Sheets Upon Sheets

Write about your approach to budgeting.

Budgeting is a no-brainer, essential part of financial planning. It helps you track your income and expenses and allows you to allocate your resources effectively. And yet few people really do it or stick to whatever they try to do based on ideas found on the internet. Creating a successful budgeting approach requires some thought and planning, but it also means you need to adapt as much as you can based on your own reality. Here’s my own approach to budgeting, based on some tips found both online and offline in my real-life work.

Step 1: I List My Obligatory Expenses

My first step in creating a budgeting approach is to list all my obligatory expenses. These include rent or mortgage payments, utility bills, groceries, transportation costs, and any other expenses that I CANNOT not pay each month. I put these expenses on an Excel sheet, using a column for each month and rows for each line of expenses.

Step 2: Include Debt Payments

Any outstanding debts are included in my budgeting approach. I write down the minimum payment required for each debt and plan to pay off more than the minimum whenever possible. You can also include a column for debt payments in specific months when you expect to pay them off.

Step 3: Add a Miscellaneous Line for Leisure Expenses

While obligatory expenses and debt payments take up a significantly heartbreaking portion of my budget, it’s also important to enjoy some leisure spending. To do this, I add a miscellaneous line to my Excel sheet, which can be about 10% of my salary. This line can be used for non-essential expenses like dining out, shopping, or entertainment.

Step 4: Use a Different Bank Account for Expenses

Using a separate bank account for expenses helps me stay on track as much as humanly possible with my budgeting approach. When I receive my salary, I transfer the allocated amount for expenses to this other account and use it for all my obligatory and leisure spending. This helps me avoid accidentally overspending. I won’t be able to spend more than what’s available in that account!

Step 5: Track Budget and Make Adjustments

Finally, it’s essential to track the budget and make adjustments as needed. I review my Excel sheet periodically and ensure that I’m sticking to my budget. If my income or expenses change, I have to update the budget accordingly. I also adjust my miscellaneous line as needed, based on my “discretionary” spending habits and also on any additional money I can make outside my salary.

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To recap, creating a budgeting approach requires planning and discipline, the latter being *extremely* important if you want to stick to it as much as you can. So I listed my obligatory expenses, included debt payments, added a miscellaneous line for fun expenses, used a different bank account for expenses, and tracked my budget. If it fits you, you could consider this approach and make any necessary adjustments to suit your unique financial situation.


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