Personal Finance 101: Budgetarianism
Budgetarianism
Personal finance can mean different things to different people. This is because everybody has different needs, especially in how much to save or where to park their money for retirement. But despite the complexity of the phrase, we all have something in common: we need to know how much we spend every month.
Knowing this can be the difference between being in debt for many years and living a less-anxious life. It’s been said that it doesn’t matter how much you earn; what matters more is how much you get to keep after all the expenses. Then you can start living financially more comfortably. You are not beholden to someone. You can even choose to help others financially from time to time.
How Much Do You….
When you are asked how much you earn, you could probably answer that question without thinking much about it. This is especially true if you have one source of income. But when asked how much your monthly expenses are, you would probably need at least 5 minutes before you can answer that. Don’t worry, you are not alone. Why?
Because It’s very challenging to track expenses, especially if you have never done it before. Who’s got the time to record all expenses per purchase? Where do I write my expenses? These are some of the concerns you may have. But with a simple tool and some tips, you will be able to see how much you approximately spend every month.
Why would you want to track your expenses? If you want to decrease your anxiety, especially during emergencies, you need to know how much you spend. Are your expenses greater than your income? Or is it lesser? If it’s greater than your income, then you may either need to cut back your spending or increase your income.
But if your expenses are less than your income, then you can start saving, which opens the door to countless opportunities that we will also discuss in the future. For now, let’s break down the categories, so you can find out how much you spend approximately monthly.
Categories
You may have heard of the basic needs “food, shelter, clothing.” But usually, clothing doesn’t consume that much, unless you’re a shopaholic fashionista. You may not be a high-functioning alcoholic, but you could be a “high-fashioning” shopaholic. Okay, enough of the lame puns.
What would cost you would be housing, transportation, food, and education. These vary from person to person. But essentially these are the main expenses. These are primary expenses. Then there’s communication, clothing, toiletries, and other household compounds such as dishwashing liquid and laundry powder. But you can lump them all together with the toiletries. These are considered your secondary expenses.
Then you have what is called your discretionary expenses. These are your nice-to-haves, not the must-haves. In other words, these are the costs that you can survive without. A latte at a premium café is an example. Then there are movie and concert tickets, eating out, and the occasional treat you bring your loved ones with you.
Primary
Housing. Are you renting or do you pay a monthly amortization for your mortgage? Housing is probably the most significant chunk of expense on your budget. Without a roof above your head, you’re roofless. You cannot afford that; you have to have somewhere you go home to if you are still living with your folks, good for you.
Transportation. If you don’t own a vehicle, then your transportation expense is spent on public vehicles, such as trains, buses, taxis, etc. If you have your own car, this can add another big chunk to your monthly expenses. If you are still paying the bank for the loan, that can be an expense in addition to your regular checkups and of course fuel.
Food. Do you cook? If not, then you are spending most on eating out or ordering. If you cook, you can save more. And you can control the quality of your nutrition as well. But if you don’t cook, you are spending more. If you cook, how often do you shop for your ingredients? Do you buy long-shelf life goods or fresh whole foods?
Education. If you are a student, how much is your tuition fee? Do you have to buy your textbooks, or do you borrow them? Do you take courses online, or offline? Do you buy books on topics you love? If so, do you buy softcopies or paperback editions? Do you attend seminars and conventions in your field?
Secondary
Communication. Do you have any subscriptions to a telephone company that also provides an internet connection? How many sim cards do you use, are they prepaid or postpaid? If you have a postpaid account, do you go beyond your limits or below your limits? Do you make international calls? These are some of the ones you can record in this field.
Toiletries. Soap, shampoo, toothpaste, dishwashing liquid, laundry powder. Cleaning solutions. You can fill in any other items in this field. These can include beauty and facial products.
Clothing. How often do you purchase clothing? Where do you buy them? Do you keep your old clothes that still fit, or do you buy trendy ones? Do you shop for brand-new clothing, or do you purchase them at second-hand shops?
Discretionary
These are tricky because each one has her own preference. We all have our indulgence; dome to food, others to collections. Still, others do activities, such as a hobby or a sport. Some people consider a gym membership a necessity. While others choose the less expensive ones for their fitness, such as buying a pair of running shoes to run in.
Spreadsheet
By now you may already have understood the importance of tracking your expenses. It can inform you whether you can save, and how much. It can even let you know whether you need another source of income, like a freelance side hustle during your free time.
But where do you put all of these numbers? Well, there are countless apps out there for you to download. But you can use a simple spreadsheet, such as your Google sheets. We have provided a sample for you, so you will have an idea of how to do it. You can even edit it to suit your needs.
Here it is: https://docs.google.com/spreadsheets/d/129oUENKWOECy6-3sRX5tLM_4yHISIhFRchjjHzZ7WTI/edit#gid=0
Happy tracking!
