The road to healthy financial behavior #2: get an overview

By Jessica Ruelens

An important step towards healthy financial behavior is knowing how much money flows in and out. We will guide you on your way with a step-by-step plan. Combined with the income and spending overview created by the Cake app, it gives you the tools you need to handle your money consciously.

Tips & Tricks by CEBUD

The very first step towards healthy financial behavior is to organize your administration. Read all about it in this blog post.

The next step is knowing how much money flows in and out. Why? This way you really take control of your budget.

Step 1: What comes in?

Check your Cake overview per month to see what sort of incomes you have. Ignore one-time income such as a refund for joint dinners, a refund from your employer for expenses incurred, gifts received and so on. Focus on your salary, wages, benefits, rental income, child benefit (growth package), copyrights, dividends, interest, disability compensation, alimony or maintenance fees, school and study allowances, … Do you receive this income every month or every year? And is it (approximately) the same amount? 

Probably there are months in which you receive more income, for example if you receive the end-of-year bonus in November or December, your vacation allowance in spring or if you get a personal income tax refund. But there might also be months in which you receive less, during (long-term) illness, annual vacation or unpaid leave. You then add these incomes together and you know your available annual income. Is that more or less than you thought? 

If you divide this annual amount by twelve, you will get your average monthly income. But don’t get caught, because that doesn’t mean that you will get this amount on your account every month! In reality, it is very useful to know what income you can expect each month. So keep track of the monthly budget you have at your disposal. The sporadic income is useful to absorb larger costs or to plan ahead. 

Step 2: What goes out? 

Your Cake app assigns your spending to umbrella categories. This way you can quickly find out what you’re spending a lot or a little money on. The cash flow overview shows you how balanced your income and spending is per week and per month. You can see at a glance whether you are spending more than you receive and whether you have withdrawn any savings. How easy can it be?! Our previous blog post made you think about your fixed and high costs. If you haven’t done so yet, take a look at your regular and more expensive spending in your Cake app. Think for example of your house rent or loan, your energy costs, the purchase of lenses or glasses, water bills, childcare, annual membership fees for the gym, car maintenance, real estate tax, delivery of heating oil or propane gas to your home and the annual contribution for your car insurance. 

First look at all the more expensive non monthly payments and then add up everything you pay over a whole year. Divide that total amount by twelve. That way you know how much you have to set aside each month to pay your non monthly costs. 

Then you add up the amounts you pay each month. These are your fixed costs. Ideally, you pay them shortly after your salary is deposited so you can’t use this money for other things. Are you still tempted to use it? You can also temporarily put it in a savings account until the invoice arrives, or you can ask the supplier to postpone the invoice date in the direction of the date on which your wages are paid.

A tight budget or high monthly costs? If so, additional income such as vacation pay, end-of-year bonus or a personal income tax refund will come in handy to cover recurring or higher expenses. Are you still not there? In the next blog post we will look at spending that you can save on.

💡 Did you know that we are continuously improving the Cake app to automate even more insights and help you keep your budget under control. All planned features can be viewed here. You can also add your own ideas or vote on other people’s ideas. Together we make Cake even better!

Step 3: Ditch yoga, start saving! 

Expect the unexpected… During this corona crisis many people are confronted with illness, loss of income and insecurity. A piggy bank can help to cope with these setbacks. Therefore, also provide a piggy bank for unexpected costs. Estimate how much money you can do without each month and lock it into a savings account immediately after your wages have been deposited. 

An ample budget or limited fixed costs? Lucky you, your piggy bank can grow faster thanks to your one-time income such as your end-of-year bonus or vacation allowance. 

Don’t have a savings buffer or little financial margin yet? Start small and persist. If you save 50 euros a month, that’s 600 euros a year! And if you manage to stay away from those 50 euros for six months, you might be able to increase your savings to 60 euros. Evaluate your savings behaviour regularly and, if necessary, sharpen your target. In the coming weeks we will also write a post about goals and good intentions, so keep an eye on it! 

How big should your piggy bank be? First a reality check: how much you can save depends on your income and fixed spending. Also important: what do you want to do in the future? Will you fly to New Zealand next year to start that trip around the world (fingers crossed!) or will you soon have to buy a (new) car? This determines of course how much money you will need. As a rule of thumb it is often recommended to have (at least) three times your fixed costs aside. Replenish your piggy bank systematically if you have plundered it. But hey, don’t be discouraged if you don’t have any savings yet! Everybody started with nothing.

Step 4: Stick to your budget to spend

Well done! Now you know perfectly how much budget you have left to spend. Thanks to Cake, you can track in real time what you are spending money on and how much budget is left over. The app automatically allocates your spending to categories and compares your current spending with that of previous months. If you keep a close eye on this, you’ll quickly learn what you’re spending (a lot of) money on and how stable your spending pattern is. Tips to save money will arrive in our next post, so stay tuned.    

Overview is control! If you’re aware of your budget to spend you don’t have to check if there’s enough money in your account to pay for your shopping cart in the supermarket and you’re done with secretly transferring money in the fitting room. And believe us, just that control gives you more freedom and peace of mind.

Guidelines for a balanced budget

– Know what income you can expect on a monthly and yearly basis.
– Reserve a budget in advance for fixed, recurring and expensive costs.
– Build a piggy bank.
– Keep yourself to your imposed budget to spend and don’t just take money from your savings account. 
– Do you want to make an annual plan on paper? Download it here for free. 
– Your budget in balance is ready! Piece of Cake!