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Thursday, August 28, 2014

About Nailing that Budget

As indicated in this blog, I have officially started on this journey to financial independence this year. It’s been (only or already) 5 months since then and I tell you the journey is not as easy as pie. I’ll try to tell you why. But just as disclaimer on this entry, I will not be talking about all the aspects of the journey; rather, I’d be focusing more on where I am at household budgeting.

To give you a background, I am the sort of person who likes to get things done ASAP. It’s good and bad. It’s good because I can get really determined at accomplishing something; yet, it’s bad because obviously, loving “ASAP” means I am not a very patient one. So getting a household budget in place is definitely a challenge for me. Why? Because first, the budget is going to be a hit or miss for some time (as can be read in most personal finance sites and books)—meaning, there’s just no way I can get it “right” the first time/month, ; and second, I can’t get it done ASAP.

Knowing where I’m coming from, you now understand if I say the first 2 months was a horrible experience.  :hide:  I was such a mess (on the inside only, I hope). Let me tell you the reasons why:

  1. I don’t really have an existing budget in place.
Not having an existing budget in place means a lot of things. This means I have to try to set a temporary budget while I have to track each and every expense we have for a month or two and tweak the budget every month until I get it right.

  1.  I believe and want to practice the 70-30 principle.
Already told you I was determined. LOL! So the 70 is 70% of the income goes to expenses while 30 is 30% goes to savings. So this means I have to evaluate the expenses and eliminate what needs to be eliminated as much as possible. 

  1. I have existing debts.
These debts are not as high as the Eiffel tower though. These are short–term debts incurred due to inexistent plans for the year’s school tuition. Period. Lesson learned. :O (So with #2, you do understand it was not going to get easier.)

  1. As I constantly tweaked the budget to get to the right working one, I had to change the budgeting spreadsheet I use twice.
I’d like to think this is very easy to understand. I just can’t sit there and wait for something to work out for me. Hehe. In one of my previous entries, I used a very simple spreadsheet based on the 7-30 principle. That was actually okay. However, with #1, I have to keep track of every expense, so I just have to use a spreadsheet where it’s possible to input all of the expenses and sums them all up as the actual expense, placed side by side with the planned expense. This way it’s so much easier for me to see how I’m progressing with my budget outlook and at the same time, have all the info I need (planned and actual budget, list of expenses) on one workbook. Here’s the spreadsheet I currently use which I got from Christian PF, which I love to read very, very much. :)

It was difficult and besides, (singing) “nobody said it was easy” anyway. So I guess I was really prepared for the worst. Fortunately, five months later, I’d like to think I’ve finally nailed building our household budget. It’s not perfect, but it’s close to the best budget for us given our situation. 

But do you know what’s tricky about budgeting? 

You may already have one set up, but you do NOT stop tweaking it to increase your savings/investments; 

as you make more financial plans or goals, you do NOT stop tweaking it to increase your savings/investments; 

as you pay off all your debts, you do NOT stop tweaking it to increase your savings/investments; 

as you get salary increases, you do NOT stop tweaking it to increase your savings/investments. 

To cut to the chase, it’s always about living below your means and wisely saving as much as you can for your retirement and your family's financial goals. And most importantly, don’t forget to share, and celebrate or have fun especially when you reach a goal.) :)

How's your journey so far? :)


Maria Porpio said...

And having a visual short-term and long-term goals are very helpful reminders to nail that budget. Thanks for this insight!

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