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143. Budgeting for Peace of Mind
A simple way to predict expenses to help reduce stress
Prior to my sabbatical, I was working a high-paying job, and a majority of my income was automatically sent to investments and savings. I wasn’t worried about overspending, so I did not budget. Now that I’m not working, I am more focused on where my money is going. I’ve started to track my expenses again. I really enjoy logging every expense and the insights that come with being mindful about where your money is going.
Who likes to track their spending? This girl!! 😁
Budgeting is another story. Budgeting, or planning how your dollars are going to be spent in the future, is more tricky than simply tracking each expense. I’ve always marveled at zero-based budgeting software like YNAB, You Need a Budget. With YNAB, you take every dollar from your income and assign it to a job. Some money gets set aside for rent, groceries, savings, etc. However, as someone with a high savings rate, zero-based budgeting strategies seemed a bit overkill for my needs.
Not working complicated all of this. Budgeting and tracking my expenses is so much more important when you don’t have a job. At the same time, you can’t “budget” a non-existent paycheck. Was I supposed to assign each dollar of my net worth a job? That seemed insane and very difficult to predict so early on in my life.
Michelle and I took time this week to discuss simpler ways to budget. Our friend and fellow podcast listener, Arjun, told us that he has a general idea of what he spends on most things each month, so he knows how much he typically spends.
We took this concept and combined it with tracking your spending. First, we calculated our monthly fixed expenses; rent, utilities, health insurance etc. For me, this number is around 1600-1700. Next, we use data from tracking our spending to track our other spending categories and costs. As an example, my typical spending categories are groceries, gas, hanging out with friends, home supplies etc, which can range from about $800-3000. Spending at this rate would result in an annual spending of about $43,000.
I can use my typical monthly spending to estimate my next month's costs and consider any extra expenses I might have- travel, Christmas, etc. When I see how much I spent at the end of the month, I can tell if I am above or below my average spending which helps me decide if I am still on track.
Though this method may not be as accurate or stringent as zero-based budgeting, Michelle and I found that it helped paint a realistic picture of our spending which relieved money anxieties and our scarcity mindset. Listen to today’s podcast for the details of our method.
How do you all track your expenses and budget? Are you on a break from work or self-employed, how do you manage your spending? Let us know in the comments below.
Thank youfor your insights from our episode 142 “What are you telling the universe”
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Notice anything spooktacular about today’s Build a Wealthy Spirit Jingle? Yes, we did have a spooktacular edition of the theme song because I’m OBSESSED with Halloween. Do not fret! This eerie jingle is here to stay for the month of October, so be sure to join us next time as we put down the ghoul-book and rethink the status quo.
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