GO FORWARD THIS YEAR BY LOOKING BACK: HOW YOUR BANK HISTORY CAN SHAPE YOUR FUTURE BUDGET

Has “Finally getting on top of my finances“ or even “Doing a budget” been a New Year’s resolution for you? Developing and sticking to a budget can be challenging, yet many people find getting started can be the hardest step. It doesn’t have to be! If you make a lot of online payments—EFTPOS, credit or debit cards, and digital wallets—your bank statements will have valuable insights about your spending patterns. Here’s how looking at your recent banking history can help you create a realistic budget for the year ahead.

A Digital Advantage

While paying with cash has its advantages, digital payments offer a key benefit: a detailed financial trail.

Your bank statements serve as a comprehensive record of your spending habits.

This makes it easier to track your financial behaviour and make decisions about your future budget without relying on memory or scattered receipts.

Getting Started: A Three-Month Financial Review

To begin this process, you’ll need secure access to your online banking platform. Remember to practice good cybersecurity habits and never share your login credentials with anyone. If you look at three months of transactions, you’ll be able to identify patterns, and the list will be manageable to analyse. If you’re doing this in February and if you have a habit of spending more in the month of December, you can set yourself up for success for next December by setting aside money early (look at November, December and January dates).

Essential Documents for Your Financial Deep Dive

Before you begin, gather these key resources:

• Online access to your account/s.
• Your recent payslips, which provide insight into your regular income, if you need more detail than just what has been deposited into your account
• Information about bills and recurring payments, if these aren’t also in any of your accounts, or you pay for these things outside the three-month period you’re looking at; car registration may be an example of this
• A spending diary (particularly important if you frequently use cash)
• Access to a reliable budget calculator

The Process

1. Your first step is to export your transaction history into a spreadsheet. This is easier than you might think.
   1. Most banks offer this feature through their online banking platforms.
   2. Look for an “export” feature and export to a file type you know you can work with (like Microsoft Excel or Google Sheets).
   3. If that’s not available, you may be able to download your transactions as a “.csv” (comma-separated value) file and then upload that file into a file type you can use.  
2. Once you have your data, begin categorising your transactions.
   1. Your income entries usually stand out as they tend to arrive at regular intervals.
   2. The real detective work comes with categorising your expenses.
      1. Many businesses use trading names that differ from their store names, so you might need to do some investigating to accurately categorise each transaction.

Creating Meaningful Categories

To make this analysis practical and useful, consider organising your expenses into these main categories. You may want to colour code them, give them a code, or both. 

• Financial Commitments: This includes your rent or mortgage payments, utility bills, insurance premiums, and any loan or credit card repayments.Don’t forget to account for Buy-Now-Pay-Later arrangements.
• Household expenses: Cover your regular grocery shopping, household supplies, and maintenance costs.
• Other Regular Expenses: Think about transportation costs, phone bills, and internet services.
• Children’s Expenses: If applicable, include school fees, activities, clothing, and anything else related to these expensive household members!
• Discretionary Spending: This encompasses entertainment, dining out, shopping, and other things where you decide if you want to spend the money or not. 
• Savings & Goals This includes allocating for your savings and financial goals.  You may find our article on Budget Spending and the MoneySmart Savings Calculator useful. Don’t forget to account for your future plans and emergency funds.

Making Sense of Your Findings

As you categorise your spending, patterns will emerge. You might discover regular expenses you’d forgotten about or identify areas where spending tends to creep up. This information becomes really valuable when planning your budget for the coming year.

• You might find ways you want to save by finding a better deal on one of your utilities.
• You might find subscriptions you’re not using.
• You might find you’re spending a lot on take away coffees or another discretionary item and decide you’re totally fine with that—it’s your budget and you can do what’s right for you; it’s as individual as you are.

Looking Forward

Once you’ve completed your analysis, you’ll have a clear picture of your spending patterns and can make informed decisions about your future budget. This information helps you set realistic financial goals and identify areas where you might need to adjust your spending.

Remember, this process isn’t about judgement—it’s about understanding. Your spending patterns tell a story about your lifestyle and priorities, and understanding this story is the first step towards making informed financial decisions for the future. Use these insights to develop a budget that reflects both your current reality and your future goals.

New Year’s resolution: tick!