Easy Budgeting for Families

Friday, March 19, 2021

This is the second part of my post from previous month regarding finance management for families. I aim to help people like me, to get in control with their finances because once upon a time, I suffered with money management too. I relied so much on credit cards until I find myself sinking slowly in financial quicksand.

It's very stressful. So I've developed a system to manage our income (this is particularly helpful for low and middle income earners who struggle with making ends meet). Anyway, if you haven't read my previous post, it's essential that you browse through it because this post is just the second step. 

To do the first step, head over to Practical Money Management for Everyone.

Disclaimer: I am not a finance expert. I'm just sharing what I learned after I read the Barefoot Investor by Scott Pape. I recommend you buy the book too. What I'm sharing is not 100% taken from the book but this is what's working for me now.

First of all, you need to fill out the budgeting spreadsheet. You can make your own or download this template I created HERE.

Why you need to put into spreadsheet your income and expense

The spreadsheet helped me see where we currently stand and what we can afford. Before, I used to give in to all whims because as a parent, I felt guilty not being able to buy this or afford that for my children. When you have a credit card, it's easy to say "I can afford this." In reality, I was already spending more than my means.

I didn't get buried in debts immediately but that meant, I did not have enough savings for emergency. That emergency hit when I got pregnant with our 3rd child. Going on maternity leave, we had to live off on one income. Without enough buffer, we ended up with maxed out credit cards.

No more skimping to save

Anyway, I don't agree with skimping to the point of depriving the children. But a disciplined kind of splurging is what I'm after and filling out the spreadsheet helped a lot. 

Now, I don't have to spend hours per week to manage the finances. I just go into my bank account and I can see right away if we have enough to splurge on something or for family holidays. I've also included "GIVING" in the spreadsheet because the Filipino culture is heavy on this. 

It's not a bad thing. But you also have to watch out that you aren't eating up the money intended for your utilities and other necessities. You have to give with a happy heart and the only way to do this is to make sure that you are not abandoning your other responsibilities. 

Most people were shocked to hear that Filipino families send financial support to their families of origin. Especially since they understand how hard it is to work for money here. But with disciplined budgeting, it's possible - without being detrimental.

Zero out your credit cards

This exercise also helped me zero out all my credit cards. And I'm happy to say, that only last month, I have finally gotten rid off all of them - TOTALLY. Yes, ZERO balances in all credit cards since last month. It's such 

Anyway, without further ado, let's dive in to step 2.

Set up your bank accounts

Scott Pape recommended ING in his book but even before I've read this book, I have been using ING. I have already set up an Everyday Orange Account and Savings Maximiser for each of us since around 2016.

Three reasons: 

  1. I wanted to benefit from their referral codes. For setting up both accounts, I was rewarded $100. That was in 2016. Now they pay only $50. If you want to enjoy this referral bonus too, you can use this code when prompted: EXO285 - they don't hold this bonus constantly now but currently, there is one running until 31st of March 2021.
  2. They don't have bank fees for withdrawing at other ATMs. Initially, you will be charged, but the withdrawal fees are reimbursed in your bank account. In saying that, there are criteria to benefit from this feature. I think you need to deposit at least $1000 monthly and then spend 5 transactions. I've never had issues because I use both accounts regularly anyway. But please read the fine prints so you're not missing the advantages.
  3. Savings maximiser, as the name depicts, offers a higher interest rate than most savings account (and even term deposits). It's at 1.35% at the moment. Again there are criteria (like monthly deposits of at least $1,000, 5 settled card transactions, and you also need to outdo your last month's balance - well the idea of savings in the first place is that you top it up. So I don't see an issue with these 3). 
Currently, these are the bank accounts I keep (combined with my husband) and for which purpose:

2 x NAB Everyday Account
  • These were our original bank accounts and this is our usual payroll accounts. Our salaries are deposited here. My account is used for paying the rent and the car loan. Let's call this account as "RENT&CAR."
  • My husband's account is used for groceries. So let's call this account "GROCERIES."
1 x NAB Personal Savings 
  • I keep one for my MOJO account. A MOJO account is like an emergency fund of $2,000. When you have a MOJO account, you can choose to have a higher excess fees on insurances for lower monthly premiums.
3 x ING Everyday Orange 
  • My husband's account is used for our auto-debit expenses: utilities, internet, etc. - I name this "AUTO-DEBITS"
  • My account is used for splurge - when we go out for shopping and the kids had an urge to buy trinkets here and there, bubble milk tea, yoghurt ice cream... for those stuff that are not too expensive to deny. But it's only limited to a set budget weekly so when it runs out, that means the kids (everyone in the family that is!) will have to wait for the next budget to splurge again. I name this account "SPLURGE."

