Most people start budgeting by looking at how much they earn, and then allocating that money into categories.
They take their net paycheque and decide: Hey, let’s … spend $100 on miscellaneous.
Why not do it the other way around?
Find a comfortable minimum amount of money you need to live on and stick with that for as long as you feel like it (if kids come along, that’ll have to be adjusted, of course).
And by all means if you are in the red because you want to spend $500 on buying new toys each month, then revise your budget.
If you are still in the red without being excessive:
- re-consider what you think is a comfortable lifestyle
- make more money to meet your expectations
Tradeoffs of the last option is having to take a hit in loss of free time (working overtime or taking on two jobs) or having to take on extra debt for student schooling.
Either way, this will make you decide what you analyze and re-consider your lifestyle in a different light.
Benefits of budgeting with a comfortable minimum first:
1. Helps avoid lifestyle inflation
2. You already like the lifestyle at your comfortable minimum, but it isn’t excessive.
3. You can maintain that lifestyle sustainably
4. If/When you make more money, it feels like a bonus and can go into savings or towards a fund of yourself (Travel?)
It’s a new way to look at budgeting for me, but I must admit it looks like a great one! Especially with kids I’d say. There are certain things that you imagine your life with as parents. Like buying quality shoes for your kids or having friends over instead of going to the restaurant in family. Renting movies and doing some activities with the kids on weekends… I have some clear images of the type of mom I want to be and it does impact on finances. Might as well take them into consideration! 😉