Back in March I posted a Monthly Budget Template.
Now I have some budgeting tips from GreenPath debt solutions (with some editorializing by yours truly):
1) Estimate each monthly expense (be as accurate as you can, since this will help you later!)
If you are unable to do accurate estimates of your monthly expenses, try tracking your expenses for as long as you can (a year is good). Then you can use the previous year's expenses to set up your monthly budget.
2) Put in how much money you get each month (if this is variable, try tracking your income for a year as well.
Do you see a pattern? Do you get paid more consistently in certain months? If you have variable income, it's even more important to have a savings fund to help you cover those lean months so you don't go into credit card debt!).
3) Add up your total monthly expenses.
4) Subtract that from your total income.
5) If you have a surplus - great! You can build up those savings, invest, or pay off debt.
6) If you have a deficit - you either need to cut back on spending or get more income.
Your goal is that you want to have a surplus. They call this "living within your means".
They advise you to "pay yourself first" by saving 10% (or more, I think!) of your income.
You should prioritize and consider what your family's most important goals are (Food? Safer/better living conditions? Education?)
Think about what you want versus what you need. Could this be considered a business expense or investment?
Savings play an important role to cover you when your expenses are too high. However, you won't build real wealth without investing/paying down debt - especially if your debt has a high interest rate. So please, be aware.
I keep track of my actual spending by recording the previous month's spending in a Google Sheet.
They advise you to hold meetings with your family and talk about adjusting the spending so you're still living within your means.
Some advice they give for saving money: turning off lights, using energystar appliances, unplugging appliances when not in use (I think that's dumb), turning down heat (impossible in our apartment), turning up air conditioning (I think it's cheaper to just not use air conditioning in the first place) and insulating.
More advice: shop around for vehicle insurance (does your work offer vehicle insurance or telephone/cell phone discounts?), keep proper air pressure in tires, car pooling, public transportation, combining errands, walking, and (I don't do this but I know it's popular in the FIRE community) biking?
Third round: keep your debt low (or non-existent), make arrangements to pay off old debt, carefully evaluate taking on new debt.
Finally, buy sale items (but do you need them?
If you don't need them in the first place, you will save much more money by not even buying them!), take your lunch to work, limit entertainment and dining out expenses (I would advise thinking about what you want to splurge on. Whatever's important to you, save up for that and then spend on it! Don't be afraid to spend, but only if you can afford it!).
Honestly, you should think about saving on the big three expenses: food, rent/mortgage and transportation.
Well, thank you for reading! :)
Warmly,
Into the FIRE
