Dear daughter,
Today I want to give you some budgeting tips. I’ve creating budgets for several years now, and I believe these tips will help you to have a healthy budget.
1. Start a not-too-tight budget
One of the reasons people start having a budget is to save money.
Because of this, people make their first budget too tight. As a result, they find out that they cannot keep up with that specific budget.
This can have a negative impact on what you want to do. Remember, the main reason you want to have to budget is to have control over your money. With time, another result will be saving/investing more, being able to do more for your loved ones, etc. But first, you need to have control. That is your first and most important goal when you start following a budget.
So, avoid negative psychological impacts by being generous with yourself. With time, you will be able to see where you can cut expenses.
2. Always have a miscellaneous category
What do you say when you plan for something and then, something else happens?
Some people will say, life happens, you know.
Usually, some expenses that you didn’t plan will show up.
How can you be ready for that?
You can allocate money to the Miscellaneous category to cover those things you didn’t plan.
Don’t worry, this will become less and less with time.
One example, did you ever forget about someone’s birthday? I sure did. When that happens, you can pull out some money from miscellaneous and give a present to that person.
Did you spend more water and electricity than what you budgeted for?
I think you get the idea.
3. Don’t start with too many categories. It can be overwhelming
When I first started budgeting, I try to divide all my expenses so I can have more control over each one.
The way I did that was by creating as many categories as I could. The result is a lot of categories.
It was difficult to track each one and allocate money to them. They were too many categories and I started to feel overwhelmed.
At that time, I remembered from my professional experience, that the best solution to a problem is usually the simplest one.
Also, several authors of books I read have the same opinion.
What was my way of simplifying the solution to my budgeting problem? I should have as few categories as I could have.
Here you can see the budget categories I recommended to you. These are the ones I use.
So, keep it simple, it is easier that way.
4. Keep your expenses up to date
Do not wait until the end of the week, or worst, the end of the month to update your expenses.
If you do that, you will miss several expenses and you will probably feel overwhelmed.
It is better to do it in small steps. Remember how you eat an elephant? One bite at a time.
I track my expenses daily. Before going to bed is the best time for me. In that way, I only have a few expenses to record each time. And some days, I have no expenses to track.
5. Postpone expenses as much as you can
Don’t look at me like that, LOL.
What I mean is this, if you still have vegetables, don’t buy more until those are finished.
If you still have meat, first finish that one and then buy more.
I used to like having many things at home. Every time I want to do something, even if it wasn’t planned, I had what I needed just at home.
Then I started to finish things before buying more.
The result?
What I know have at home is fresher. Nothing lasts a lot of time and gets old in the fridge or a cabinet.
Also, I spend less on food than I used to spend.
6. Holidays budget goes separate
Plan your holidays with enough time.
Have a specific category for holidays so you make sure you can enjoy and relax after a period of working hard.
For me, it works better to have an extra category for holidays. I have had it since the beginning of the year after I save enough money to have the type of holiday I want to have.
Once I complete the holiday budget, I remove it altogether for the rest of the year. Usually adding the extra money to the investing budget.
Dear daughter, these are the main budgeting tips I have for you, I follow all of them.
Use the ones that work for you and ignore the others.
All I want for you is the best in this world.
Love you, Dad.