How to Budget - the most useful tool in your property investing toolkit.

Knowing how to budget is useful for anyone to know, but it's essential for the astute and serious property investor. Without the money to get started, you will be almost dead in the water, unless you know how to wheeler-deal your way into some of the more advanced investing strategies that require no money down!

As an investor, you will be:

  • Writing a budget so you understand your finances,
  • Writing a budget so that you know how much you can save.
  • Writing a budget to work out how much you can afford to spend on your next investment property
  • Writing another budget to show to the bank and/or your joint venture partner showing that you know exactly what you're talking about when you go to apply for a loan.
  • and writing yet another budget to figure out what you have to spend on renovations and exactly (down to the last screw, if possible) where in the property you will be spending it!

So it's really important to know how to budget!

The thing is, learning how to budget is really quite simple.

Starting with your personal budget, all it takes is a spreadsheet, or even a simple sheet of paper (or a beermat...) and a rough idea of how much you spend each week/fortnight/month/year on particular expenses.


Try to line up your budget with how often you get paid. Fortnightly is probably the most common, and also the easiest to work with if you happen to be paid less frequently, like monthly or yearly.

Then you write them all down (separately for each bill), and have a good hard look at where you can improve!

What you might need to put in your budget:

  • Your pay and your spouse/partner's pay
  • Any other sources of income such as government Family Tax Benefits, or income from trusts, shares or rent on properties you own.
  • Rent or mortgage repayments
  • Food
  • Expenses relating to children
  • Electricity and gas.
  • Fuel and maintenance for your car(s)
  • Phone services (including separate rows for each mobile bill in the household)
  • Internet service
  • Credit/store card debts, personal loans, vehicle loans.
  • Cable TV
  • Insurances
  • education funds for the kids, plus regular expenses if you are currently studying
  • Childcare
  • Clothing
  • Entertainment

Here's an example:

Learn how to budget for investing in rental property with this spreadsheet as a starting point.

You can download your own copy of my How to Budget Excel Spreadsheet for free HERE.

Finding you have a surplus is good news. Making that surplus bigger by using some of the tips in my page about How to Save Money is even better.

Discovering that you are going backwards means you need to have a serious rethink to get yourself back on track! Start by cutting your costs until you're in surplus, and then you're ready for my special lesson in how to budget:

The Pay Everything on Payday Method

This might sound like a crazy idea, but it's my number one, foolproof budgeting tip for making sure that you will not have a problem with paying your bills on time ever again! If you have trouble paying your bills when they come in, because you forgot about something and spent too much, this is the tactic for you.

You've heard of paying your mortgage fortnightly to reduce interest on your loan faster (and save years off your loan)...

Has it ever occurred to you to pay your bills up front? On payday?

I mean, they're going to ask for the money anyway, so you might as well give it to them when you have it.

Most of you would have just worked out how much you spend on anything in each pay cycle (usually fortnightly, here in Australia). You can adjust this concept to pay as frequently as you want (as long as it keeps your service suppliers happy!).

What you do is set up your account with internet banking to automatically transfer money via EFT or BPay into each of your suppliers' accounts on your payday.

If money is tight, it might take a few weeks to get everything lined up so you don't get an overdue notice, but a phone call to your supplier explaining what you are doing is usually all you need to get their support.

Electricity suppliers in particular are now much more open to helping you work out how much you pay weekly or fortnightly over the course of a year, even though your usage might be seasonal.

Now that's how to budget!

If a few of your bills are paid by direct debit (that is, they take money out of your account for you each month), that's okay too. But you might want to take the next step:

Quarantining your Money

I came up with this idea when I was a new mother, flat broke on family assistance benefits, and my husband was on low wages as an apprentice. That's when I really learned how to budget.

It's the only way I could make sure that I didn't spend money I wasn't supposed to by accident. After all the juggling with the bank account online for a few weeks, it made it so much less stressful to know that the money I had, I could use, and that I wasn't going to get a nasty phone call or letter from the bank or the telephone company threatening to cut us off.

  1. Get yourself two separate accounts. Get three if you have enough money to start saving immediately. Make two of them difficult to access by your ATM card (or just one if you only have two accounts), and preferably high interest-paying accounts. The savings account could even be a mortgage offset account!
  2. Get all your pay put into one of the difficult-to-access accounts. This is your quarantine zone for bills and other responsibilities.
  3. Set up all your deposits and BPay payments to go out on payday.
  4. Set up one deposit at least each fortnight or week to give you all, or a portion, of the money you've allowed yourself to spend on things like groceries, fuel, entertainment, and clothes. Cash payments!
  5. Each week or fortnight, take out the exact amount you have budgeted for groceries and nothing more. Then use this to go do your shopping in cash. Take a calculator if you have to!
  6. Take out cash for your fuel and other expenses, or use EFTPOS, but remember to keep an eye on what you're spending on each item if you use EFTPOS. If you don't trust yourself, use cash in the exact amounts for each purpose when you go out for that purpose.
  7. From your first account (the one where all your pay goes), transfer any leftover savings into a high-interest account or mortgage offset... or decide to use some of it to pay down your credit cards faster first.

And that's the basics of how to budget!

Got a question about writing a budget?

So... ask away!

Do you have a question about property investing that's not answered here or elswhere on this site?

Ask it here and we'll try our best to answer it for you. Sometimes there's some research involved, so please forgive us of we take a little while to post back.

Others can also comment (politely, please!) too and help you out. It's a bit like a forum and FAQ rolled into one!

Just remember, we're not financial advisers, so you should use the information we give here as a guide only (in relation to your personal circumstances) and see an accountant or financial adviser before proceeding further.

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