Okay, let’s say you want to start saving properly.
The first thing literally everyone will tell you is “You need a budget!”

The problem with this advice is that while most people know budgets are important and useful, they’re just incredibly hard to stick with. Meticulously tracking your every expense is time-consuming and annoying. Ain’t nobody got time for dat!


This Pidgey in't gonna catch itself!

This Pidgey isn’t gonna catch itself!

Budgeting is restrictive – like a diet for your money. Budgets fail for the same reason that strict diets fail; they aren’t fun, and it feels like you’re punishing yourself when you do something wrong.

If you’re one of those rare people that can stick to a budget over the long term, though, congrats! (I’m not one of those people)
Your finances are probably in great shape, and there’s no need for you to read this article. Feel free to resume your regular interneting.

For everyone else, I’m going to show you a different way to approach your spending.
One that allows you to actually have fun while working towards your long term goals!

One big life goal

People know saving money is a good thing. But as I wrote in my article Long-Term Saving Motivation, it’s almost impossible to motivate yourself to save consistently without a big goal.

With that in mind… start by coming up with just one big financial goal.
You might want to pay off your credit card debt, save for a holiday or house deposit, or even save for a big luxury item you’ve been lusting after! Make sure it’s doable, though – a lot of the time people’s savings goals are unrealistic or too vague, making planning for them tough and usually doomed to failure.

For it to work, your goal has to be significant enough to motivate you to put the work in. Something like:

Wouldn’t it be great if I was debt free!
Wouldn’t it be great if I could afford a deposit on a house
Wouldn’t it be great if I could take a trip to Europe next year

Wouldn't it be great if I owned an NBA team!

Wouldn’t it be great if I owned an NBA team!

Once you’ve got your goal, figure out how much it costs, and therefore how much you need to save each month to make it happen in a given time frame. E.g. I want to save $2,400 to go towards a trip in a year’s time, so I’ll need to save $200 a month.
That does sound like a lot when you plan out how much you’ll need to save, but it also really helps to break things down into weekly payments – $50 or so a week doesn’t sound as daunting as $200 a month. It’s amazing how fast saving just a little bit a week will add up.

A better way to save for your goal

So, since meticulously budgeting and tracking your expenditure isn’t the best way to save (plus it just sucks), here’s something that I’ve found works well instead – a spending plan!

A spending plan involves directing your money in such a way so that you’re able to enjoy your life while still moving towards your long term goals.

The idea: Spend more on what you enjoy the most, and cut back on everything else. Most people don’t know where all their money is going. A spending plan shows you this, and from there, you can see where you can cut back to achieve your goal. When you’re doing this exercise, you’ll probably find yourself saying: “Flipping heck, I can’t believe that’s how much I spent on that last month!”

I first read about this in Ramit Sethi’s book I Will Teach You to be Rich. The chapter on spending plans happens to be available for free here!

How do you do it?

I’ve made a Spending Plan Template which you can use!  It’s a Google Sheet that I’ve designed to be as easy to use as possible. You can access it here. This link will make you your own copy!

You should already know roughly what you spend each month on your fixed expenses (rent, electricity, phone, etc.).
You probably won’t know how much you spend on your “variable expenses” (food, alcohol, clothing etc) each month. You’ll need to check back through your transactions and enter them all in the spending plan template. It does all the calculations for you. All you need to do is enter in all the transactions. Easy!

I’ve pre-built all the standard expense categories and I’ve also left some space for you to add your own. I recommend adding your favourite hobbies and anything else you’re passionate about. It might be your goal to find a way to spend more on one of these things. If so, a spending plan can help you do that!

Once you’ve done this and also entered your monthly income (after tax), you’ll see where all your money is going and how much is left over each month.

When doing this exercise, it’s important to think about what it is that you enjoy the most. One person might look at $450 a month spent on nights out and think “what a waste!” while another person might be okay with that expenditure as they love going out.
This is why I’ve stressed not to cut back on the things you enjoy the most because it just isn’t gonna happen!

Now that you know where all your money is going, It’s very likely you’ll spot a couple of areas you can cut back in. You might have an expensive gym membership you aren’t getting the value out of. You might be buying your lunch every day (like how I used to buy Pita Pit heaps – it seriously added up!) You might be bleeding money on smartphone apps or subscription services.

Ugh, why did I think I needed a years subscription to a Meditation app?

Ugh, why did I think I needed a year’s subscription to a meditation app?

With all your spending spread out in front of you like that, it’s really easy to see where you’re spending money unnecessarily. Then, you can come up with realistic ways to cut back.

It’s really important to be as specific as possible when coming up with ways to cut back on your spending. “I’m only going to eat out once a week” is better and more doable than “I want to spend $100 less on food per month”. It’s harder to pay attention to your monthly expenditure than it is to your weekly activities.

I’d suggest picking between one to three areas to cut back in and writing them down.

How to execute

Planning everything is the easy fun bit. Now you’ve gotta stick to it!
Like I said, the good thing about the spending plan is that it’s so much easier to stick to than a budget. You’re only focusing on cutting back in a few key areas, and you have your major goal to motivate you. You’ll still need to be conscious of what you’re spending, though.
Something that really helps you to do that is automation.

It’d work a bit like this. Let’s say you want to save $200 a month to go towards a trip, which comes down to about $50 a week. You’ve done the spending plan exercise and found a couple of things you can cut back on to make this happen.

You could leave the money you want to save in your regular account, but a much better way would be to transfer it to a separate account (preferably even a different bank, so it’s less visible) This way you won’t be tempted to spend it. Just set up an automatic payment to come out of your wages the day after payday (assuming you get paid weekly)
I use Rabobank for my savings account since they offer superb interest rates and security. The security thing is also great for making you rethink a sneaky savings withdrawal since it’s quite a time-consuming process to access the account!

One of the best things about the spending plan is that once you’ve done all your saving and bill-paying if there’s any money left over you can just spend it! It’s like a guilt-free gift of money to you from yourself.

I do this exercise about once every six months. I always find a couple of areas I’m overspending in, and it’s a fantastic way to make sure I’m on track for my long-term goals. Budgets have never really worked for me – I’ve always given up on them because they take up so much time.

It’s important, too, not to beat yourself up if you don’t quite reach your goals! If you aim to save $100 extra a month and only achieve $50, that’s still a success. You’re still making some savings and making the effort.

A spending plan is a great way to make sure your money is going where you want it to, and  I seriously recommend you give it a go! Just in case you missed it, here’s another link to my spending plan template.

Let me know how it works for you 🙂

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