Do you use any strategy or technique in planning and reviewing your monthly budget?
As a minimalist, I prefer to keep things as simple as possible. I have tried several personal budgeting softwares and mobile apps, which have a plethora of functions and automated tools, but what worked for me best was just using a piece of paper, a pen, and this 5-Category Budgeting Technique.
First, I write down these 5 categories in a clean sheet of paper then fill them out one by one to get my expected total budget for the month.
- RENT *
- TRANSPO *
- BILLS *
Do you notice the items marked with an (*)? These categories are my top expenses that are consuming a significant amount of my salary. I make it a point to identify, and then cut-off or drag these items down, so I can get a higher surplus for the next month.
Here is an expanded view of the categories:
- To work
- Eat Out
- Credit Cards
- Personal Debts
**I used to charge this to my yearly budget instead of my monthly budget since I do not usually go out of town every month.
If you are a minimalist, who does not like to tinker with a highly detailed budget plan, this simple technique may work for you.
Once you have calculated your monthly budget, subtract that amount to your monthly income and the difference should be your monthly savings.
When it comes to your savings rate, with all due respect to George Clason, I believe that it is way better if we can “pay ourselves first” MORE THAN 10% of our income. The higher your savings rate, the faster you’ll reach your financial goal.
In my view, a 10% savings rate is inadequate and will just lengthen the time for you to reach your personal financial goals. Personally, I keep 50% to at most 80% of my monthly earnings and use the lump sum I accumulate to help my parents, pay our mortgage back home, and to strengthen my long-term savings.
Let us all remember the purpose of this activity: We are doing this proper allocation of finances not to restrain the joy and freedom that we experience in our lives but to have a happy, enjoyable life while accumulating enough funds so we can be more prepared for any upcoming ordeals and be able to retire much younger, regardless if we work or not.
I have yet to meet a happy and contented person who is one pay slip away from financial disaster and who is not deep in consumer debt and house mortgage payments.
Decide today what your (and your family’s) future will be.
Be financially independent.