2 x ING Savings Maximiser

  • My ING Everyday is linked with 1 ING Savings Maximiser. This account is intended for mid and long term wants and needs. Things I consider under this account are holidays, big toys, parties, clothes and even furniture and fixtures needed around the house. Some necessary expenses that are not urgent are also budgeted under this account. For this account, I borrowed Scott Pape's term, "SMILE", and rightly so. Because these goals give a smile to our face when we think of them.
  • Another ING Savings Maximiser is linked with my husband's account. This one is for savings and are usually long term, like home deposit for instance. ING's interest is quite competitive compared to a lot of term deposits. For this account, I call it "FIRE EXT" taking from Scott Pape's book, Fire Extinguisher. If you read the book, you will understand why Pape refer's to fire - but what it means is that these are for the big purposes in your life.
While building your target amount, preferably 20% of the value of house you're looking at, you may choose to diversify a part of your savings to investments (for higher earnings) but that's for another post. Right now, our concentration is to budget wisely, so that our hard earned money does not feel like burning in ashes! 

1 x Bankwest Easy Transaction
  • This account is for charitable purposes like financial assistance to families, church donations, anything that is about giving. I have a small time side hustle that helps me earn a bit of extra from time to time which is linked to this account so that also helps fund it. My hugs in a card mission is also budgeted through this account. This account is personal to me. I don't know if my husband keeps one like this himself but that's all up to him too. 😄 Let's call this last account as "GIVE."

With all the bank accounts we are using, there really were no particular reason except for ING, which I have stated above. So feel free to choose your own bank accounts. The idea is to just separate your salary every time it comes so that you don't OVERSPEND unconsciously.

From spreadsheet to bank accounts

Now let's move on from our spreadsheet to actually putting the plan into action. Exciting!

Let's base from our example spreadsheet below:

Barefoot investor template income vs expense
Start by grouping up all your expenses and figure out which ones should go under which account:

As a recap we have 8 accounts at the top. Sounds like a lot but that is only because some accounts were savings linked to main accounts. Plus also because, I have mine and my husband's account separated. So don't get overwhelmed.

We'll match the expenses with the accounts. I have chosen the weekly amounts to make it easy. You can use color coding to make it easier. We just need to know how much amount needs to be transferred to each bank accounts every time your salary comes.

Barefoot investor excel template bucket
This sample spreadsheet allocates all expenses to each bank accounts - color coding makes the process easier

Set up auto deposits and auto debits

Once you have all expenses sorted out to which bank account they should go, now you should schedule your auto deposits. Say for example your salary comes in on Wednesday, then you should schedule your auto deposits on a Thursday.

If your salary comes in every month, then it will be a little bit tricky. You may want to set up your auto-deposits (especially for the groceries and splurge) on a weekly basis still. For me, I would do this because it's easier to create a trigger on a weekly basis. 

For instance, in this example, the weekly amount is $192.50 per week. If you have this amount on a Thursday and by Sunday only $50 is left, that means you only have $50 to spend until the next Thursday. Time to tighten the belt! It's easier to tighten your belt for only 3 days then for a whole month!

Setting up auto deposits is easy. Just go through the normal procedures of transferring money online. Once you get to the Frequency portion, choose periodic instead of one-off. Then just check the calendar to make it coincide with your salary payments.

Periodic transfer will let you choose cycle (weekly, fortnightly, etc) and the first transfer date. 

Auto-debits are for those expenses that are billed by cycle. For instance, monthly internet, monthly phone plans... you may still transfer to the AUTO-DEBIT bank account weekly, that's not a problem. The money will just sit there until the auto-debit is scheduled.

Setting up auto-debits may be done online or you can call your provider (ie. Vodafone, AGL Energy & Gas, etc.) then just give out the account details of your chosen AUTO-DEBIT account (in my case, my husband's ING Everyday account.)

Finally, the best part

In the beginning, you may encounter some bumps like a missed out auto-debit charge. And for things like SMILE (mid and long term wants), you may start with ZERO so you may need to say NO to some plans. But don't worry, that's not going to last long.

Time is our valuable friend. God willing, if we still live tomorrow, chances are, the deposits will accumulate before you even knowing it.

The best part is choosing a day in a week to have a date with your partner (or a time out for yourself). You can be creative and do it at home like what I and my husband did because we have a toddler - see post here

If you are the Finance Manager in the family hehehe, bring your spreadsheets with you and explain it to your partner. You can both choose your mid and long term plans (how you'd want to spend your SMILE account), or check if there were any other expenses you've missed that weren't budgeted. In any case, it's always best to work as a team.

And that's it... so many birds hit in one stone, I believe (but please don't literally hit birds with stones 😉). Managing your finances will give you a huge relief down the track. I hope this exercise will help some families out there. 

This journey entails a lot of sacrifices, especially in the beginning, but with discipline, you'll discover that it gets easier in time...

Again, you may download the budgeting template featured in this post by clicking the image below:

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