I was introduced to frugal living after watching a youtube video (see below) on how a man (Tom), Sarah (his wife) and Neesa (their daughter) managed to live in a 20 square meters Off-Grid Cabin in New Zealand. It is a life-changing story telling how one can live a simple and yet enjoyable life without worries and rat race in the world as we know it. Since then, I always try to find way to live a simple life as I could. To begin with, I have moved to a tiny home about 7 months ago. This has proved to be smart move as my living expense has reduced by 125%! And of course, this success was possible thanks to a proper budgeting which I am sharing with you today what had worked for me:
- Analyse your expenses on a monthly basis. Here you should list down the regular expenses per month. This includes even money spent on entertainment, hobbies and eating outside. Include your Debt payments too and this will now be a great perspective of looking into your budget plan.
- Analyse your total earnings. You should calculate how much you earn after paying taxes, checkouts, and deductions monthly. Include the money you get from investment and residual income too.
- Do the math. Proceed to subtract your expenses from the earnings you make. This helps you test how effective your spending habits are. This math is supposed to indicate how much money you will have left to spare at the end of each month.
- Have your budget Redone. Here you should pay attention to how your budget comes out. If it’s on the negative, you should work on it until the numbers crunch. This should be done by analyzing the expenses all over again and cutting down any irrelevant expenses.
- Debt Reduction. Include the monthly minimum payments that should be allocated for any debts you have. You should analyze your expenses again and identify what you can sacrifice to bail yourself out of debts. The money to pay debts should be from within the already existing allocated money for expenses.
- Allocate money for investments and savings. Make a money budget for financial goals too. Make a comprehensive list of everything you wish to achieve. Retirement investments, vacation, emergency fund and more. Proceed to survey the budget and calculate the money you need to achieve such goals. However, if you have pending debts, you should skip this step and come back to it maybe later. Our priority number one is debt reduction.
- Work on your budget. Once your budget is complete, its high time to put it down to work. The comprehensive budget covers monthly expenses and goals altogether. Its high time you put it to test while trying to live within a limited budget and see how it feels to be budget mindful.
- Analyse your budget. On a monthly basis, you should look at your total expenditure and match them up to your budget. If your spending does not match up to your budget, you should work on a strict way to maintain your budget. You can also consider reworking the budget in order for it to show your actual spending versus the target spending.
- Never ditch your budget. It’s time you realize that a frugal budget is and will never be complete. Each and every month you should assess and analyze your budget in order to highlight any areas you may have overspent on. Always crunch the excess numbers by sacrificing one or two things that may not be of so much importance. This should be on until you make your actual spending match to your allocated budget.
Final Note on Frugal budgeting:
- Be true to yourself about your spending norms and habits. This will help you come up with a realistic budget plan.
- Remember that budgeting does not mean living like a cheapskate. Budget even for the fun things in your life. This may include things like your hobbies, eating outside, buying your favorite sculptures, and movie tickets to the theatre.
- Never back down from making adjustments to your budget. An evolving budget is the best budget. Adjust it according to your current needs, economical state, and preferences.
- Last but not least, it is highly important that you live a healthy lifestyle. Without health, you will not be successful and won’t enjoy a happy life. In the past 7 years, my uncle has suffered from this arthritis disease (see here and here for additional info) which render him impossible to play his favorite sport until today. This is the main reason, I warn you about staying healthy in all case.