BUDGETING 101
I am a little obsessed with budgeting, is that weird? I’ve recently gotten really into watching budget videos on YouTube and I find them so relaxing. There are lots of different budgeting methods out there but I tend to gravitate towards the Dave Ramsey method. I do think it can be a bit overwhelming to dive into any of the methods though, so I hope this post will be a bit more straightforward and less intimating. I can be a little intense about budgeting (I generally check my bank account a couple of times a day, even if I know nothing has changed), but if I’m honest, I’m not always great at sticking to my budget. I usually do okay, but it’s still a learning process. Budgeting is a skill, one that needs to be practiced. So don’t be too hard on yourself if you don’t do too well at the beginning. You just need to jump in and keep swimming, even when it gets a bit stormy.
MAKING A BUDGET
I think the most important thing is to actually write out a budget so you know exactly where you’re money is going to go. The Dave Ramsey method says you should allocate every single euro (or whatever currency you use) you earn. I usually follow this for the most part, but I’m not super strict. If possible, I like to give myself a little cushion in my account, just in case, ya know? I get paid monthly, which I know some people hate. I’ve never known anything different though and I actually quite like it. However, because I only get paid once a month, I just do one big monthly budget. If you get paid twice a month, I would suggest breaking you budget down by paycheque, so you know exactly what you are paying from each one.
Here are the steps I follow when creating a budget:
Write down all your bills, how much you expect them to be and when they are due. This will include rent, electric, internet, phone.
Next, write down all your other expenses. This may include: groceries, any recurring health or beauty related appointments (nails, therapy, chiropractor etc.), money for eating out etc. It may help you to start by tracking what you spend money on a couple of weeks before making your budget so you know exactly what you need to budget for. I always include a miscellaneous category which would be for beauty products I may need (such as shampoo, moisturiser etc.) or anything non-essential things I may pick up through-out the month. You can be more details here if you like but I prefer board categories.
Add up everything you have written down in step 1 and 2, and any money left over should be allocated to your sinking finds. Sinking funds are basically saved money that is allocated for something very specific that you know you will need money for in the future. For example, I start a Christmas sinking fund in May, so I put a bit of money away each month so I don’t have to worry about it when it gets to December. I usually always have a travel sinking fund since I like to travel. Other sinking funds you might need: insurance, birthday presents, any upcoming big purchases etc.
TIPS
Savings – As well as my sinking finds, where I put money aside for very specific things, I also have a saving account where I put money aside for nothing in particular. I very very rarely touch this money. This is my emergency money. I have a direct deposit that comes out of my account for this and I treat it like a bill. As in, in my budget, it comes under my list of bills. I think this helps with the mindset of not touching this money. I also can’t add money into this account other than the monthly direct deposit so I know when I take this money out, I cannot replace it.
Cash – At the beginning of each month, I take out money for everything I can pay for with cash. So for me, this is usually my grocery money (I have a separate purse I use for grocery shopping), as well as money for my nails and therapy. I also take out the money for my sinking funds. I have a place where I organise my sinking fund money and make sure it’s labeled so I know exactly what the money is for. I like doing this because it means I know I have money for everything covered for the month. For example, if I don’t have therapy until the end of the month, I know I have the money set aside for it and don’t need to stress about how much money I have left in my current account when the appointment gets closer.
Revolut – If you haven’t heard of it, Revolut is a banking app. You can pay for more features but I just use the free basic functionally. They send you a debit card (you only pay for shipping) and it’s super easy to top up and keep track of your spending. They also send you a notification on your phone every time you spend money. They are some features I don’t use, such as setting spending limits and analysing how you spend your money, but I do use it for my “going out” money. Each month, I put money on it that I’ll use for eating out, grabbing a drink, going to the cinema, that kind of thing. I like that it’s separate from my current account so that it’s super easy to see how much I have left. It’s also great to use when travelling, particularly within Europe. I used it exclusively last time I was in Copenhagen and Stockholm.
Evaluate – Make sure you evaluate your budget each month before making a new one. If you’re constantly over spending in a category, maybe you need to increase the amount you’re assigning to it or look at ways you can reduce how much you spend.
Well that’s it folks, that’s how I budget. I honestly think the best way for people to figure out their own budget is to look at a bunch of other people’s and take the elements that work for you. If you want advise or just want to chat about budgeting, feel free to reach out to me, I honestly love talking about all things budgeting.