The Surprisingly Simple Budgeting Strategy That Never Failed Me
By: Rose Goldberg
Tags: Money, Budget, Personal Finance, Finance, Productivity

The Surprisingly Simple Budgeting Strategy That Never Failed Me

Photo by Nathan Dumlao on Unsplash

Contents:

Why you should budget

Rules

The strategy

Why you should budget

The purpose of this article is not to convert you into a financial minimalist (a concept that I described here) but to remind you that you can and should have control over your finances.

You don’t have to give up things that have a lot of meaning to you, but to cut out things that don’t.

A good budgeting strategy will give you confidence in your finances and will make more money available to you.

Rules

As do all budgeting plans, mine comes with a few rules that I put in place at the beginning of the month, and I never step on:

Never save less than I set out to

than I set out to Only splurge on what gives you great meaning or makes more money long-term.

or Go over your budget for unavoidable situations and not for unnecessary purchases.

and not for unnecessary purchases. Keep track of every purchase.

For me, these rules don’t seem extreme, and I’m very comfortable putting them into practice. If they are too extreme for you, tweak them so that they fit your needs — but prioritize needs over desires.

Not spending $500 on eating out every month might seem extreme to some people, but you should strive to accomplish it if you know it’s good for you.

I’m not saying “never purchase anything,” — but be mindful and analytical about what you buy.

The strategy

Now let me detail the picture you see right next to this text.

First off, I’ll explain the color-coding:

Green : necessary purchases / stable income streams

: necessary purchases / stable income streams Yellow: unstable purchases (that I’d like to get rid of in the future)

unstable purchases (that I’d like to get rid of in the future) Red: purchases that don’t come up every month.

purchases that don’t come up every month. Grey: I left this in as an example of how it looks when I reach the monthly budget for a category.

First things first

I like to track the amount of money I start the month with — hence the “initial” — and the amount of money I’m left with after every purchase — hence the “current” — in order to not forget any. Also, at the end of the month, I’ll log in the money I’m left with — hence the “final.”

Income

In the “Income” section, I make separate categories for every stream of income I have that specific month:

Scholarship : an important part of my monthly income comes from my university as a monthly monetary “reward” that students with very high grades — over a certain level — earn (and I’m one of them, yay!)

: an important part of my monthly income comes from my university as a monthly monetary “reward” that students with very high grades — over a certain level — earn (and I’m one of them, yay!) Job : this is the income I get from my 9-to-5 job

: this is the income I get from my 9-to-5 job Medium: this is the revenue I get from writing and publishing Medium articles every month — it’s transparent because although it is monthly, it fluctuates and varies in amount

After I’ve received the money from all of the income streams I have, I’ll write the amount down in the “Total” section to keep track of how much I made that month.

Expenses

My favorite part is here — the actual budgeting. Not spending money is a very satisfactory experience for me, and I’ve optimized my budgeting strategy to include as few unnecessary expenses as possible.

Rent and utilities : these sum up around 30% of my income and are quite stable expenses, which is why you see them in green.

: these sum up around of my income and are quite stable expenses, which is why you see them in green. Groceries and ordered food : I like to keep these around 10% of my entire income — this is the amount that works for me, and it served me well so far

: I like to keep these around of my entire income — this is the amount that works for me, and it served me well so far Miscellaneous: these generally include donations, my Medium membership, phone plan, Apple storage fee, and Netflix membership, and are around 2% of my income, and I consider it necessary for obvious reasons. The donations could probably be considered unnecessary expenses, but it’s an exception I’ve decided to keep. Another expense that could be considered unnecessary is the Netflix account, but considering the fact that I share the payment with my boyfriend and sister, I don’t think it makes a difference, and it ends up being a meager amount of money spent for entertainment. BTW — you don’t have to leave all these as separate categories, as I do, and you can just make one big Misc. category if that works better for you.

these generally include donations, my Medium membership, phone plan, Apple storage fee, and Netflix membership, and are around of my income, and I consider it necessary for obvious reasons. The donations could probably be considered unnecessary expenses, but it’s an exception I’ve decided to keep. Another expense that could be considered unnecessary is the Netflix account, but considering the fact that I share the payment with my boyfriend and sister, I don’t think it makes a difference, and it ends up being a meager amount of money spent for entertainment. — you don’t have to leave all these as separate categories, as I do, and you can just make one big Misc. category if that works better for you. Gifts and uber : these don’t really come up that much, but when they do, I include them in the 2% miscellaneous purchases

: these don’t really come up that much, but when they do, I include them in the 2% miscellaneous purchases Investments: I like to also invest a small portion of my income and am eager to raise the amount as I will increase my income as well. For now, I like to keep my investments around 10% of what I earn.

At the end of the month, I total all of those up and start calculating how much money I made minus how much I spent — hence the “B (budget)=I (income)-E (expenses).”

Then, I subtract my savings from the money I had left — which honestly should be an article on their own. I save a massive 48% of my income every month, which has proven to be one of the best decisions I’ve ever made.

Don’t be fooled by my savings

Although the calculations of the money I have left minus my savings appear after the income/expenses table, I actually save at the beginning of the month.

Savings are the first thing I do with my money, and I highly advise you to take up that approach too. Like that, you don’t save what’s left after spending carelessly, but you spend what’s left after saving and securing your monthly deposit in a savings account.

Of course, if unexpected necessary expenses come up (like when I cracked my phone screen a few months ago), I can expand the spendings amounts or even tap into my savings in order to take care of whatever needs immediate taking care of.

Planning

At the bottom of the page, you’ll see a very thorough planning section, which I normally take care of at the beginning of the month and doesn’t change that much.

I like to calculate how much I should spend per week or even per day on certain categories (such as food), and that helps me keep track of how much money I have “left” during the month in order to plan out my groceries or even going out habits — when that was a thing.

Bottom line

After all of this, my budgeting plan looks something like this: