Budgeting is both a skill and practice that isn’t usually taught in school but is indispensable to life. Even if you happen to strike gold or win the lottery, budgeting is a skill that you want in your toolkit because it will help you preserve your wealth in the long run, which will help you lead a happy and financially stable future.
I first started budgeting my expenses and income in college when I was working part time as a career counselor and research assistant in addition to my school work and extra curricular activities. Budgeting was a means for me to keep track of my income and expenses, helping me to avoid overspending and credit card debt. Credit card debit is a young person’s worst financial nightmare (it also happens to be one reason why financial institutions are failing, but that’s another story for another time). I wrote about my experience with credit card debt and the process I went through to eliminate my debt and develop a solid financial plan for my future. You can read it here.
My initial attempt at budgeting was an utter failure because I tried to budget everything, food, drinks, transportation, cost of books, pencils etc. While I think this is generally a good practice for people who are list oriented (you know who you are) it simply didn’t work for long. Eventually I got tired of logging everything down in my excel spreadsheet.
A typical day would look like:
Coffee - $2.00
Lunch - $8.00
Metro fare - $4.00
Dinner - $12.00
Books for School - $25.00
Entertainment (Movie) - $10.00
Now that doesn’t seem so bad, and it really isn’t. But imagine doing that every day for a year. After a while it can get tedious, fast.
When I was working in Japan during my Junior year in college, I logged everything down because I decided that I wanted to save a minimum of $2500 after covering cost of living. I budgeted a set amount for food each week, roughly $80-100, and left a little for entertainment. The rest went to my savings fund. Living in Tokyo is expensive and spending only $80 a week on food is pretty impressive in my opinion. It’s doable, but it requires cooking for yourself every day.
That summer was my most intense budgeting experience and it was extremely valuable in that it helped me achieve my savings goal. However, my experience taught me that I needed a less time consuming way to budget my expenses. Since then I’ve found that the best way for me to budget is to set daily, weekly and monthly spending limits.
For example, my routine week involves visiting the bookstore about five times a week to write. Usually when I go I spend about $2.00 on coffee or tea. This can easily add up to $40-50 dollars a week. The café workers always try to push me to spend more on a larger side, usually saying, “Don’t you want to treat yourself to a medium or a large?” They’re clever, I’ll give them that. Since I’m on a budget, it’s easy for me to say, “no thanks.”
Some weeks I don’t buy coffee, which allows me to indulge on a pastry or a book perhaps. But the key is to never go over budget. Going under is fine because you’ll just end up with a surplus, but going can lead to bad and terrible things. Buying an extra coffee may not seem like such a big deal, but they can add up.
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1 response so far ↓
Nice writing. You are on my RSS reader now so I can read more from you down the road.
Allen Taylor