In my previous blog post about ‘realizing the reality’, I explained the necessity of creating alternative sources of income, for you to be able to work less or do another job that you love but that pays less. Of course, income is irrelevant if you spent every dime you earn. If you’re like me and feel every dollar/euro bill burning a hole in your pocket until you spent it, this article might help you. And no, it will not focus on self control. I don’t have it, and I don’t believe in it. And even if it does exist in some people (oh how I envy and hate them), I’m not a qualified therapist to help you find the root cause of your spending problem. I do believe however, in developing superficial mechanisms for coping with your money spending desires. Its faster, cheaper, and you don’t have to deal with growing emotionally and psychologically. Win-win right?
1. Lets start with the big one: the money bill burning a hole in your pocket. With the amount of entertainment and distraction available to us, I firmly believe in the principle of ‘out of sight, out of mind’. If you don’t see you have money, you are less likely to feel the urge to spend it. That’s why I have a lot different bank accounts where I assign each penny. Each month, a certain amount goes there automatically and I’m basically left with nothing to spend. There, problem solved, right?
2. OK lets go into further detail. How to make a budget? ‘Oh god! Here it comes!’. Yes, I’m not joking this time, here it really comes. If you don’t measure what you eat, its hard or near impossible to count the amount of calories and make the necessary adjustments. Its the same with money. Except for the fact that I master the money part, and still keep eating like a pig. Anyway, I digress. You probably know how much is coming in, and how much is going to the ‘big stuff’, but I doubt you know more than that, and often wonder ‘jeez, where did all my money go?’. I strongly recommend listing EVERYTHING you spend for a whole YEAR. Yes, this is possible and no it won’t take you a year. You will be done in a week at most. You simply list everything you buy from the smallest to the biggest expense. Don’t tell yourself the excuse you don’t have the time or don’t know how to make list. Your massive Amazon wish list or shopping cart proves you otherwise. You can do this on a piece of paper or a spreadsheet. Microsoft Excel is free on Android, but not on Windows. If you prefer using a PC and don’t want to enrich Bill Gates any further, you can use free alternatives such as Libre Office and Open Office. I don’t recommend apps since I’m paranoid they track everything. Just kidding, I know we are already being tracked by the pigeons. Why else would there be so many in the city? I digress again.
So once you’ve written down everything for a week, you simply make an estimate for an entire month and year. Notice that there are also periodical costs that only come once or a couple of times a year, like house and car insurance, a visit to the dentist office, a parole budget for shooting too many pigeons, and so on. I divide those by the number of months in a year (12 for us normal people, 10 for the citizens of the Roman empire), and make this a separate category in my monthly budget called ‘yearly expenses budget’. This way, there won’t be weeks or months where you’ll have to live on bread, water and dead pigeon to survive.
3. Now that you’ve listed all your expenses, and realized ‘OMG do I really spend that much money on this!?’, you can make rational decisions to cut costs and assign a budget for each expense and category of expenses. The rational decision to budget only works when you make that decision in advance and allot the money immediately somewhere else where you can't access it easily. If you don’t do this, your willpower or lack there off will take over when you look at whatever it is that you fancy.
I prefer working with ‘budget categories’ because they still give you a certain amount of freedom, but still restrict you from overspending, unlike a debit/credit card with one lump sum of money. For example, if your entertainment budget is 100-200 per month, and you’ve wasted all of it, that's it. You can’t spend the other money, because then you won’t have anything left over for food, transportation or bullets for those pigeons. All the extra money you have left over, should go to a savings account. If you have credit cards: cancel them. Simply leave no leeway to go beyond your allotted budget. This will have the effect of you being aware of your spending, instead of getting the OMG feeling at the end of each month.
4. Lets say you’ve done what I suggested and made a list of all your expenses. You will immediately notice the biggest three: housing, food and transportation. If you are like me, entertainment is also a big category. It’s no use trying to cut your spending in the little categories, when the ‘big three’ are left unchecked. These are the hardest decisions to make but saving on these three area’s has a massive payoff. You can even buy your daily coffee if you focus on those three, although I find buying coffee a massive waste of money and you would be shocked how much money you lose every year if you buy a daily cup of coffee.
I for example live in my mother’s basement to save money. I’m kidding of course, I put her in the basement. I still have my standards. I also drive a 17 year old ‘hooptie’ as Dave Ramsey would say, but its reliable and cheap. I don’t spend much on food either, since I can plunder my mothers fridge. This is not something you can do if you care about others opinions and being perceived as weird. I highly suggest you watch Dave Ramsey’s ‘be weird’ video on Youtube. Basically, being broke and in debt is the new normal. Therefore, being weird is a good thing.
I almost forgot. In my last blog post I promised to bring up the turtles again. Well I lied. As I said in that post: we had to eat them to save money. This is a realistic blog post and we can’t bring dead and already digested turtles back to life. It was them or the kids (I would never harm the dog who is far more loyal than children, and the wife for that matter). I would also like to add a disclaimer that no pigeons were killed during the writing of this article. All my jokes about animals (and other things such as putting my mother is the basement) are of course pure fiction. For example: the pigeons I spoke about are not being shot but are humanely enslaved, I mean ‘domesticated’ so I can use them to send letters to my enemies. They are well kept in our nice attic, which is the real location where I locked up my mother so I could stay here forever and save money. I hope this will put your mind to rest.
- Mike