Living Within Means: Maintaining a Balanced Budget

by - January 12, 2018

Living within your means means more than just balancing your budget. It also means being aware of the difference between what you need and what you want. You need to learn to find a way of spending that works for you -- not for your neighbors or best friends. Living within your means is knowing how much money is coming in, and and making sure that it goes to where you want them to go, and grow into.

 Create monthly budget

Essentials are things you absolutely cannot do without like groceries, utilities, and clothing that you need. Clothing ofcourse depends on your need versus on your want to get new stuff. This will probably work best if you use a monthly income. If you are on regular, and fixed salary, it is probably easy. However, if you are part-time, freelancer, or a dependent, this may be a bit more difficult. Most likely, your best option is to take your monthly income or budget for the last three months and take an average. It may not be spot on but it will most likely be enough for you to rely on to make ends meet.When you have to estimate your income, remember to deduct the amount that you would reserve for taxes, and other obligations. That is how to calculate how much money is coming in every month.

 List down what you spend

To do this, record what you bought, how much you spent, and where you bought your goods/services from. This does not have to be extremely detailed, a “1,248.50 - SaveMore groceries” would suffice. You can also tailor it to see how much you've spent on all of your essential items and non-essential items as well. You can use a notebook or tickler for this one, a note, or a finance mobile app. 

 Income versus spending

Check how you're doing. If you are significantly in the green, meaning your expenditures are lesser that the money you're saving -- then you’re doing fine! However, if your income and expenditures are equal, then you're not saving any money, and if your expenditures are much higher than your income, then you have a problem.

 Evaluate your spending

See where your money is going! This is where recording your expenditures get handy. Check the “Essentials” category, and the other categories that are unique to your preferences. For example, one category might be “Eating Out”. Once you have done this, add up all the expenses in that category and create a category total.

 Cut the fat

This is where it gets dirty. More than likely, you’ll notice at least one category other than “Essentials” is eating a large portion of your income. Take a look at that category. See what you can cut out, or lessen your expenses.

 Earn more

If you may see that your spending has outrun your earnings that need to do far more than just cut your expenses if you want to make ends meet, you may need to take on extra hours at work, ask for a raise, or look for a higher paying or part-time job to raise your income.

 Savings goal

Create attainable goals within a reasonable timeframe. Maybe your goal is to save 75% of your income for the month in the next 3 months. The more specific and attainable your goal is, the more likely you will be to reach it. If your general goal is just to "spend less money," that is too vague, you might develop some excuses that those you spent on are necessary expenditures.

 Save for an emergency

If you really want to live within your means, then you can't let one unexpected event, like a car accident or job loss, completely ruin your finances. You need to save some away for a rainy day, even if you're only saving 3,000PhP a month. This money will add up, and you'll feel much more safe and confident than if you're spending your money down to the wire every month without having a penny to spare. Throw in your change in a "emergency jar" at the end of every day to help you mentally prepare to set some of your money aside for the unforeseeable.

While we try to change our spending, and our financial literacy, we end up cutting down expenses. Even though there is nothing wrong with that, when done wrong we get the feeling that you've cut off to enjoy what you've worked hard for and end up binge spending.

lisa marie.

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