What kind of budget is right for you? I know some people who use ledgers or apps to keep track of their money. Some people just go with the flow and pray to the God of Wealth to make ends meet.
There is no one formula that works for everyone because it depends on the number of people the budget is set for, the timing of income, and other unforeseen events.
This pandemic has either taught us to save so we have something on a rainy day (like lockdowns and no jobs) or spend what you have as much as you can because you never know if another pandemic will stop you from enjoying life.
You can tighten or loosen the belt. For me, the goal is to live comfortably with the least amount of debt.
So how do you live comfortably and succeed on a budget?
Know your net income
Your income will serve as the basis for your spending. I’m sure you’ve heard the cliché about don’t spend more than you earn or don’t exceed your means. The average employee with a regular monthly income can easily do this. However, as incomes change, freelancers can find this difficult. As a freelancer, I set a personal target income/quota for each month. This quota is set based on my living expenses.
Cost of Living
Your living expenses are your non-negotiable monthly expenses or your needs, they are:
- house rent or mortgage
- Electricity bill (a nice amount set aside for this is your most expensive electricity bill to date)
- Water bill (just like in your electricity bill, you should set aside the highest bill amount}
internet car - Transportation Allowance (this is your average daily/weekly commute/gas and parking costs)
- Food (budget based on the number of people eating and how often you eat at home) It is best to have a meal plan to be able to set a realistic budget) Multiply the cost of a meal for one person by 3. Others make a weekly food budget, others Monthly or bi-weekly depending on the timing of payday.
Contingency/buffer funds
This is an amount at least equal to your monthly expenses or a buffer fund in case something needs to be replaced or repaired at home or someone gets sick. This is a one-time monthly allocation that can be used for your savings if not used.
savings funds
Savings are not just a buffer, they’re a lifesaver. When the pandemic lockdown happened, I was a bit lucky, had almost no savings, and was comfortable, albeit boring. The ideal savings is at least 6 months of living expenses, if not 3 months, enough to start your phase and then build however you want.
Happiness/Luxury/Reward Fund
Working without play can leave you tired, depressed, and unmotivated. Rewarding yourself from time to time can help you live a fulfilling life and the motivation to keep going. Happiness/luxury/reward funds are also important.
These funds can be used to finance your travel, new equipment, new appliances, new clothes, new shoes, a new look (remodeling or pampering), a new car or a new house. Anything you can put aside but have every now and then.
borrow money
However, if you are on a tight budget and your budget can only reach the buffer funds, then this is borrow money can go. You can apply for a loan, get a credit card, or apply for those buy now, pay later or installment plans.
I know a lot of people who say “I don’t want to take out money or loans, I want to live without debt”.Trust me, in an ideal world it would be nice to have no debt, but even a billionaire have a loan make their lives more comfortable.And if you’re struggling with past debt, there are short-term financial solutions for those struggling with bad credit, such as creditloan.com.
invest
when you become Master of Budgeting You can easily allocate your money here and there, maybe throw in some investments. Investing is not the same as saving. Investments are disposable money that you can lose. You can put it on commercial businesses, stocks, cryptocurrencies, NFTs. There is no guarantee that these funds will be recovered, but if you succeed where you put your money, you can double or triple or even more!
I hope you learned something from this article and maybe apply it next time you’re on a budget!
