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Welcome to the $1,000,000 blog.

My name is Dan and I am going to raise my net worth from practically zero to one million dollars. This is where I write about how I make, save and invest my money.

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Changes to my budget

In my last post I mentioned changes I've made to the way I calculate my net worth. Now I'm going to look at making some changes to my budget.

My budget has been working well. I've consistently come in under budget (by an average of about $50). I'm going to try reducing the amount of money I have for general expenses by $10 (I could maybe reduce it by more, but I want to take it slowly). I am also going to change the way I allocate the money I save.

Currently I have been saving $100 per week. Of this, $75 goes into savings and $25 into a holiday fund. If I come in under budget I can use the excess any way I want, though I've usually been splitting it between savings, holiday fund and an emergency fund.

Now though, I think I'm going to concentrate on building up an emergency fund (to cover unexpected payments and to provide a backup in case it takes me time to find a job after uni). I would like to have enough to cover rent and general expenses for at least 3 months. I think this can be achieved with about $3000. So my main priority at the moment is to build this $3000 emergency fund. After this I am going to move on to savings. The full $110 I save per week will be used in this way.

I will not be putting a guaranteed amount away for holidays, etc., but instead I will use any money I have left over from my weekly budget for holidays and anything else I want to spend money on (I'll call this short-term savings). This should give me sufficient incentive to continue coming in under budget.

So here's how I'll spend the $360 I get paid per week:

Rent - $130
Emergency fund - $110
General expenses - $120

Of the $676 I have already saved (my current net worth), I will allocate $107 for the remainder of this week's general expenses, $114 to kick off my short-term savings and the final $455 will start my emergency fund.

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