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Sometimes, life just gives you bills… It did that to us about two years ago, when we found out that the foundation under our house would no longer carry the home we lived in and needed to be replaced. Ouch!
It would be nice to be able to spend whatever we like. I know I dream about that plenty. Especially with the kids, I’d like to be able to give them whatever they want (not that this is a good idea, but that’s another topic). But we’re tight enough on money as it is, and my husband and I have agreed that our financial health takes some major priority over luxury right now.
The first instinct in such a situation is usually to duck your head down and pretend the issue isn’t there. You just do your best to be careful about your spending and hope for the best. But does that really work?
Apart from whether this approach works for the financial aspect, what about the mental aspect of it? How often do you think about money and secretly feel this worrying, nagging feeling in the pit of your stomach?
It’s uncomfortable, isn’t it?
That is exactly why I believe a budget creates space…in your head as well as in your wallet.
Instead of asking yourself whether you’ll be able to pay all the bills, you can know exactly what you can and cannot afford and take action accordingly. For instance, if you see that you have only a little bit of money left for groceries, eat a few vegetarian meals to cut down on costs. Perhaps it’s wiser to take the bus instead of the car. But you won’t know unless you keep track of things.
And let’s face it, we spend money not necessarily where we need to, but on what we think is justified.
Let me give another example:
Your wintercoat is completely worn and there’s a big tear in the side where you got caught on something. You need a new coat as it’s going to get cold soon (pretend it’s November). So you go to a shop and buy one. Right?
So, buying a coat is an example of where you NEED something, we don’t want you to freeze. However, WHERE you get a coat and how much you spend on it is where you have a choice. You could have gone to a thrift shop. Perhaps that’s not an option you like very much, but fact is that it’s an option nonetheless. Fact is also that sometimes, you may not have that choice. If the choice is between a brand new coat, or being able to pay the rent, then you need to be able to pay the rent. However much you deserve a new coat.
Sometimes, in spending less, it’s not a question of what you deserve, it’s a question of how much money you have.
How does this help you to find space and balance?
Great, so the numbers don’t lie. That’s not something you have to like. It’s just a fact and our opinions about it isn’t going to do anything about that. So, let’s try and make this something we can use to our advantage.
Knowing how much money you have, tells you whether you can actually pay all the bills that are still going to come this month. In most cases, you will find that if you take action (stay in budget, don’t buy what you don’t need, coupon, etc) you can pay all of the bills. And instead of worrying and having a tight ball of anxiety in your belly, you can relax. You know that if you follow the steps you set out for yourself, you will be just fine. Isn’t that empowering? I’m liking it 😃
In short, I can sum up the ways in which using a budget creates space for you in four bullet points (and remember, the budget is there to serve you! You don’t serve the budget):
- Create calm by creating an overview;
- Create space by knowing what’s coming;
- Create balance by knowing how much you are spending on everything;
- Create space by asking yourself whether that was what you wanted to spend!
What if the news is bad?
But, you might be thinking, what if it turns out I can’t pay for everything? Well, look at it this way: if you find out that you can’t pay for everything that this will happen anyway. Except now, instead of being in the unknown limbo, you already have the facts clear. You can now start analyzing: where are things going wrong? Ask yourself:
- Are costs higher than I expected? Where?
- Can I cut any of these costs? Are there subscriptions you can cancel?
- Can I downscale? Are you paying for a public transport subscription, but you only travel two days per week?
- Can I use less? Eat less meat, eat out less, bring your lunch, shower shorter, hang your laundry instead of using the dryer.
- Can I get discounts?
- Can I get support?
In many countries you can get coupons, cheaper subscriptions and government support if you can’t make ends meet. Check this with your local authorities, etc. This can add up quickly!
Budget step 1: Was this what you wanted?
This step is often skipped, but is really important. Ask yourself whether you really wanted to spend this amount on these things.
Say, that at the end of the month you find out that you spent $100,- on eating junk food. Was that what you wanted to spend? If you’re otherwise very healthy and love French fries, then perhaps yes. If the amount is a number that you’re okay with, then great. However, if you are not okay with this number and you think that spending $100,- on fries is not a good idea, then take action. Now at least you know how often you really have been eating fries. The next time you find yourself at that counter about to order, you can stop yourself, turn around and walk out.
Budget step 2: Push the margin
Pushing the margin was at the term used in my previous job for increasing the space between what came in (in the case of a business revenue, in your case your income) and the cost. You can do this in two ways:
- Increase income
- Decrease cost
Sounds obvious, right? But you’d be surprised how many people forget this. Especially when it comes to money, a lot of people are intimidated and hide themselves. Don’t be one of those people! Start with the simple stuff, and with each step forward make sure you understand what you’re looking at.
Examples of increasing income
There are lots of ways of increasing your income, but many take time or an initial investment. So, as a start it’s probably best to look at more simps and easier ways to increase your income:
- Ask for a raise;
- Sell things you’re not using;
- Side hustle through Uber or AirBnB
- Look into apps like Swaybacks if it’s available in your country.
Consider these ideas in the order listed. Why? Because number one is not just the easiest to attain, but also the most permanent. Once you get the raise, it’s there always. Number two, selling things, though profitable in the short run, will mean you’ll run out of things to sell at some point.
Examples of decreasing cost
Probably the fastest way of giving yourself more financial space and thereby more breathing space, is by decreasing the cost. You have a lot of control here, probably more than you think, and having a budget is going to tell you exactly where your options are. Here are some ideas to start with:
- Meal plan within a set budget;
- Review existing subscriptions and contracts and replace them with cheaper options;
- Shop for a better mortgage;
- Shop daycare;
- Monitor electricity / gas / water usage;
In most households, these are the big spending areas, so cutting back on these has a major impact. If you haven’t reviewed your budget in a while, you are going to be so surprised.
With regards to meal planning, don’t just plan meals, but also review how much each individual meals cost. Try replacing the most expensive meals with cheaper ones.
As for points 2 through 4, shop around online using websites that compare prices to find the best deals.
With regards to monitoring how much electricity, gas and water you use, this is often an overlooked point. And yes, I admit it’s not a very sexy thing to do. But it’s effective and that’s what we’re looking for. Big wins in just a few major areas (we don’t want to spend all day on this, do we!). Knowing how much you’re using will give you plenty of inspiration on cutting back. For instance, I love being in the shower. Just love love love! So, I have a little shower clock that tells me how long I’ve been there. I can tell you, my shower times, and thus my use of water, have been cut more than in half!
Oh, some small things you can do here!
- Put a clock in the shower to monitor how long you’ve been in there! Small effort 😃
- Turn the thermostat down by just 1 degree. Use blankets and vests in winter.
- Put a lid on pans when cooking.
- Cut down on how often you use the oven to cook. Major gas/electicity consumer right there!
- Turn off the lights / television / radio when your not really there!
- Don’t use the dryer unless you have no other choice.
These things put together can make a difference of hundreds of dollars a year, with almost no effort on your part!
Okay, I can talk for days on this topic, but for now I think I’ve filled your head with enough information 😃 Don’t forget to sign up to my newsletter for more tips on how to find some space in your life! And start putting these tips into action!