Mark O'Grady

Budgeting is a very simple concept: Weigh up your income against your expenditure to determine your cash flow and make sure you’re living within your means.

But one of the big mistakes most people make is that they don’t attach their future financial goals to their budget as fixed costs.

Most people will consider rent/mortgage/bills/social etc as their fixed cost and then have a savings account on the side if they have any money left over. Sound like you?

The problem we know only too well is that if there’s money left in  our current account, it has an uncanny ability to vanish into thin air.

Financial fitness is based on a concept of no surprises. Simply put, your financials are considered to be lean, fit and efficient if you arrive at financial events in your life and have the provision to pay for that event without having any impact on your day to day life.

In order to do that you must build these future financial events, whatever they may be, into your fixed costs in your budget.  That’s the financially fit way to budget, and that’s what we’re going to look at here.

Financial Goal-Setting

The first task you need to do when looking to put a budget in place is to determine what your goals are. Do you need life insurance because you have kids, or perhaps a mortgage or do you need to save for a house deposit? Do you expect to have kids’ 3rd level education costs to pay for in 10 years or are you concerned about your retirement?

Regardless of what your goal is, it should be built into your FIXED costs, otherwise it won’t happen.

But how do you prioritise these goals and figure rout how much money should be allocated to each every month?

Typically, I would apportion more importance to goals that are nearer to you at whatever stage of life you are at.

Are you 27 and want a house deposit in 3 years? Then that goal will take a significant amount of your available for goals cash. Protecting your income is always very important as your ability to earn an income into the future is at the foundation of everything you do.

If you have kids and their college fund has been raided for a few expensive, albeit very necessary holidays then perhaps that goal will require more attention.

Employee Financial One to One

To figure out how much you should set aside every month, you can use a simple formula. Estimate what the future cost of the targeting event is and then divide that amount back to now by the number of months left until it happens.

For example:

Kids education in 10 years. Existing Pot – €6,000, 120 months left. Expected cost €30,000. That means that you should expect to put €200 aside each month and you’ll be there or there abouts!


The Financially Fit Budget Model

The Financially Fit Budget Model is simple.

Your Gross Income

Less the taxman’s bit and your pension through work.

= Your money!

Less ’have to pay’ costs aka Fixed Costs (Cost of Living + Goal Costs)

= Your Disposable Income


Let’s break down Fixed Costs a bit.

You’ve got Costs of Living, for example:

  1. Mortgage/Rent
  2. Utility Bills
  3. Food
  4. Loan repayment
  5. Travel costs
  6. Phone

And then you’ve got Goal costs, for example:

  1. Correct insurance set up – income protection, illness and life cover
  2. Kids’ Education Fund
  3. House Deposit
  4. Emergency Fund
  5. Improved insurance set up
  6. Additional retirement savings
  7. Holiday fund

Deduct both of these from your net income and you get your REAL disposable income.

Your disposable income should absolutely be spent enjoying your life. Your disposable income is for whatever floats your boat. Cooking classes, skydiving, golf, collecting Star Wars memorabilia, pimping your ride, dressing your dog…. no judgment here! There’s no right or wrong way to spend your disposable income, just your way.


And if there’s anything left over after that?

You can get even fitter!

If you find you have additional cash over and above catering for your fixed costs, your intended fixed costs and your disposable income costs then great news! Any of your existing goals can be funded more aggressively, which means you’ll reach that goal ahead of schedule.


Thank You!

To reduce future financial stress you need to get financially fit. it’s really important you list, assign importance and quantify your goals. Make the cost of financing these goals part of your fixed costs when planning your budget. That way when you get to those future financial events the money is there to pay for them and life becomes very easy to live and enjoy!

Sticking to the Financially Fit Budget Model will help you do this.  

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