Two months into my marriage, when I took inventory of my credit card bills I was in for a surprise. Even if I paid my entire month’s salary as ‘part payment’ for the next couple of months, I would not have been able to clear my bill in full.
You know what that means right? I was paying the minimum due because why not, my bank was so kind to let me do that. Right?
I quickly realized I was caught in the sinking sand of credit card debt. I couldn’t ask my husband to help me as he was swimming in his own credit card debts. Engineer, MS, MBA, these are the collective qualification between the two of us. And two months into our marriage my husband and I were looking at a massive financial tsunami that was soon going to hit us. That should establish how weak our personal financial skills were at the time.
I needed a plan if I was to fix this. That’s how I was introduced to personal budget.
I was able to pay off my entire credit card debt faster than I had planned to and that’s when I first experienced the power of the budget.
11,000 INR (165 USD) is what I paid in interest alone. I never wanted to have that experience every again and thus began my love for budgeting.
I don’t know why budget gets such a bad rap.
Living within a budget is not such a bad thing. If you see it as permission to spend, it can be quite fun. Now I have to admit that I am a stickler of tracking my spending. And my love for spreadsheets makes it kind of fun for me.
Finding motivation is your key
Talking money with your spouse can be tricky. But synchronizing ‘our’ financial goals is very important. It all begins with syncing the financial goals and finding the motivation towards the whole activity. It can be getting out of debt, childbirth, house purchase, kid’s future, international vacation, retirement.
Keeping it simple
Your budget should be realistic and not over complicated. Keep minimum categories and make sure to track your expenses in real time. There are a whole lot of app that you can use on your phone to track your expenses as they happen. If you forget, don’t disregard it for the entire month, saying, “I’ll get back next month.” Get back the same day. You missed one, two, an entire week’s worth of entries? No problem. Don't let that stop you. Get right back. You'll anyways be averaging it out at the end of the month, quarter, year.
If that’s hard, try cash only system. (you know, keep said amount in an envelope with the category name). When it’s tangible, and you see the money leave every time, you automatically become frugal. I keep a specific amount in my checking account and move the rest. That way I don’t have the money ready to spend.
Re-visit & Reassess
Re-visit every three to four months and reassess what can be cut from your expenses and what recurring charges can be renegotiated. Check if your money is working for you and not against you. It’s not a one-size-fit-all or always kind of a situation. You will need to tweak it as you go since your income, expenses and your goals will be changing. So give yourself about three months to get it right. Compared your actions to your goals, that’ll always give you a clear picture.
Be kind to yourself
Know that you are going to fail some months. It takes off the pressure. Somedays things will come up; other days, it’ll be for the family. Then, of course, we need that thing right now. The excuses/reasons will be endless. It’s hard at first. But trust me, it gets easier with time just like anything else. It’s more like developing a habit.
Money Habits I Stopped Altogether
I stopped shopping for entertainment. (No more retail therapy for me.)
I stopped carrying a credit card and use it only for online transactions.
Surprising Ways I Save
I shop for my groceries only as per menu which reduced waste.
Buying online not only saves time, but you can move items to cart and log out. Log back in after a while and see if you still feel like you need that maxi dress (which is not really your style).
I buy only eBooks. They cost less, occupy zero physical space, and they don’t require dusting.
This is the generic budgeting formula but should give you a sense of how to go about budgeting.
Cost of your living
25% daily living
Savings & Investment
10% towards emergency fund (i.e. 3 to 9 months of living expenses as emergency fund)
5% towards your dream purchase (house/car/international trip)
(You can reshuffle these as per your requirement)
Here are some resources to get you started:
My favorite mobile app