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"I'm Sticking to a Strict Budget During the Pandemic But It's Making Me Miserable"

Know when to stop trimming

Much personal finance advice focuses on making cuts. The information is useful when you're trying to avoid mindless spending. However, there is a time to shift your focus from slashing to earning.

Polish your resume, and apply for open roles that could be earning more. If you're not looking for a career move, a side hustle can help increase your income.

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IDEA EXTRACTED FROM:

"I'm Sticking to a Strict Budget During the Pandemic But It's Making Me Miserable"

"I'm Sticking to a Strict Budget During the Pandemic But It's Making Me Miserable"

https://thriveglobal.com/stories/sticking-to-managing-budget-spending-money-financial-stress/

thriveglobal.com

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Key Ideas

The cash flow formula

The word "budget" is often synonymous with restricted and rigid, making you want to avoid it. Instead, use the term "cash flow."

The formula for cash flow is:

(Monthly income) - (Monthly expenses + saving) = (Money left to spend.)

Decide how strict you need to be with y our money

Your budgeting style will change over your lifetime. You may use the envelope method when you need to be stricter with yourself.

Some people feel less stressed when they use budgeting styles that track every penny. Others find it is enough to run cash flow and know there's some money left each month for nonessentials. They don't need to itemize where every dollar is spent. See what style of budgeting support your goals and sanity, then adjust as needed.

Know when to stop trimming

Much personal finance advice focuses on making cuts. The information is useful when you're trying to avoid mindless spending. However, there is a time to shift your focus from slashing to earning.

Polish your resume, and apply for open roles that could be earning more. If you're not looking for a career move, a side hustle can help increase your income.

Give your savings account a nickname

When you give your online saving account a fun nickname, it will remind you why you are budgeting and saving.

Instead of an account no, change the name to something like "Quit this boring job" or "Italy trip post-pandemic."

SIMILAR ARTICLES & IDEAS:

A Monthly Budget For Your Money

No matter how little or how much money you earn, creating a monthly budget is one of the most important aspects of managing your finances. What gets measured gets managed.

...

The Envelope System

The Envelope system is a way to track your variable expenses like food, entertainment, and drinks.

This method, preferably used weekly, allocates a certain amount in each category in labeled envelopes (food, drinks, movies, etc.). Once the envelope is empty, you are done spending in that category.

How to Create a Good Budget

The principles that make a good budget, something you can stick to:

  • Being Realistic: Being too strict is a recipe for failure.
  • Making Adjustments: A budget is not set in stone, but a fluid thing.
  • A Team Sport: If you live with a partner or spouse, you have to agree mutually on how to budget the financials.
  • Expect the Unexpected: Keep an emergency fund, ideally 3-6 months of necessary expenses.
  • Budgeting the Expected: Certain upcoming expenses need to be budgeted in advance, like property tax, holiday shopping, etc.

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Warren Buffett

"Do not save what is left after spending; instead spend what is left after saving."

Warren Buffett
From consumer to investor

A consumer spends money and follows trends while an investor puts capital to work and takes advantage of trends.

Chronic consumers often go broke, and persistent investors often get rich.

Discover if you’re a consumer
  • You feel the need to reward yourself after a hard day of work by buying new clothes/accessories or eating out.
  • Lifestyle creep controls your expenses. When your income increases, you buy a new car or a more expensive house.
  • You reserve your credit card for unexpected expenses instead of using an emergency fund.
  • You rationalize using a credit card to buy things you might not purchase with a debit card.
  • When something is on sale, you feel the urge to buy it, even if you wouldn't have otherwise bought it.
  • You follow social trends.
  • You don't think you have money to invest or the time for it.

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Regular monthly bills
Regular monthly bills

The bulk of your budget is made up of necessities like rent, phone and internet bills, insurance, etc. If you can lower your monthly expenses, you can save a lot for unplanned events.

Debt when you're on a tight budget

There are a couple of paths you can take to pay off your high-interest debt when you're on a tight budget.

