Personal Budgets: A Different View

Many people find budgeting cumbersome and burdensome, and they don’t see its point. Yet, most personal finance books open with “do a budget.” How come some people find it so easy and effective?

I believe that how we view it could make it easy or hard. First, it is your budget; own it, possess it. It’s just like your shirt; you wear it when you want–it’s up to you! Second, if it will give good results, it will require some effort!

1. Many of us handle accounting and finance in our jobs (both financial and non-financial jobs). Yet we do not see how the knowledge from the workplace can apply to personal lives. As on the job, separate between CAPEX and OPEX. Simply put, OPEX refers to the expenses that keep you going (or alive), and CAPEX refers to the expenses that get you growing! If I dedicate 10% of my income to growing, and you dedicate 45% of your income to growing, we can expect that you will grow faster than me. How much of your income are you willing to commit to your growing?
2. Open multiple accounts; one account for each “bucket,” so to speak. Elizabeth Warren writes in her book All Your Worth: The Ultimate Lifetime Money Plan about 3 general buckets of allocating income 50% to needs, 30% to wants, and 20% to savings. In this case, I’ll recommend 3 bank accounts (real bank, online bank, mortgage bank, whatever). That’s the idea. Since it’s your budget (just like your shirt), you choose the buckets! You could have 10 buckets! But they shouldn’t be that many so you could be efficient.
3. At the end of the month (or the money) do a review and make necessary adjustments. I remember once in the early years of work when I used to borrow money to complete the month every month. Finally, I had to trace where my money was leaking from. When I plugged the leak, my money stayed in the tank!

Image by Steve Buissinne from Pixabay