How to Live Within Your Means and Be Happy
If you earn a reasonable salary but still struggle to get to the end of the month, this article is for you. Here are some proven tips on how to plan your spending in a way that's easy, effective and creates a happier life.
When budgeting is a problem
If budgeting didn't seem like such a horrible chore, more people would probably live within their means.
But did you know that it's easy to learn money management – and make life more enjoyable in the process. Read on to find out how.
Don't budget, plan your spending instead
The word budget automatically means deprivation to most people. The thing about deprivation is that human beings are not very good at self-imposing it for any length of time.
Therefore, it's really important to talk in terms of planning spending. Working out what we can spend, rather than what we cannot, is much more positive.
Before you cut your spending, look at where your money goes
Before asking yourself where you can cut costs, first take a look at where your money is currently going.
This may seem like a no brainer, but you'd be surprised at how powerful tracking your expenditure and income is. It's way easier to come up with innovative money solutions, and save, when you know exactly what you're dealing with.
How to track your spending
How much do you spend on gasoline in one month? What do your kids' school lunches cost per year? Would it work out cheaper to buy the good dog food in bigger sacks, rather than the low-quality chow in smaller packages?
The only way to answer these kinds of questions is to keep track of your earnings and your spending.
What you need to do is simply note down everything you earn and spend during one month.
This will give you a fair idea of how much you'll need for next month.
And if you keep up the process for a total of three months, then your forecast for future spending will be even more accurate.
Tools for tracking
There are many free apps, like iSpend on Android or Toshl on iPhone, that allow you to track your spending on your smartphone.
(Many of these not only let you note your expenses and income, but also automatically collate your expenses under different categories, like housing, bills, healthcare, transport and so on, and contrast these with your earnings to give you a monthly balance.)
Alternatively, a spreadsheet – or simply a pen, a small notebook and a calculator – will do just fine.
EXAMPLE – ONE MONTH OF TRACKING:
Let's start with your spending over one month.
If you note down every single penny you earn and spend during 30 days, at the end, you'll have a whole bunch of small and large figures.
What to do with them? To make sense of your expenses, at the end of the month, you need to quickly group all the little expenses under larger headings, and then work out the total spend for each category.
To explain this another way, take a look at the categories below.
You'll probably find that your monthly costs fall under some of these basic headings:
INCOME (Wages, Grants, Benefits, Gifts)
SAVINGS (Pension Plans, Periodic Savings Plans, Investment Accounts)
HOME (Mortgage, Utility Bills, Maintenance or DYI, Council Tax, Furniture, Appliances)
TRANSPORT (Car Insurance, Car Maintenance, Gasoline, Parking, Public Transport)
GROCERIES (Food, Groceries, Household Items)
CLOTHING (Clothes, Shoes, Accessories, Jewellery)
SELF-CARE (Cosmetics, Hairdresser, Massages, Gym or Exercise Classes)
MEDICAL & HEALTH (Health or Dental Insurance, Prescriptions, Vitamins, Supplements, Optician, Dentist, Orthopedic Equipment)
ENTERTAINMENT (Eating Out, Cinema, Books, Magazines, Online or Cable TV, Subscriptions to services like Spotify, Audible)
CHILDREN (Clothing, Toys, Nappies, School Fees, School Bus, Classes and Clubs)
PETS (Vets, Food, Kennels, Taxes and Licenses)
DEBTS (Credit Cards, Loans, Unpaid Fines, Late Taxes or Social Security Payments, Money Borrowed from Friends or Family)
*TOP TIP*: On many smartphone apps and computer programs, you can just feed your figures in, assign categories and the work is done for you. At the end of the month, you'll see exactly where your money went. But it does not take that long to do by hand. Just us a pen, paper and a calculator – about 15 minutes per week, or about an hour each month.
So what do we do once we've grouped our expenses into categories?
Well, this is where we confront the reality of our spending in black and white, and begin to plan a better future.
How much did I spend on coffee?
Does my grocery bill really come to that much?
Would it be cheaper to swap my gas guzzling car for a smaller one, or take public transport?
Once you know what you are dealing with, it is so much easier to start crunching the numbers and looking for ways to move money around.
Take a look at the next example to see how this can be done.
EXAMPLE 2 – MOVING MONEY AROUND
Your goal should never be to simply cut money from a spending category (=deprivation) but to spend smarter (=planned spending).
Let's say you feel you're over spending on groceries and you're regularly throwing food away because it's gone bad in your fridge.
That might mean that you need to start carrying a shopping list to the supermarket, instead of relying on your memory and buying things willy-nilly.
Once you do this, you'll find that your food shopping bill grows smaller.
Well done! But don't stop there.
Now, it's time to reassig some of that excessive grocery spending. You could start a savings account. Or treat yourself to a much needed family night out at the cinema (=planned spending and enjoyment). It's up to you. But the point is, you're in control.
Enjoying your money
When we take control and actually see where the green stuff is going, then it is much easier to divert it elsewhere, as needed.
This kind of simple money management can be done with absolutely anything in your spending categories, including debt.
Watch out for the next article on credit card and payday loan debt cycles, and how to manage yourself out of them without too many tears.
SPENDING PLAN TEMPLATE
- Welcome to Google Docs
A spreadsheet template for planning monthly spending.