“Happiness is not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort.”
Franklin D. Roosevelt
My financial education began quite dramatically. I was an Erasmus student in Italy and was supposed to receive a grant to cover my expenses. When the first allowance vanished from my account within days, I discovered that the payments were not monthly – as I’d initially assumed – but quarterly. I was left with nothing for the months to come.
One might think that indulging in the temptation and the feeling of instant gratification would have made me happy and bursting with joy. Well, it did not. I was angry, frustrated and frightened. I had zero control over my finances, no idea where my money was going and how I was spending it.
Luckily, I’ve learned a lot since that day and am now a faithful budgeter who prioritizes nearly every day, always looking for new ways to improve and optimise my expenses. For many people, the mere thought of budgeting is cringe-worthy. For me, setting it up feels empowering and exciting!
Of course, every month involves a series of trade-offs and compromises, but it also means gaining power and responsibility over my life and my future. It hasn’t just improved my financial state of affairs – it helped me feel more relaxed, energised and happy.
Budgeting has enabled me to focus on what matters most and guides me through every decision, aligning my spending with my values and goals.
Before, I wasn’t in control. Now, I know I can afford every thing I buy, instead of spending the money I don’t have on stuff I don’t really need. It allowed me to break from the habits I practiced out of fear and insecurity, to free myself from the accidental financial life.
So, as I’m setting goals for the coming year, I took a moment to reframe and re-prioritise my budget – yet again. Here are some of the guidelines and practices I found really helpful and I hope you might, too.
- Set goals. Take time to think about what you really want – your budget is a tool to serve you, not the other way around.
- Take stock. Forecast and plan fixed and variable expenses for a specific period of time: a week, a month, a year.
- Keep track. Having a clear overview of your spending patterns is the best way to find out where your money is going – I use this app.
- Reality check. As your priorities and circumstances change, so does your budget. Keep it flexible, dynamic, and shift things around to stay on track.
- Use categories. The 50-20-30 rule uses three spending categories – essentials, lifestyle and savings – and is a great framework to work within.
- New perspective. Consider mixing up your categories. Reorder and rename them, close the unused ones, make sure they reflect your goals.
- Make changes. Evaluate your habits and spending patterns and start cutting out some non-essentials, where it makes sense.
- Get creative. Instead of making mindless sacrifices, try new routines, hobbies, and solutions that are both enjoyable and cost-effective.
- Shop smart. Develop unique, personalized spending strategies – this includes both, cutting costs and occasional indulgences.
- Stay grateful. If we are content with who we are and where you are, we consume less, desire less and – ultimately – spend less.