When looking for a business name, I read that the word ‘budget’ might not be a good choice because it has many negative connotations. As you can see, I followed that advice – but that is the end of the avoidance!

Budget. Budget. Budget!

That felt good. 

Now, let’s get started with what you came here to read about.

There is a general association between budget and restraint. Limitation. Withdrawal, even. Naturally, whenever you set yourself priorities, by default you decide to limit resources for other things. That’s just how resources work. However, as long as you have any discretionary income at all, you do have the choice what to limit and how much. 

A budget helps you spend your money with intent. It reduces the constant questioning about what you can afford and enables you to spend guilt-free while reaching your goals. 

A budget isn’t your parent. 

The most important thing: It needs to work for you. There are millions of templates and methods out there and putting in the work to find what works best for you is absolutely worth it. More or less tracking? Paper? App? Who decides on the categories: you or a program? 

What a budget should never be is someone else telling you what you should or shouldn’t do. It just won’t work if you don’t have your own reason for doing things a certain way. You might have come across calculations of what your daily latte adds up to, implying that this expense is unnecessary and the money could be put to better use. That might be right, but a good daily latte might be important for you – or not. That’s your decision! Drink all the coffee you like if you enjoy it and don’t feel it gets in your way. Shop, drink, take the bus to work even if you could walk. Your budget isn’t here to tell you how to live your life. It gives you an indication of where you are at with your finances to help you make better decisions for yourself. 

Different budget types

Unsurprisingly, what works for me doesn’t necessarily work for you. Here are a few methods that could work for you. The list is not exhaustive and you can mix and match, too. 

EXCEL

A few formulas, some formatting, maybe a pretty little pie chart and voila: Some people’s nightmare. However, for those who love to be the master of their own creation, who like details and might want to tinker with how the information is presented, an excel sheet can be a great solution. You can access them on the computer or your phone, making updates on-the-go easy. 

PEN AND PAPER

Here you have even more control over design, but are naturally limited by paper dimensions. You can take it wherever you go, don’t rely on formulas or batteries, and create much more communicating representations of your spending/saving behaviour. 

SET AMOUNT A DAY

Especially if overspending is a worry of yours, the daily amount method, which I heard about from Avram Byers (1), is simple and effective. Deduct all your non-negotiable expenses (rent, tax, wifi) from your net income, divide it by the number of days until the next paycheck, and you’ve got your ‘magic number’. Anything you don’t spend today can be carried over to tomorrow, allowing you to save for larger expenses like a bi-weekly grocery shop or a camera. 

THE PLAN AHEAD METHOD

The ‘PAM’ as it’s also lovingly called is the creation of Kelsa Dickey at Fiscal Fitness Phoenix (2). The key here is to single out your non-negotiable expenses and have them in one account. Then you take your irregular (MOT, christmas) and unexpected (broken fridge) expenses and calculate a monthly amount to be put aside for each. Whatever remains from your net income now is put into another account and can be spent freely and as you wish. This method makes sure that the big expenses life throws at us are planned for ahead of time and will not throw you off balance completely. 

APP

Then there are all the budgeting and banking apps out there. I don’t use one and therefore can’t recommend anything specific, but they come in all colours. Definitely do your research and make sure the one you pick is reputable and does what you need it to do. Nothing is more frustrating than trying to get an app to do something (like present your expenses in a certain way) that it was just not designed to do. That being said, they can be amazing tools that intuitively work for you, connect to your bank account, or warn you if you are about to overspend. 

The Enabling Budget

Regardless of which budgeting type you are, build yourself an enabling budget. Have it help you live your best life! You’re the boss here, and your tools in life should support, not hinder you. 

Follow these 4 steps to make sure your budget is enabling you:

FIRST Decide on your budgeting system

Pick which speaks to you the most. It’s ok not to be 100% sure here, you can always switch later on. There will definitely be a learning curve as you figure out your preferences. The most important thing here is to get started in the first place.

SECOND Find the ‘Why’

What is the specific purpose of your budget? To stop you from overspending, give you peace of mind, help you save? And if it’s the latter, what are you saving for: a trip, a move, a wedding, a feeling of security, retirement?

Write this down somewhere, in an app or notebook for example. You could even write it on a piece of cardboard and keep it in your wallet as a reminder. It will help you keep your decisions in line with your ‘why’ during the next step and whenn you are out in the world. 

If you use a vision board (or are tempted by the idea) you could include images of your ‘why’ for the budget on it, too. 

THIRD Set the velvet ropes

Set some rules, boundaries, or principles around what is allowed and what isn’t. These will be your velvet ropes guiding you down your ‘financial red carpet’. They are there to make it easier for you to achieve success.

For example, do you get a monthly allowance for eating out? Do you always have to sleep on it before spending more than £100? Will you save every £2 coin you get back as change?

Remember not to restrict yourself for the sake of it: Everything needs to serve you! 

If you don’t like your impulsive spending habits, you need different ropes than you would set up for keeping an overview over your expenses and overall situation. One size does not fit all here.

You can gamify them, too! Use colour in trackers, reward systems, competitions with other people, you name it. Get creative!

When in doubt, keep it simple though. Building new habits takes time, so it may be best for you to implement one at a time. Do it for a month, then review and add more if you like. Less can definitely be more here because (I may be repeating myself here) the most important thing is to keep going. Small changes are usually easier to maintain: Better to make little steps of improvement continuously over years than to take a huge jump and get overwhelmed after one month. 

FORTH Do what you want

Ever heard of a fun game without any rules? There’s a reason for that, and it turns out that money management is much the same. Now that you know the name of the game and its rules, you can play! As you spend money in your daily life, you will have an awareness of the guidelines you set for yourself and therefore can act more freely and worry-free than before. 

Choosing a system, being intentional, and creating velvet ropes for it enables you to confidently use your budget as a tool which serves you. 

Will you get that latte every day? Absolutely up to you! You’re the main character in this game, and your budget and income are your strongest allies. 

References

1. Avram Byers, author of ‘Your Magic Number’ https://www.avrahambyers.com/ (accessed 21/03/2023)
2. Kelsa Dickey, CEO of Fiscal Fitness Phoenix https://fiscalfitnessphx.com/ (accessed 21/03/2023)