Rising Tide Blog

How do I know if I’m spending too much?

Posted by Sam Gawenda

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Unsurprisingly, this is one of the most common questions I get asked by people. I clearly remember asking it to myself and realising that I needed to make changes. It was a Sunday morning and we were sitting at our favourite café, having just ordered breakfast. We had also eaten there the day before and I was calculating how much the bill was going to be.   

Looking at the menu, I remember thinking “can we actually afford this?”. We certainly had a bit of money sitting in our account but was there enough to also cover all our other needs like bills, holidays and investing.  Put simply, were we stealing from “Future us” to have ordered a second serve of bacon and eggs in one weekend? 

The worst part was that as I thought about this, I couldn’t even enjoy the meal I had just paid for!  That was the moment that I realised we needed more accountability and visibility of where we were spending our money. 

With that in mind, here are four simple steps to setting up a budget: 

Step 1 – Know your numbers

You need to thoroughly understand your “Fixed” costs.  These costs are the non-negotiables in life, such as groceries, rent and petrol.  This doesn’t mean just estimating your expenditure, but going through the past six months statements and calculating exactly how much it costs to run your life. 

Step 2 – Set your goals

How do you know if you’re on track, if you don’t know where you are heading? Most people don’t know what their goals are, let alone understand how much they need to be putting towards them.  Spend time thinking about what you want to achieve, then prioritise and add deadlines to make sure you reach your goals.  From here you can work out exactly how much you need to be putting in your “Future you” bucket each pay cycle. 

Step 3 – Don’t forget the fun

This part should be easy now that you know how much of your cashflow to allocate towards “Fixed” and “Future you”.  As you can see below, the equation is simple:Net income (-) minus ‘Fixed’ (-) minus ‘Future you’ = Fun. You can now spend this amount absolutely guilt free knowing that your basic living expenses are all covered as well as being on track to achieving your goals. But remember, once this amount is gone, resist the urge to dip into other buckets or spend on your credit card! 

Step 4 – Take it to the bank

The final step is to setup your accounts and automatic transfers to make sure your payments are regular.  The key to success is not having to go in each month and manually transfer the funds because, believe me, that will never happen! 

So, there you go, if you follow the process, know your “Fun” allowance and make sure you stick to your budget, you will never need to ask that question again!

Sam Gawenda
Senior Lending Specialist, Director
As head of our lending division, Sam comes to us with more than a decade’s worth of experience in mortgage broking and is highly respected by his peers....