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  • Writer's pictureVictoria Wallis-Smith

Why budget?

It’s a new year and time for a new budget – yay!

Have you downloaded one yet? Well before you try and decide 'which one' from the millions of budget templates out there, read this.

Cashflow. Money Coach. Budgeting. Money Management.

If you’ve ever used a budget template, there’s a fair chance it didn’t work very well. And it’s not because you used the wrong template… because they’re basically all the same:

  • Income in the top rows.

  • Expenses in the following rows – sometimes under headings, like ‘personal’ and ‘household bills’.

  • And at the bottom, the magic answer – your total income minus your total expenses.

The problem with most budgets

That budget template does have its use – IF you’ve included everything (and that’s a big IF), you’ve just worked out if your cashflow is positive, or (hopefully not!) negative:

  • Cashflow positive – This means after paying for all your expenses, you have money left over. This is a good thing.

  • Cashflow negative – This is not so good. Your income is not enough to cover your expenses and you’re going into the negative… cue overdraft, home loan redraw or credit card misuse.

So, what’s the problem with that budget template? I have two issues:

  1. A budget is just a tool. Until you know the purpose, it’s not very useful – you can read more about the purpose here.

  2. Timing. The timing of money going in and out of your accounts is important, even critical – so instead of thinking about budgeting, think about cashflow planning.

We don’t get paid on ‘day 1’ and then pay all our bills on ‘day 2’. For most of us, the timing of when we’re paid and when our expenses are due within a pay period varies.

Added to that, I’m pretty sure a lot of your expenses vary – maybe the groceries are $220 one week and $180 the next, or you spend nothing on the kid’s clothes one month and then do a big trip at the start of summer/winter when you realise how they’ve grown & nothing fits.

So, one of the reasons most budget templates are a failure – and it’s the template we’re blaming here – is because they’re not designed as a forward planning tool.

A different approach to budgeting

I LOVE the spreadsheet I use for my cashflow planning – but I know spreadsheets aren’t for everyone. The good news is you don’t have to use one – good money management means finding an approach that works for you.

In my view, money management isn’t so different to time management – you might use a paper diary, a wall calendar, an app in your phone. The important point is that all of these are time management tools that let you know what’s ahead. And that knowledge gives you confidence.

Try approaching money management in a similar way – your cashflow plan is the tool you use.

(Have you noticed I’m talking about planning, not budgeting – the 'b' word has such negative connotations…. Scrimping & saving? Tracking every dollar? Not a fan? – you’re not alone!)

Whatever cashflow planning tool you use, it’s only one part of successful money management.

The Nutshell Money approach starts with making your money a priority.

Can I point out the obvious – money doesn’t take care of itself! So, try scheduling time in your diary to manage your money.

I’d suggest scheduling a recurring weekly ‘money time’ appointment with yourself. (I’ve been using this approach for years, & I don't intend to abandon it anytime soon!)

Having time set aside to manage your money on a weekly basis, makes it easier to stay engaged with your cashflow plan, and any other money projects you have – in fact, I’d say it’s habit forming. #moneymanagement

Nutshell Money’s cashflow plan

What do I do that’s different? My cashflow plan is full of dates. It might not seem like much of a difference but believe me, it’s a game-changer:

  • Focus on using the date your income hits your account, and the dates of your expenses.

  • Smooth your expenses by setting set up regular direct debits, wherever possible.

  • Aim to extend it out at least 3 months, building it out to 12 months.

  • Be sure to allow for all your expenses – that means planning and saving for the irregular and variable expenses, like holidays and extra expenses at Christmas.

Want to know more

At Nutshell Money, we want to make money simple – so you can focus on living life, not tracking every dollar.

So, if your budget is broken and you want to try a different approach, book a chat with Victoria Wallis-Smith using the link below – a Let’s Chat call is a 30min phone consult, at no cost, to discuss your needs. What are you waiting for?


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