  • The snowball method. For those who need to see progress, pay off the lowest balance first. You'll feel inspired to keep going.
  • The avalanche method. Choose the debt with the highest interest rate to pay off first. This may require larger monthly payments and will take longer to see progress, but you will save the most money in the long run.
  • If you need to prioritize your credit score, focus on paying down your credit cards first. Paying the ones you are near to maxing out will improve your score quickly by a few points.
  • Set up payment plans, even if you can only afford a few dollars at a time. That way, your lenders can see you're paying something.
Incorporate unplanned entertainment in your budget

Financial professionals will advise you to cut out expensive nights out. In truth, you will have night's out, even when you're dirt poor.

To incorporate unplanned entertainment, set aside an amount each month. Be realistic. You can open another savings account for fun spending or you can use cash only.

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Start a financial independence journey
Start a financial independence journey

One of the most challenging aspects to change your finances is getting started.

  • You may have an idea.
  • You may want to read more.
Set alerts to work on your finances

From the day you start saving, put a reminder on your calendar once a week to work for one hour on your finances in some way. It could include reading, balancing the accounts, optimizing cash flow, researching funds, etc.

There is no right number of times to check on your account. If you feel the urge to make decisions based on the news or market changes, limit how many times you look at your accounts. With experience, you will gain more control.

Dealing with demoralization when saving money

Once you understand where your money is going and what is left for savings, you may feel demoralised. Even though the amount is small in the first few months, you may be surprised by how much your balance grows in six months or a year.

The power of compound interest is what helps accounts grow exponentially and reach your savings goals quicker.

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When budgeting comes in handy
  • You have no idea where your money is going.
  • You’re chronically overspending.
  • You’re not saving any money.
  • You struggle to afford the things you really want.
  • You...
Preparing financially for the future
Preparing financially for the future

With the perspective of an economic crisis in 2020, some of us already have to rethink our spending habits to make ends meet. Others may feel more financially secure. But when recessions come, they...

How to treat your income

Whatever income you are earning right now should be treated like it’s temporary.

Treat your current income as if it might need to stretch for as long as possible. It doesn't mean you need to cut back on everything, but you might need to consider cutting some of your expenses so that you can put more money into savings.

Saving versus spending

Saving money now is worth more than spending money later. This advice applies to any budget item that you could spend less on now.

Even if it is a really great deal, remind yourself that cash in hand now is worth more than an unnecessary purchase.

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The zero-sum budget

Using this method forces you to “spend” every dollar that you make, by allocating all of your earnings into the different categories that your finances require.

It prevents waste and m...

Steps of the zero-sum budget
  1. Determine how much you make on any given month.
  2. List your bills: Once you determine how much money you'll make this month,  figure out how much money you need to spend next month.
  3. Compare and contrast:  Once you see your monthly income and your monthly bills on paper, a clear picture of how much money is left over emerges.
  4. Spend all of your money on paper: decide where that money will serve you best.
  5. Track your spending.
  6.  Make adjustments to get it right.
The 50/20/30 budgeting method
The 50/20/30 budgeting method

With the 50/20/30 budgeting method:

  • 50% of your monthly spending goes toward essentials - your home, your food, etc.
  • 20% of your monthly spending ...
Debt payments

Debt payments may look confusing when you add it to the savings column. But the easiest way to build up a savings balance is not to have your money go toward debt. Once your debt is paid off, you can increase the savings.

Reducing your essentials

Play around with your monthly budget to see where you can reduce your monthly spending:

  • You could contact your internet company to get a discount.
  • You can clip coupons and use rebate apps to spend less on your monthly groceries.
  • You could set aside less for medical expenses if you have an emergency fund.
Making Your Budget Too Strict

Budget for the life you have. When you’re going through your budget and assigning spending categories, be realistic. 

Don’t tell yourself you’ll never buy a single discretionary i...

Budgeting for a Life You Can’t Afford

This becomes a problem when you’re spending for a life you can’t afford. It puts pressure on your budget and encourages you to live in a paycheck to paycheck cycle.

Assess your financial situation, cut back on your expenses, prioritize your money goals, and then come up with a new spending plan.

Budgeting Without a Purpose

It’s hard to stick to a budget that doesn’t have a goal.

When there isn’t one, your budget becomes an afterthought rather than a spending plan to reach your financial goals.

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