Budgets are a very important tool for businesses. They can also be good for improving your personal finance situation. The important thing is not to because obsessed with them. To be effective, it’s not necessary to track every cent like some people suggest. If you are like me, that just sounds like too much hard work. Even if you have the latest app to scan receipts or similar.
You do need to be aware of all your spending. You also need to budget for and tracking some of your spending. Having enough money at certain times to pay utility bills, car insurance, rent or mortgage payments relieves a lot of stress. This is common sense budgeting.
People laugh at me when I can tell them where I stayed and what it cost for any night since May 2009. As a permanent traveller, the costs can get out of control very quickly. Accommodation is the main one. If you’re eating out for every meal then food is another large one. Not to mention the health aspects with so many options.
Without that knowledge I wouldn’t be able to enjoy it as much.
So I decided to track the majority of my expenses. I don’t have a steady income and it varies wildly for month to month. It’s essential I have a way to even things out and not spend more than I am earning. That is the basic premise of improving your financial situation. Spend less than you earn.
I have categories to accommodation, flights, shuttles/cars/taxis, insurance, phone/internet, health, car expenses and a few others. The spreadsheet is simple with a few column for date, category of expense, description, local cost and cost in USD. I grab the foreign exchange rates each month to convert all expenses to USD as my base currency.
Because I use credit cards for most payments, it’s simply a case of running though the statements and completing the spreadsheet. Maybe a few receipts from cash payments. All up less than half an hour a month to enter them and get the foreign exchange rates.
I don’t track food spending or the small miscellaneous items. Not being a foodie makes this easier. I eat reasonably healthy food and cook the majority of the time. I am strong enough to have a self imposed limit of only eating out once a week at the most. If friends are in town or I am staying with them, it might be more than once a week. I don’t get stressed about that. You may need to track this or at least track the major food expenses.
There is one thing I didn’t think about when I first started this system. I have the ability to travel anywhere I wish. Some of those places can be expensive or maybe just peak season. If I know I am below budget for my accommodation then I don’t mind splashing out for a hotel that costs more than I would prefer to pay. Without that knowledge I wouldn’t be able to enjoy it as much. I would be thinking about the cost. Instead I can enjoy my time.
Airports and when out exploring for most of the day used to me a problem. I’d end up going without food because it was either too expensive or I couldn’t find any healthy options that were appealing. Atlanta airport comes to mind here for both reasons. I believe it was Chris Guillebeau who said on a podcast that he doesn’t question any expense under $10. Using that philosophy made it a lot easier. Yes it is frustrating that the sandwich normally $6 and is now $10 at the airport. However, I would still get it and move on.
Like the frequency of eating out, in the back of my mind I know this don’t get out of control. I am not the type to then spend half a dozen under $10 things each day. It comes down to a budget shouldn’t rule your life or ruin your enjoyment.
Create a budget and track those expenses to ensure you have enough money when bills are due. Don’t spend all your time managing your budget and not enjoying some of the benefits. Monitoring some of your spending will lead you to a mindset where you question things a bit more before handing over the payment. This should help to reduce your overall spending.