Sometimes, being an adult is extremely difficult! There is a bunch of stuff that they just don't teach us at school which we are forced to learn by ourselves - for me, the steepest learning curve of all of them has been how to look after my money and budget properly. I definitely still have a long way to go, I am not the greatest at this by ANY means. But over the past couple of years I have learnt a lot about ways to manage money that have really helped me, so I wanted to share them with you here, for all of you out there also wondering where exactly all your money went last month.
I will start by saying that I am quite old-fashioned and I like to write everything by hand - it is just easier for me and helps me make more sense of my finances in my head - so if you are also this way inclined you might want to get a notebook with a grid. If you are great at using speadsheets, go ahead! I also have the 'Receipts Storage Book' from BusyB, which has been SO useful, so I would recommend getting that or something similar. One more thing - as I live in Germany I deal with euros, so all the examples I give here are in euros, but please apply whatever your currency is in their place!
1.Know your income
The first thing, and perhaps the most important one here, is to know exactly what your income is. I work out all my finances per month, I think this is the easiest way. You will be off to a great start if you know exactly how much money is coming in each month and from who.
2. Divide all expenses into categories.
OK, so once you know your income, start to think about all the different areas in your life that you spend money on, and write them as a list. For me it goes something like this: Rent + Utilities, Phone, Food, Travel (plane and train tickets), Local Travel (city tram tickets), Household, Personal (toiletries, clothes etc), Social (cinema, going out etc), Violin Costs, Events (tickets for concerts etc), Books and Blog, Gifts, Extra. It doesn't matter how long the list is, just try to get everything down. You might want to add an estimate next to each category, how much money you think you will need for that one for the month.
3. Keep receipts!
This is where my receipt storage book really comes in handy. Every time I come home, I empty the receipts form my bag and make a note in my book of what I spent on what category. For example, I can see that on 3.11.2016 I spent €3.50 on Food. Of course, you might not want to do it every time you come home - but if you just keep all of your receipts in a pile then you can go through them all at the end of the week. At the end of the month, I will go through it all, add them all up and total what I spent in each category for the entire month. Then you can go back to step 2, and be able to say for sure, OK, I need €X for Food, €Y for Travel etc. It is interesting to see how this compares to your estimate! Do you need more for Food than you thought? (Usually the case with me...)
4. Are your outgoings greater than your income?
So, now you can see exactly how much you are spending, every month, and on what. Time to compare your monthly expenditure to your income. If what you spend is less than what you have coming in, great! Why not put the extra aside in a savings acount?! However, if your are spending more than your income, please proceed to step 5.
5. Look at ways to reduce.
This could be an important step for everybody anyway, especially at this time of year - the build up to Christmas might mean that we all have to look at ways to reduce our expenses or allow ourselves more wiggle room in the Gifts category. It's hard, but be brutally honest. Maybe you don't need to go clothes shopping every weekend. Maybe you don't need a take-out every Friday. Maybe you could cook more at home instead of going out to eat. If you are a student like me, this step will be even more difficult because we are already living pretty frugally, but there are ways to reduce. For me, I decided to walk everywhere in the city, so this cuts out my Local Travel expenses. I also downgraded my phone contract to one of the cheapest ones I could find, and I really recommend checking up on this, as I have heard so many horror stories of friends paying far to much for their phone bills.
6. Always know where you are
What I mean by this is, if your monthly budget for Food is €160, and you have already spent €150 and it's only 4th November, you are going to be in some serious trouble by 29th November! Make sure that throughout the month you are checking that you are within budget and that you know how much you have left to spend for the rest of the month. You might even what to break down your monthly budget in some categories into a weekly allowance - for example, if your monthly budget for Food is €160, that gives you a weekly allowance of about €40, or €5-6 per day. This is much easier to deal with, and works for things like Food but might not be appropriate for others like Travel.
7. Expect the unexpected.
Here's the annoying thing. Even if you budget really well and are super strict with yourself, things happen which we just can't prepare for. Last year I had to deal with a tax issue, which was a little bit scary, and just a few days ago Logan and I had a message from our landlord saying that we owe a large amount for the costs of our building, which we had no idea we would have to pay. But it could be anything; you might have a cancelled train and have to pay for a taxi, perhaps have to contribute to a surprise collection for a colleague's retirement gift or pay for a plumber if the boiler suddenly goes out. You never know, and that's why it's a really good idea to have that Extras category, and save! Even if you are just able to put €10 aside every now and then, just to know that you have something for those unexpected times will give you peace of mind, which I have learnt, means a lot.
I would love to know your budeting tips! As I said, this is a learning curve, and I am trying to work it out as much as anyone. If you have some things that really helped you, I would love to know them, so please leave a comment below!
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