Calculate variable expenses
This is the third column. Everything you need for a normal life is here: food, household chemicals and household goods, clothes, travelling expenses. And also expenses for sports, hobbies and entertainment.
During the analysis phase, you can highlight the expenses in each category in different colours. For example, everything related to food in green, hobbies in blue and entertainment in purple. This way you can estimate how much money you need for each category and calculate your budget for the new month with this information in mind.
Plan your expenses based on the average of the last three months: this will give you a realistic budget that is easy to follow. Then, if necessary, adjust your spending. For example, consider buying food in bulk and then preparing it for long-term storage.
Meat and fish can be cut up right away and frozen in portions. You can do the same with herbs, such as parsley and dill. You can also use berries, bell peppers and other vegetables. If you do this in the summer, when prices are lower, you can save money during the colder months. And then make soups and bake pies using your stockpile.
Once you’ve decided on the amounts, it’s worth marking on your calendar when you’re going to make big purchases. You can tie them to payroll days.
Both watching your spending and looking at events on your calendar are mindfulness exercises. To be prepared to actually spend, you must be aware of your current spending habits.
Start a few “envelopes for the future”
The first two expense columns are necessary to live. The second two are necessary to do so in comfort. The same column will help to prepare in advance for various events – both planned and unexpected.
To begin with, you should transfer all the money that remains after filling in the second and third columns to the fourth. This is how you will start to form an emergency reserve fund. It is necessary for you to have the means, if suddenly there will be some trouble.
For example, you miss a couple of weeks of work due to illness. Or your washing machine suddenly breaks down. It is desirable that in this situation you have at least minimal savings. Even better, if they cover all the costs and you don’t need to take out a loan.
Kumiko Love advises to first of all send the remaining money to the emergency fund. It should end up being at least two months’ income. If it seems to you that there is too little of your money left at the end of the month and it will take you almost forever to save up that amount, start saving anyway. Don’t wait until your income grows a lot.
