Budgets and buckets

How to sort out your finances on the back of an envelope

No one really wants to spend a day fighting through piles of invoices, and budgeting is for treasurers, right? But if your bank account keeps hitting zero and you find yourself juggling bills with the rent between pay days, you might have to crunch some numbers before they crash down on you. 

Thinking in buckets

We usually think of our money in three major buckets or jam jars, with the main ones being:

  • Money you have to spend on things like bills, rent, repayments, etc
  • Money to play with on groceries, petrol and having fun.
  • Saving up for something special.

Here’s a quick and easy way to sort out your finances on the back of an envelope—although a sheet might be better. It won’t take long.

1.  Write out a list of your regular bills and how much they usually are

Draw up three columns. Put these in your first column and the amount in the second one. You’ll know them pretty well and typically you’ll be paying:

  • Mortgage/rent
  • Electricity
  • Water
  • Gas
  • Council rates
  • Health insurance
  • Building insurance
  • Home and contents insurance
  • Gym membership
  • Car registration
  • Car insurance and so on.

2.  How often do you get paid?

Is it weekly, fortnightly or monthly? Put this at the top of your third column with the amount.

3.  Column 3: Convert each cost to your pay period

By converting each cost into your pay period it will help you get a better grip on what you spend on. This is where you’ll have to do some mental arithmetic, although a calculator helps. Round the numbers down if it’s easier, and write these numbers in your third column.

Here are some numbers which help:

Annual bills: There are 26 fortnights in a year.

Quarterly bills: There are 3 months, 6.5 fortnights and 13 weeks in a quarter.

Monthly bills: There are 2.17 fortnights and 4.33 weeks in a month.

For instance, if you’re paid fortnightly and you pay your car insurance and registration in one hit of say, $3,000, divide this by 26 and your fortnightly cost is: $115.38. If you have a quarterly electricity bill of $260, divide it by 6.5 which comes to: $40 a fortnight.

4.   Now add them up and deduct this from your pay.

Do you really have that much left over?

This is what is safe to spend between pay days. It will have to cover your petrol and shopping, as well as your play money. (Make this the amount you set as your ATM withdrawal and don’t let yourself go over it).

Is it more than you expected?

It is? You can save! Did you want to save up for a new car or a holiday?

Flip that paper over and set yourself a goal with an amount.

Let’s say you want to visit the States next year, for about a month, and think you’ll need $8,500. That means you’ll need to put around $165 aside each week—or $330 a fortnight.

The best way to do this up is to set up a regular transfer to your savings account, just after pay day.

There are accounts which will help you save with bonus rates and withdrawal restrictions. However, the most important feature you’ll need is your determination … and only you can bring that.

Important information

Show more

It’s important to consider your particular circumstances and read the relevant Product Disclosure Statement or Terms and Conditions before deciding what’s right for you. This information hasn’t taken your circumstances into account.

This information is provided by AMP Life Limited. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you. All information on this website is subject to change without notice.