How to Budget: Income and Living Expenses

Whether you are new or old to budgeting, this game of money managing tends to be an art all by itself. If you’ve been budgeting for years then you’re already aware of the basics and have formed your own way of doing things with the odd variation here and there. If you are new then there is no better time than now. To start budgeting requires a strong passion for making do with your money and where your money goes.

According to Wikipedia budget is ‘a financial plan for a defined period of time’. For me budget basically means to have a certain amount of money to accomplish certain things for a certain period of time. The money for example can be 500 euros to live on for a month. That means paying rent, food, all I need to exist on. The time can be a week, two weeks, a month, a number of months, a year.

If you don’t know where to start here is my good old time budgeting recipe.

  1. Know your income
  2. Know what your basic needs are
  3. Know what your basic needs cost in total
  4. Subtract these costs from your income. Your spending money should be less that your income money. (This is widely known as living below your means)

For many people who have used budgets for years it might be straightforward. If it isn’t for you just yet that’s perfectly fine. To do all of the above it is necessary that you develop a habit of tracking your money. Write down on a booklet all your expenses. From your monthly car instalment to the tip you gave at that low cost restaurant. Know where your money goes. All of it, to the last penny.

After your financial needs have been met and there is still money over you can proceed and spend what is left on your wants. Or perhaps you could save what you didn’t spend instead. As long as you keep the costs of your needs and your wants below your income you’ll always have emergency money to fall back on and you’ll stay out of debt.

Once you’ve mastered your income vs living expenses budget then you can move on to further budgets. You’ll realize that once you get the hang of it, every other type of budget is similar.

Thank you for reading my tips, I wish you a beautiful day and a well budgeted life!

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