What kind of budgeting works for you? I know people who use ledgers or apps to keep track of their money. Some just go with the flow and pray to the money Gods that they break even.
No one formula will work for everyone because it depends on the number of people the budget is set, the time the income comes in, and other unforeseen events.
This pandemic has either taught us to save so we have something on a rainy day (like a lockdown and no work) or spend what you have while you can because you’ll never know if another pandemic will halt you from enjoying your life.
You can tighten your belt or loosen it. For me, the goal is to live a comfortable life with minimal debt.
So how to live comfortably and be successful in your budgeting?
KNOW YOUR NET INCOME
What's Inside
Your income will the basis for your expenses. I am sure you have heard of the cliche don’t spend more than you make or don’t spend beyond your means. A regular employee with a fixed income a month can do this easily. A freelancer however will find this hard as income varies. As a freelancer, I set a personal goal income/ quota for me to reach each month. This quota is set based on my living expenses.
LIVING EXPENSES
Your living expenses is your non-negotiable montly expenses or your needs, they are:
- Home rent or mortgages
- Electric Bill ( a good amount to set aside for this is the amount of your most expensive electric bill yet}
- Water Bill ( just like in your electricity bill your highest ever bill amount should be set aside}
Internet Bil - Transportation allowance (this is your average daily /weekly commutation/gas and parking expense)
- Food (budget it according to how many people are eating and how often they eat at home} It is good to have a meal plan to be able to set a realistic budget) How much are you spending for one person for one meal multiplied by 3 . Others do weekly food budget, others do monthly or bi-weekly based on when is payday.
EMERGENCY/ BUFFER FUNDS
This is an amount least equal to your monthly expenses or a buffer fund in case something needs replacement or fixing in the house or someone gets sick. This is a disposable amount allotted every month, if not used these funds can go to your savings.
SAVINGS FUNDS
Savings is not just a buffer but a lifesaver. I was a little lucky to have little savings when the pandemic lockdown happened I was comfortable albeit bored. The ideal savings is at least 6 months of your living expenses, if not 3 months would be enough time for you to pick up your phase and then build as you go.
HAPPINESS/ LUXURY / REWARDS FUNDS
All work and no play make a person tired, depressed, and unmotivated. Rewarding yourself from time to time helps you live your life to the fullness and the motivation to keep going. A happiness/ luxury/ rewards fund is also important.
These funds can go for your travel funds, new gadgets, new appliances, new clothes, new shoes, new look (makeover or pampering session), new car, or new house. Anything you can put aside but is good to have from time to time.
BORROWING MONEY
However if your budget is tight and you can only have your budgeting go as far as the buffer funds, this is where borrowing money can go. You can apply for a loan, get a credit card, or apply for those buy now pay later schemes or staggered payment schemes.
I know a lot of people will say “I don’t want to borrow money or have a loan, I want to live in debt free”. Believe me, in an ideal world it would be nice to debt free, but even the billionaires have loans to make their life more comfortable. And if you are struggling with your past debts, there are short-term financial solutions out there for people who struggle with bad credit like creditloan.com.
INVESTMENTS
When you become the master of budgeting it will be easy for you to allot money here and there and maybe put some on investments. Investments are not the same as savings. Investments are disposable money that you can risk losing. You can put this on business ventures, stocks, cryptocurrency, NFTs . There are no guarantees in getting back these funds but if you become successful in where you put your money it can be doubled or tripled or more!
I hope you learned something from this post and maybe apply it next time you do your budgeting!
