Starting one takes effort, time and will power, sticking to one is stressful, and generally gives us a headache. At the end of it we have to ask ourselves whether it is healthy? When is the end of it? What is our goal?

For the last month or so, I have been in the process of updating a long outdated budget. I am fortunate, in that we don’t live beyond our means, but it has been a while since either my wife or I have had a concrete understanding of our various expenses.

Research shows that even when started properly, very few of us stick to a budget in the long term, and this is very similar to crash diets. More than that, it is quite possible that sticking to a strict budget, listing each expense on a daily basis could be detrimental to your health.

Money is already the number one reason for arguments in relationships. How could we expect that this will decrease, where (most likely) one partner is checking and cross checking what the other is spending every last cent on.

Don’t get me wrong, I am a strong believer of living within your means and knowing what those means are, just as I am a strong believer in healthy eating and healthy exercise. I suppose that is where the difference arises. Crash diets are not healthy in the longer term, but healthy eating and exercise clearly is; just as daily monitoring of your expenditure is only going to lead to heartache down the track. However, understanding your expenses vs income situation is vital.

So how do we do it? How do we change to healthy eating? How do we budget without worrying about every last cent? And don’t worry, like having a chocolate bar here and there, a functioning budget is not about taking away your coffee!

Like anything we need to take stock of where we are currently.

What is our current state of affairs? There are many ways of doing this, some consist of rifling through a filing cabinet and pulling out all old bills (if you have them). The easiest that I have found is to sit down and scan through the last years’ worth of credit card/debit card or bank account statements.

Here is the process I would recommend to understand your current expenses:

  • Download your credit card/debit card/bank account statement in .csv format
  • Import it into Excel, and sort by the size of the debit (this will allow you to see your biggest bills)
  • Download a Budget Planner such as the one at
  • Import your biggest bills into the planner; these should include:
    • Rent/Mortgage
    • Other debt repayments
    • Utilities Bills
    • Personal Insurance/Health Insurance/Vehicle and Home Insurance
    • Other Transport Costs (Rego, Public Transport Tickets etc)
  • Estimate the remaining big expenses (Groceries/Clothing /Entertainment)
  • Determine your take home pay (amount in your bank account x times per annum you get paid) ie. Fortnightly = 26
  • Deduct your expenses from your take home pay

If at this time your expenses outstrip your income, you have some tough choices to make. It is hard work to change the big expenses listed above, but if this is your situation, the sooner you do it, the better you will be.

However, if you have a positive number here (and hopefully you do), figure out how much of this you want to save. Be realistic, you can’t save all of it.

And here is the big tip… Automate the saving. Set up an automatic payment (preferably with your employer) for the money to go into a second bank account.

Living within your means is not about budgeting. It is not about deciding whether to enjoy a coffee, or a drink with friends. It is about knowing that you have a plan, and that the occasional blow out is ok.

Just like eating healthy is not about banning yourself from chocolate, or chips, or whatever your treat may be. It is about knowing that you can’t have it every day, and that the occasional blow out is ok.

As a Financial Strategist, I often get asked the question “Will you make me do a budget?” Understandably there is a fear here, not unlike asking a personal trainer if they will make you go on a diet.

My simple response to this question is “I need to understand your income and your expenses to determine what we can do with any savings, to better provide for the goals that you have for your future. I have no expectation that you will stop living your current lifestyle.”

So now we have our plan. We have worked out that our income is more than our expenses, and we have setup an automated savings plan (no matter how small). How do we keep track? Do we want to?

Having knowledge is better than walking blindly. Just as you would weigh yourself on a regular basis to know that your occasional blow outs aren’t affecting your weight dramatically, it is important to be aware on an ongoing basis that you continue to live within your means.

BUT… this does not mean recording every receipt week in and week out. Who would stick to that?

The secret here again is automation. If you spend it on a card, there is a record, and many banks and some third party providers such as now allow anything spent on a card to be categorised and tracked day to day, month to month and year to year.

It takes a little work initially to setup the categories, but this will pay dividends well into the future.

Budgets are like Crash Diets… but Living within your means is like Health Eating – if you want to live a long and prosperous life, you need to figure out, or get advice on how best to achieve this simple life long strategy.

John Forwood and Forwood Planning Pty Ltd ATF Forwood Planning Trust are Authorised Representatives (No. 1007813/1238510) of MyPlanner Australia Pty Ltd AFSL 345905.

The information provided above is general in nature and does not constitute financial advice. Every effort has been made to ensure that the information provided is accurate. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult a financial planner to take into account your particular investment objectives, financial situation and individual needs.