Your Needs Account

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We are going to breakdown the different components of our money system, starting with the crux of it – your living account.

The starting point is to write down a list of what you spend on everything to be you, living where you do. Ignore your discretionary spending for now and focus on your core living costs.

If you’re going to buy a house, I suggest budgeting like you already own a house – start factoring in costs like House Insurance / Rates / Property maintenance or improvements / income insurance.

This includes:

  • Rates
  • Rent /Mortgage
  • Insurance
  • Groceries
  • Petrol
  • TV Sub’s
  • Car expenses.

Be honest with yourself!

A good way to do it is writedown what you think you spend in each area. Then have a scan of your bank and credit card statements for the last three months and sense check the amounts.

Often we have a bunch of “hidden” spending – 8 trips to the grocery store, 3 tv subscriptions, insurance has crept up, gym memberships you don’t use.

You then need to go through this list and link it to your priority of buying a house.

  1. Is there spending in there which is more than you would expect.
  2. Can you change it
  3. What can you review:
    1. Debt Structures
    2. Insurance Costs
    3. Fuel – Driving / public transport / biking
    4. Groceries – being organised with some meal planning
    5. Utilities – are there better plans out there?

By going through this process, it really highlights your actual cost of living and lets you make conscious decisions around each of your areas of spending.

It may be that you need to review each area, and you might do this over 3 months – so you can do the appropriate research and tidy up each area as you need.

At the end of this process, you will have a list and an amount. You know now that this amount plus a small buffer for overspending needs to be in your account every week/fortnight/month.

I then recommend setting as much up as an automatic payment as you can – this is to keep things as simple as possible so you don’t need to remember to make payments – the money is there, just pay it.

Once you’ve gone through this – I suggest only this if:

  1. Something major changes.
  2. Annual – a check in to make sure that everything is working and remains competitive.