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Budgeting: the worst word in the English language. Nobody likes to budget, but we know we should.

Keeping it simple is the key to successful budgeting.

One of the things that stops us from budgeting is that it can get overwhelming.

My advice and my process for budgeting are to declutter, de-risk, and build.

Let me walk you through each of the steps.

1.  Declutter

The decluttering process simplifies your life and makes everything easier.

A real nice simple process for decluttering is to separate all your spending into two simple piles.

Pile A is all the bills, all the spending that you MUST do. Now, this may seem very simple, but there are a lot of areas that you may think are have-tos, but really, they’re just nice-tos.

What are have-tos?

You have to pay your utility bills. You must pay your rent or mortgage. Have-tos are all the things where if you don’t pay, somebody will come banging on your door or cut off your electricity.

Some areas that may be on the borderline are a mobile phone, but in our modern world, this is probably now a have-to.

The other pile is everything else—the nice-tos.

You can leave your have-to list alone. Now, we need to focus on the nice-tos.

What are the nice-tos?

Guess what? I’m not going to tell you to get rid of all the nice-tos. I know, it’s what most financial advisors suggest—do you really need that coffee? Well, if it makes you happy, then maybe you do need it.

Instead, you should separate the nice-tos into two piles: things that make you happy and things that add no value or make you unhappy.

Those things that are not adding value or just making you unhappy? Kill them. If they are not adding value to your life or not making you happy, it’s a lousy spend on every level.

Many advisors say to cut back on all the nice to-s in one broad brushstroke, and yes, that will help you with your budget, but it won’t make you happy. And being unhappy isn’t going to motivate you to keep budgeting.

So, you’ve got your nice-tos and your have-tos. Your nice-tos are separated into separate piles: the happiness and the non-happiness.

For each person I take through this process, they find something in those nice-to lists that either they didn’t even know they were paying for (subscriptions are a big one) or something that they spend on out of habit rather than happiness.

When you cut out these mindless spendings, you’ve effortlessly created spare space in your budget.

It hasn’t cost you anything. It hasn’t cost you much time. It hasn’t cost you happiness. Nobody’s told you to stop buying lattes if that’s what you enjoy.

But maybe there are things in the happiness list that you’re prepared to let go of or at least reduce. Is there something on the list that used to bring you happiness, but now when you think about it, it’s lost its magic? These are the next things to cut or reduce.

Spend less on the have-tos.

Once you’ve been ruthless on the happiness list, look at the have-tos.

Areas that you might reduce are utilities. Maybe you can change provider. You can often get a better deal just by ringing your current provider and telling them you’re thinking about switching.

Set up direct debits wherever you can; try and go paperless. It’s an easy way to standardise your payment system. Most utility providers and service providers will give you a discount for paperless.

If someone is going to charge you extra for paperless, stay away from them.

In cases where providers won’t let you, you can automate your payments without their permission. You can go to services like PayPal and set up an automatic payment through them.

I’m a big fan of automatic payments through PayPal; it will tell you how and where you’re spending your money.

A lot of banks do this as well now. You can set up automated payments through your bank account rather than through whoever you’re paying; it’s a good idea because it gives you more control over your expenses.

It’s a new, electronic world. Take advantage of it.

2.  De-risk

With everything, there is some risk, including direct debiting. The risk for automated payments is that you forget about them, but if you analyse, declutter, and de-risk your finances every year, you’ll catch these forgotten payments.

The most significant risk for personal budgets is interest rates and loans. I’ve written about it a few times but consolidating your debt is one of the biggest and best changes that you can make.

You can consolidate your debt by moving multiple loans into one larger loan, ideally with a lower interest rate. A mortgage is a perfect way to consolidate. If you have a mortgage, you shouldn’t have other lines of credit.

If you don’t have a mortgage, and you just have a whole series of credit card debts or loans, really focus some energy and time to eliminate one of your credit cards. Pay off the one with the smallest amount outstanding; it will make you feel great and motivate you.

3.  Building

Building is probably the most enjoyable aspect of budgeting for most people. Once you start to see your finances building up and becoming more stable, it can be very motivating.

For more details on ways to build your personal wealth, check out my articles on investing through super, compound savings accounts, and personal investing. Or, for personalised help, talk to a financial advisor.

It’s about de-risking, it’s about decluttering, it’s about simplifying your life. Declutter, de-risk, and build for the future.