I think budgeting and practical finances should be taught at multiple stages throughout a student’s life. I thought I knew the general idea but didn’t appreciate how much neglecting it would set me back.

What is your process for budgeting? As a starting point this article lists a few methods.

I use zero based budgeting where every dollar is assigned a purpose. I don’t end up sticking exactly to the plan, but I do keep a spreadsheet which lists my current balances and all expected expenses, so I can see my future balance and avoid going in the red. A couple times a month I cross off expenses which have been paid and update the balance. This is especially helpful to me because a big portion of my income is irregular month to month.

  • Lvxferre
    2·
    11 months ago

    Apparently my method is a mix of those listed in the text.

    I’m in a similar situation as OP, some of my income is irregular. So my monthly budget isn’t directly based on the last month income, I use the average of the last six months, relying on a checking account for that. (I keep it with enough money to last me one or two months.)

    Then I split that budget into four categories:

    • savings - I aim for 25%. Into the saving account it goes.
    • monthly fixed expenses - periodic, somewhat predictable, monthly. For example bills, cornmeal and rice, cat food, etc.
    • variable expenses - they’re necessities like the above, but there’s some wiggling room. Like, if necessary I don’t mind eating eggs four lunches a week and walking instead of taking a bus, but I’d rather not to. Usually split into four weeks, so I expend it gradually.
    • “fluff”*¹ - avoidable expenses that I still want for some reason like “it improves my mood”. Things for my hobbies, going to a restaurant, buying nicer clothes or hardware, etc. Unused fluff gets transferred to my savings account in the following month.

    Then here’s how I address some complexities:

    • periodic expenses for things that I buy every few months (e.g. gas canisters) - I include a fraction of them into the monthly fixed expenses, and only remove the money from the checking account when buying it
    • erratic but large expenses (e.g. house repairs) - I usually “borrow” this money from the savings, then “repay” it in the following months, as a fixed expense*².
    • high income multiple months in a row - I cap the budget and send the overflow to the savings.
    • low income multiple months in a row - cut down fluff, then reduce variable expenses, then reduce monthly fixed expenses, then reduce savings, in this order.
    • really low income multiple months in a row - if really necessary I borrow from the savings, keeping in mind that I’ll need to repay myself.

    Notes:

    1. The actual name that I give to this category is “imposto das lombrigas”, or roughly “roundworm tax”. That’s from from my family jokingly referring to cravings as "to have roundworms for [something].
    2. Some people might use a credit card instead for that, to build credit; that also works, but it depends a lot on the government that you pay taxes to. I do have a credit card but I tend to avoid it, as often there are discounts for paying things in cash.