
I actually spend my weekly money.
So I have a weekly discretionary budget. I did an entire video on that, which I'll link
up in the description down below. But this is where things like petrol, groceries, clothes
for myself or for the kids, I'm going out entertainment, all of that sort of stuff.
Even presence would fit in there as well, except maybe for Christmas. So each week I
have a set amount of money that I'm allowed to spend. And so that money on a Sunday gets
moved from the pot into everyday spending. And so then what I have is just one card with
everyday spending and on my phone I've got an ing app that can show me exactly how much
money's left in there. So I don't need to add things into a budgeting APP. I don't need
to track things. I have my everyday spending account each Sunday that gets renewed and
when I log onto ing I can see how much is left for the week.
So there's no guesswork in how I'm going towards my budget. And if I go over, well then my
everyday spending gets declined and then I have to make a decision what to do, where
I'm going to pull money from, or if I'll just stop spending for the week. Money also goes
from the pot into these different savings accounts. So big bills is to pay for the bills
throughout the year that are less frequent. So it'll pay for things like car insurance,
it'll pay for things like registration, it'll pay for school fees, it'll pay for health
insurance, that sort of stuff. So basically I work out how much that's gonna cost me per
year and each week a set amount goes into big bills. Fire hydrant is the amount of money
that I'm putting towards paying off debt as well as once debt's paid off. That will be
going towards investing.
Holidays and happiness is putting towards holidays or things that are going to make
me happy. Splurge is just things that you could splurge on. And then, um, this savings
account I don't use, but I've set it up and the thousand dollar project is things that
I do outside of my regular budget to generate little chance of income I put into there.
And then that's going to be used to either pay off debt or to invest. So let's go ahead
and have a look at how I actually work out, how much money is going to go into each of
these accounts by doing my annual budget. So here we have the spreadsheet and this is
the spreadsheet that I use to work out how much money I'm going to be spending throughout
the year. And then as a result of that, I can work out, okay, well how much money do
I need each week?
So the idea here is that you go through and you feel this out and it's going to give us
a weekly and an annual figure. And for most of us that needs to then line up with obviously
how much we are earning. And so that's the goal here is you, you go through this and
you move stuff around and you work out can I afford to live and where am I willing to
spend my money? So you've got things like rent here. Um, weekly rent. So let's say maybe
$500. I moved to Sydney, now I've got three kids, school fees. If you pay for private
school then you can put that in registration for cars. That might be $1,000 electricity,
maybe $50 per week. Uh, insurances, probably another thousand dollars, I guess. Car Servicing
at least another thousand health insurance. If you have that, you can go ahead and put
it in as well.
Phone and Internet, you can put in that a lot of people spend about a hundred bucks
a month on phone and internet. I think I spend more like $30 and $40 per month. And then
as well you can go through and these are the more discretionary items. And so you got your
investing, you've got your saving, and so barefoot investor recommends that you put
20% towards that. So depending on your income, you could then adjust your interests and savings.
But let's just say for this one, we're going to put $500 a month, so $6,000 per year. Uh,
we can also put money aside for holidays and things like that. So for holidays, I think
I was doing, you know, $50 per week putting aside, um, I don't, how much is that per year?
25002000600 okay. So let's say we're doing that. Okay. And so basically this is going
to give us a total bills figure and these are our big bills that were saving towards.
Then we've got our weekly expenses as well. And how much are you going to be spending
each week? Now, if I was a single person and didn't have any kids, then this could be a
really affordable figure if I wanted it to be. So somewhere probably around, I would
imagine a $200 or something like that. I've got three kids. So let's call it $500 so we're
talking petrol, we're talking food, we're talking close, we're talking pharmaceuticals.
If someone gets sick, all of that sort of stuff. So $500 per week and then that's going
to give us our total here. Now that total should ideally be equal to or less than income
after tax or less. So then when we're going to do from this to make things automatic,
it was we're going to look at our weekly expenses and we're also going to look at yes the total
bills but more so we're money needs to move.
So back into ing, we saw that my weekly expenses is $500 so I get paid from the business, I
send money across on Thursday so that I know it arrives in my bank account on a Friday.
And then I have the transfers each week reset on a Sunday. So what I then do within ing
is, and you can do it within any bank account, is to set up automatic transfers. So automatically
on Sunday from the pot to everyday spending, $500 is going to move across there. So as
we saw weekly spending was a $500 so each Sunday it's going to move across there. We
can also look at this spreadsheet and see that rent is $500 per week. So each Sunday
rent would then be paid automatically via bank transfer to my rental manager. So $500
would go across to them. Then as well, we have money saving into big bills.
So the total of this column here, which at the moment is about $155 so $155 would go
across two big bills. Now I have, I pay for private school as well, so the money that
I need to move across the big bills is actually higher than this. But yeah, you would work
out your amount and then basically each week you would move that money across into big
bills. Okay. You would also move the money that you wanted to say for your holidays into
holidays and happiness you and move the money that you wanted to use towards paying off
debt or investing into the fire hydrant. And this is in line with what bear for it invest
our talks about. So the splurge, um, he calls it the smile account and the fire hydrant
or in line with that. So if you want to understand that more, I will link up down below to my
barefoot in best invest our bank accounts.
Explain so you can understand that in more detail. But yeah, so each week money automatically
goes from the pot into my everyday spending. This is where I focus on my weekly discretionary
income and also money moves into my splurge account, my holiday savings, my paying off
debt or investing account as well as saving for big bills. And that is basically how I
manage my money. Everything moves across. I just live off the everyday spending account.
And then when a build needs to be paid, because these ones down here, just online savings
accounts, I can't actually send money, other bank accounts. So big bills will accumulate
over time, become bigger and bigger. And then a big bill might come in. So it might be health
insurance or it might be school phase or registrations up. And so whatever the amount of the bill
is, I will transfer it from big bills back into the pot and then I will pay money out
of the pot.
I do also leave some money in the pot because things like car insurance come out by direct
debit. So I don't move that into big bills. I just kind of leave some extra money in the
pot to make sure that when car insurance comes out, there's money for it there. But as you
can see, everything is basically automated with the exception of what I spend my money
on each week. So yeah, so that is how I manage my finances. I hope that this has been interesting
and insightful to you. I know it kind of sounds pretty complicated and it was, I guess it's
not super complex to start up and to get running, but it did take a few steps, but now that
it's up and it's going, it's really easy and as my life changes, it's really easy to adjust
as well as at the moment I'm not paying rent, so just canceled that rent payment.
At the moment I am saving to pay off debt so then that payment is actually higher than
what it previously was as well. So more money's going towards paying off debt then is going
to my weekly discretionary money than in the past. So I can adjust those things I had.
I just simply go in and adjust those automatic transfers and change them to what I want them
to be and yeah, that is how I manage my finances. If you enjoyed this video, then please don't
forget to subscribe to the channel. Also, go ahead and check out the videos that I talked
about, the one on my weekly discretionary budget where I talk more about that as well
as the barefoot investor bank accounts explained. I'll link those up in the description down
below so you can check them out or go to today's episode, which is on property.com dot a u
four slash six 30 and I will link up over there. So if you're listening to the podcast
on property.com to you forced her six 30 and that will link to those other two videos I
talked about. Really key to get on top of your finances this year. This is something
that's worked for me. If you've been struggling with managing your money, managing your budgeting,
then this might be something for you to try it as well. I wish you the best in your personal
finance journey and your journey towards financial freedom, and until next time, stay positive.