Our Financial Makeover Series talks about personal finance basics and lets you figure out what applies best to your own unique situation. In Part 1, we talked about avoiding fees and their potential devastating financial pitfall. We also suggested to open a no-fee chequing account to get out of the perpetual monthly banking fee rip-off.
Today, we’ll continue to try to bring excitement to what many consider a tediously boring subject.
Like many, we used to consider budgeting like a restrictive thing. Plainly put, expenses were bad, and income was good. In practice, it mostly translated into trying to have less expenses. At some point, it could also transform into working more to have more income. With that perspective, budgeting was no fun at all.
It was like being on a strict diet all the time. Spending would be like eating. Although some of it is essential to your survival, too much of it is plainly bad. It can either get you fat or poor. With that thinking, discretionary expenses like desserts and treats can be devastating to your wellbeing. In the same fashion, exercise can be compared to income. Regular doses of it can get you in better shape. In the end, this only meant a lot of sacrifice.
Because I liked numbers, I still found some pleasure in it. But to be frank and despite some success, our penny-scratching restrictive budget was a torture that kind of got lost in all the spreadsheets. No insane person would get excited about it. Nobody was really interested to get involved in it either.
Fortunately, our way to budget transformed over the years. It’s now more about pleasure. It’s much more motivating knowing it allows us to get and do more of what we love. We finally realized that, after basic expenses, we could do whatever we liked with the rest of our hard-earned money.
So, to expose our renewed point of view, this post will be about the pleasure of budgeting. We hope you’ll discover how you could enjoy life more with clever budgeting.
Next time, we’ll talk about when we were kind of halfway there with our previous approach that still gave us significant power over our finances thru sensible budget choices.
An Efficient Tool to Boost Your Fun Level
One key to make budgets attractive is to put some spice and fun into it. Wouldn’t it be great if your budget allowed you to have more fun? The great news is that it truly can!
A budget can allow you to be conscious about your spending. It can let you decide on what you going to spend your hard-earned money. Just paying the bills at the end of every month is not deciding. Take control of your finances by knowing where your money goes, spending it on what you love and aggressively cutting what’s possible on everything else.
This is a much better alternative than what’s most people are doing right now! If they are doing something. And, put this way, doesn’t keeping a budget feels much more appealing and borderline sexy!
In that sense, your budget could be used as a powerful tool to boost the level of fun and pleasure in your life. Budgeting is a little work but remember our general objective is always to obtain the best results possible with less effort as possible. Having your priorities straight should already make things much easier.
We’ll talk even more about it in our next financial makeover article but for now, let’s start to see how budgeting can allow you to spend more money on things you truly love.
Cover Necessities then Joyfully Spend What Remains
To get things going, your budget should generally tell you how you spend your money. We are sure that with a little time, you can gather up all data about your expenses. Credit card and bank statements could be of great help.
The trick will be to separate items and identify essential needs spending. For instance, we use three levels to classify our expenses: essential, moderate and plain luxury. Here, you could also assign a level of enjoyment to each expense. When you talk about it with your family, you may be surprised on how some costly luxuries may not be that enjoyable to them.
This should not stop you but note that we’ll cover expenses later in a more detailed financial makeover post.
The most important step probably is to have a system in place to cover necessities or if you prefer, basic expenses to cover your essential needs. For instance, this could easily be done by transferring a pre-set amount from each paycheck to a basic expenses account.
We recommend having a buffer on top of your emergency fund for extraordinary expenses you can’t easily predict. We prefer the term contingency fund and we’ll elaborate on it on a subsequent post.
We’ve realized this much later in our life but what’s most fantastic is that you can spend the rest on whatever you like!
This approach is quite simple and much more stimulating.
Getting more of what you love can also greatly motivate you to aggressively cut down on spending that only provides stuff you don’t really enjoy. In the process, the pleasure of slashing senseless spending can provide you even satisfaction and joy!
Another way to free up money for your fun budget is to tackle down your debt related expenses. For instance, an efficient option could be to get a better rate on your mortgage. Take that dull mortgage expense!
Ultimately, all of that can allow you to relish more of what you truly love, guilt free. You won’t have to deprive yourself enjoying more of life’s pleasures.
We don’t want to burst your bubble but just remember a great part of retirement spending will be essential. So, you still have to somewhat plan for it. Again, we’ll talk about that later on.
Step 2 Homework
After no-fee chequing account opened in step 1, do what’s necessary to set up at least one savings account.
Remember you can manage to pay no fees. It could easily take you just a little time if you decide to do it online. You are just a few types and clicks away from opening multiple savings accounts and even linking them to your chequing account.
Think about managing your accounts with a strategy that would look like this: with a buffer, leave enough money in your chequing account to cover your basic expenses. Automatically wire the rest in your savings account. Dream about what you would like to do with that extra cash!