The first one. We pay ourselves a small amount for spending each month. The rest goes to our home loan offset account to save us interest until we get bills that have to be paid. I set them to be paid by BPay on the due date & pay everything I can on credit so it stays on our home loan as long as possible.
I worked out roughly what bills we have during the year and what we wanted to save & that's how I decided how much to allocate as spending money. Spending money covers meals out, clothes, entertainment & whatever else we "want". I generally spend mine on the kids lol. DH spends his on golf & gambling.
Initally cleared the decks with immediate bills, then broke down regular income for weekly expenses, bills, spending money, and allocated some for savings (once longer term bills like cc paid off). So we save monthly for the big stuff like car insurance/rego/rates/holiday so there is less panic at those times. It took us a few years to get the hang of it (read it took that long for DH to get my compulsive spending sorted). It definitely took a change in thought and part of that was allocating an amount for non accountable spending too.
Any pay increases have also been allocated to savings/mortgage to stop tempting us to squander it away.
I should add this was pre kids and I often bought stuff I never used or wore so there was plenty to work with, lol!
It also sounds quite anal and boring but both our personalities find it hard to cope with unexpected issues so this works better for us in the long term.
We currently do the first way of doing it - but its just a little depressing when you budget right down to the very last dollar out of every pay. DH just got cut down to 4 days a week, so basically has just had a 20% pay cut.
I'm living quite tight. I get around $850 a fortnight working 4 days and with my c'link. Hopefully now, I can work more now that I'm not studying! Anyway.. I pay $400 rent straight away, I put $50 away for bills (I only have ph and internet), I normally put $60 fuel in my car then divide the rest in half and put it in an envelope for this week and next week so I have an even amount of money. That way I don't spend big week one and live on nothing week 2. If I am really stuck with bill I can dip into savings, I managed to save when I could work more during the holidays and when I had working credits from c'link. I try not to touch that though.. I'll be better off when DP and I move back in together in another month or so.
I like small amounts to go straight to certain companies each pay so then I know what I can comfortably spend and when the bills do eventually come in they are not a suprise. I'm also terrible at saving so if I didn't do it this way we would have a massive electricity bill & not be able to pay it. It's great, we even did this with our council rates & were in credit when we sold our house. So things like Telstra, electricity/gas, rates etc put over an amount each week, then pay balance when bill comes in....usually not that much.
start by getting all your bills and receipts from the past year, and see what you *actually* spend p/an on food, bills, rates, rent, clothes, books, outings, presents, alcohol, gym, petrol, public transport, newspapers - everything.
then work out where you can cut a bit back, if you can anywhere.
then allow for you to put aside $$ for each "area" every fortnight. and for savings.
I actually used to have envelopes marked "rent" "bills" "train" "slush" (pocket money) etc.
and then stick to it.
and if you don't have receipts, ask friends with a similar household to you if they will share what they allow, to give you a starting point. I did this at the start, to try to predict what our initial gas, electric, water, phone etc bills would be.
once you've got that drafted, keep solid track of it all, and then work out what you need to allow more for, and where you can trim back spending.
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