Budget Basics – The 5 Features explained (and you are going to need a few bank accounts!)

5 Features of a Workable Budget:


  1. Safety Net – because stuff happens.
    1. A very important line in any budget is a small safety net so that all of your hard budget work doesn’t get affected by life’s inevitable surprises. We strongly recommend having some savings set aside with the sole purpose of coming to your rescue when something that you have not expected comes along, like a flat tyre or washing machine no longer co-operating.
    2. Dave Ramsay, author of ‘Total Money Makeover’, recommends having an emergency fund of $1,000 or $500 if you are on an income below $25,000. The amount can be determined by you, but should be enough to get you out of a jam, without affecting the rest of your budget.
    3. When an emergency occurs (a shoe sale is NOT an emergency), this Safety Net should be topped up quickly to avoid any further impact on your budget.
    4. When the budget is rolling along nicely, this safety net can be expanded to cover your expenses over a longer period
    5. Bank Account – Safety Net Account


  1. Savings – the best line in a budget.
    1. Determine how you want to allocate an amount to savings. Either a set amount each pay or a set % of each pay. When you have worked out how much, set this up automatically with your payroll to go to a separate account that is not easy to access.
    2. These savings are where your money can work for you and your goals….holidays, renovations, new car.
    3. Think about what you want, put a number on that amount and make it happen!
    4. Bank Account – Set and Forget Savings Account.


  1. Regular Bills – past behaviour can be a good indicator of future behaviour.
    1. Know how much your regular bills are. Electricity, Gas, Water, Telephone, all of these regularly appear in your mailbox / inbox, and occasionally, you get a few at the same time. Review bills from the previous 12 months and you will get an idea of how much and how often these bills are.
    2. Have a look at the last 3 months of transactions on your bank account. Focus on what other regular payments are going out, including loans and credit card debt (also, stop using your credit card). You will see how much and how often. Take this amount and divide it by 3, to determine a monthly bill amount. Set up a bills account with your bank and set this amount aside each month solely for paying bills.
    3. Bank Account – Bills Only Transaction Account.


  1. Money for Everyday Life – for everything else.
    1. After you have sorted a safety net, set and forget your savings for goals, allocated money for bills and regular payments, take a look at what is left over. This is your life and play money.
    2. Life basically covers everything else that is not a bill or regular expense.
    3. There are a couple of ways to work your life money. Dave Ramsay promotes the ‘envelope system’ and zero budget, where every dollar is allocated to an envelope with cash solely used for that designated purpose e.g. Groceries, School supplies, Fuel, etc.
    4. If cash always seems to burn a hole in your pocket, maybe a debit card is the way to go here. With savings and bills taken care of, you can allocate this life money whichever way works best for you.
    5. The important point to remember here is that if you only spend your everyday life money. If you have to dig into your Bills money for life expenses, you might have to add this expense to your bills account so that the funds are available.
    6. Do not give up!!! You may take several weeks to find a system that works for you.
    7. Bank Account – Life Money Account


  1. Money for Special Treats – the Sanity Allowance.
    1. You are not quite done, the last important feature of a budget is to give yourself some play money.
    2. This can be any amount that works for you, with the idea that this money can be used in any way you want, without any guilt feeling and to encourage you to stay on track. Anita Bell, author of ‘Your Mortgage and how to pay it off in five years’, calls this your Sanity Allowance.
    3. Should not be a large sum of money. Can be enough for a coffee splurge once a week or enough for a weekly date night. Whatever might help you to stay focussed and to not touch the automatic savings or bill payments that the other budget features deliver.


Remember, a budget may take several weeks to run smoothly, and there will inevitably be some bumpy weeks. With your safety net, savings and bills account, the bumps should be mild.

Do not be discouraged when all the bills come at once, just check the regular amount you are setting aside will cover future bills, and contact your bill provider to discuss your account if you ever get stuck.


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