Hello bloglings! Welcome back to this safe space for all things money.
We’ve hit out first landmark people! Budgeting for 120 straight days. Of course that’s if you’ve started along with me. Okay so it’s more like my landmark. 120 days budgeted! Hoot Hoot!
The reason why this is such a landmark to me is because in the past, about 7.5 days has been my record. Why? Because I’m a perfectionist. We either do it perfectly or we don’t touch, my friend!
My perfectionism has been one of the key reasons for undergoing therapy and I have to tell you, budgeting is a good supplement towards breaking that too! I challenge any perfectionist out there to start a budget and then try to rejig it. That’s where your inner perfectionist is going to come charging and crying over the demolition and reconstruction of the perfect house it had built at the start of the journey. It doesn’t do well with change. I didn’t do well with change.
But that’s in the past. Much like any other habit, I’ve built up a castle of budgeting now, perfect or not. Truthfully, it’s been a fun ride but not an easy one. Developing consistency and patience are key. You’re going to have to trust yourself a lot.
So on this day, I’m going to share with you the things I’ve learnt about the process of budgeting, which not only helped me improve my budgets but also my overall relationship with money.
You are going to mis-estimate yourself on Day 1
This is the most important thing I’ve learnt in these 120 days and this was something I picked up right one day 1. As humans we are bound to have immense hope and faith in our capabilities which also extends to our finances. We tend to overestimate our savings potential and underestimate the reality of our expenses. However, the world has no such kindness for us.
As a result, when one starts budgeting and exceeds their expected expenses they tend to abandon the project since it seems futile. However, this is truly where one needs to double down and get on with it. After my first month, I truly felt like giving up since I realised it was near impossible for me to reach my savings target with the expenses I had. But what those first two months really gave me was information. The power of knowing exactly how much money goes in each place.
Armed with this information, it became far easier to regulate them and even re-align my spending a fair bit. As a result, I’d personally recommend that for the first couple of months, one needs to have a ‘loose’ budget with broad categories and slightly more money to work with. The aim is to not be critical or hate yourself. It’s like going on a first date with your finances. You’re just getting to know each other. So no shame, no blame!
Adapting is another name for budgeting
Another key component of budgeting effectively and for the long term, is to adapt. It’s nearly impossible for things to always stay the same. It’s highly likely that for almost an entire year, each month will be very different for you. Even today, I get new insights into my spending each month, which I weave into my budget. For instance: in July, it was my best friend’s birthday and I hadn’t planned for it. Since I missed it out, I had to move money from some other category inorder to stay on track with my savings goal and the category in question had to be used more judciously.
Adapting in the first few months helps you figure out ways in which you reduce the need for sudden adapting, by planning for these. And while everything cannot be planned, you also figure out a certain amount of buffer that will help you adapt without any hiccups should the need arise later. Create as many categories as you need because the more you deny them, the more you’ll need to ‘adapt’ and ‘divert’ money around in your budget.
Planning makes perfect
I have three peak months of gift giving in a year- January, August and October. I also like to give Diwali gifts to my family which comes in somewhere in Octover/November every year. Naturally, if i were to use my incomes alone in these months, I’d save nothing for these months. This is where the concept of sinking funds comes in. You basically save smaller chunks of money around the year and use them for these occassions. My sinking funds not just serve my gifting occassions but also sometime double up as buffer money in months with no occassions.
Accept your expenses
This is a crucial realisation that comes after one makes a budget and figures out their rhythm. You have to accept your expenses. No matter what you do and what you cut out of your expenses, you will always have some expenses. It is impossible to live on 0. Take it from me: I live with my parents. That’s as free as it gets.
It’s imperative that you accept that you will have some expenses always and while you can minimise them, you cannot cut them off. So figure out your expense thershold and accept it. This threshold depends on whether you’re going completely barebones or you’re looking for something slightly more comfortable. Figure it out and accept it! Acceptance is key!
Stingy (or Frugality) is in the eye of the beholder
This is a debate I have seen happen so often that it’s not even funny. My closest friend is a frugal person. Back in my extravagant days I honestly thought that he was stingy and didn’t enjoy life. Then I saw his budget and spending habits recently and I realised that he derives far more value from his spending than I ever did from my shopaholic days. He went out for movies every weekend (sometimes even four in one), but he didn’t invest in the popcorn, a movie staple (extremely over priced staple I might add). If he didn’t intend on buying something, he didn’t loitre around the mall after his movies and just went straight home! He lives in a comfortable apartment (not in a particularly fancy neighbourhood though), walking distance from him office. He buys clothes when needed and he knows exactly how much money he needs each month. He has more in investments, than I have in possessions today. My point is: stingy and frugal are terms relative to the observer. And if it works for you, who truly cares about the observer? Figure out your sweet spot!
That’s it for this time around. Sorry I’ve been away a lot more now, but I’m hoping to get back to the cycle of regular posting with a bang! I’ll be coming out soon with another part of my series on learnings from personal finance books shortly.
Share your budgeting trips, tricks and stories down in the comments. Don’t forget to share this post around, you may just help someone who needs it!