Nobody wants to learn about budgeting, especially when it comes to your own expenses. It’s boring and it’s depressing that you have to keep track of all expenses. Shopping without a limit is always going to be a more exciting alternative. Unfortunately, when income is limited and spends are unlimited, it becomes unbalanced.
While you will enjoy the thrill of unlimited shopping today, the burden of empty pockets tomorrow can become unbearable.
Ideally, we should try not to be on either extreme; neither do we want to live on a permanently tight budget, nor do we want to become spend thrifts. Is this even possible?
As Plato philosophized, a person who has the virtue of moderation subordinates the desire for pleasure to the dictates of reason.
What this means is that it is you who is in charge of knowing when too much budgeting is harmful and when you are going overboard with spending.
Let’s see how this can be done.
Make it macro
If you can’t handle writing down every small detail of your expenditure, then why not build the larger picture and stick to it. This will require you to do one-time micro entries to figure out the big picture. At the end of this month, on the last day, sit with your pen and paper or excel sheet. Make your expense columns like salaries to house help, groceries, eating out, kids’ classes, EMIs and so on. The spends can differ month to month, but will largely remain in the same zone. Make note of your aggregate spend under each of the columns and write these down or make a simple note on your mobile. Now come next month, take a few envelopes and put these amounts in there, label the envelopes with the expense it is meant for.
If you finish the money before month end, don’t replenish.
You don’t have to do this for the rest of your life but maybe for 6-8 months, till you get an intuitive sense about not overshooting your monthly spends.
Every now and then you will overspend; relatives come to visit, birthday months and so on. However, at the end of the 6-8 months of this practice you have conquered the budget without going through the tedious task of writing down each detail.
To feel like you aren’t always on a budget, to feel less depressed about a limited income, keep another envelope called the frills envelope. In that one-time micro exercise we did, you need to have a column on wants. This column can include spends on going out and on buying accessories for the family.
Add the last two months of such spends, just check your credit card if you aren’t sure. Whatever this amount is, leave it aside in one envelope at the start of the month – call it your splurge or frills envelope.
It indicates that you don’t really need to spend this money, but can do so if you feel like some indulgence. You may not end up spending all this every month, whatever accumulates in the envelope over time, then becomes a bonus for whenever you want to splurge a little.
The big spends
For the big fixed spends like school fees and insurance premiums put an alarm on your phone.
The alarm has to be for two months before the payment is due, so that you have a good warning that something large is coming up.
If it means not refilling the frills envelope for a couple of months or withdrawing an amount from your short-term investments, it can all be done in time.
Budgeting can be boring, but once you get a hang of the macro method, you needn’t get into the boring details, you have to know the big picture though.
Monika Halan, in her book – Let’s Talk Money – suggests using separate bank account for this purpose and labeling them as such.
That is also a good way to work out this strategy and it helps you earn a little on your money too, rather than keeping it idle in envelopes.
Whichever method you choose, it will bring some semblance to the chaos that can otherwise happen every month in the absence of a structured budget. Take a shot at it and see how you go. Alter the structure and method to suit your ways, but make sure you don’t let go of the big picture which is really working towards saving enough to have a comfortable financial future.