When it comes to personal finance, I like to think of myself as a little bit of a budget warrior.
I’ve been budgeting for 6 years and it taught me more lessons than I can probably ever write about. And one thing I’ve always credited for my success is my budget template. It got me through some tough times and celebrated some big wins with me.
But at the beginning of 2019, I started seeing a lot of personal finance blogs/YouTube Channels *ahem* CNBC Make It *ahem* vilify the word “budget.” Their content will be filled with financial gurus and millionaires condescendingly preaching how budgeting is “an unnecessary waste of time” and is created out of the “scarcity money mindset.” And I got defensive. I owed my budget so much, but was I doing it wrong?
Well, challenge accepted.
This year, I decided to create a little budget experiment for myself. For the first time in 6 years, I stopped budgeting. And I learned a lot. To read about my full lessons and the backstory to my experiment, read more here.
However, my biggest lesson was coming to the conclusion that they kind of had a point. Budgeting was really time consuming and it could get as complicated as you wanted with as many categories that Excel could formulate.
So this summer, after I regained control of my life and budget, I decided to make a big change. Instead of several categories and sub-categories, I based my whole budget strategy around a pretty simple question that financial gurus have been recommending for decades:
Is this a Need or a Want?
Most financial experts recommend that you should be living your life according to the following percentage breakdown: 50% on Needs, 30% on Wants, and 20% on Savings.
So I reworked my entire template to revolve around this idea.
How does it work?
My budget template now consists of 4 categories: Needs, Wants, Investments, and Savings. I know the true method only breaks it up into Needs, Wants, and Savings, but come on. It’s the 21st century and investments are not just for the rich and white on Wall Street anymore.
It’s very simple: I still have an Income section. I begin with my income for the month and also how short I was the last month.
Next, I have a section for upcoming expenses. One thing I’ve always fallen short on is remembering what is coming up. So this section isn’t involved in any calculations in the spreadsheet, it’s just there as a reminder.
Then for the main section, I have my Needs, Wants, Investments, and Savings categories.
And lastly, I have the totals and how much I’m either in the negative or in surplus for the month.
Whenever I make a purchase, I now ask myself “is this a Need or a Want?” The problem with my last budget template was that I was just collecting data for the sake of collecting data and I wasn’t make a budget that was personal to me.
And there are many purchases that can vary on the section depending on the circumstances. For example, I have sensitive skin so a lot of my drugstore purchases are usually for my skin. However, purchases I make for beauty (like the Bioderma Toner) are a Want, and creams I use for body because I have eczema (CerVe recommended to me by my doctor) are a Need.
Another example is coffee. I used to always put coffee in my Need category (because for me it is a Need). But there are times when it’s a Want. My daily coffee is a Need, but sometimes, I’m just tempted by the call of Starbucks or Tim Hortons (or just lazy to make my coffee in the morning) and those are Wants.
I call this template my 50/30/20 budget planner and it also allows me evaluate how I’m spending. Last year, I did an audit of my spending and found that a lot of my data was useless. I could tell you what I was spending money on, but I couldn’t tell you if I was spending it well. So hopefully when I do my round-up this year, I will better know how to improve my spending habits. I’m not someone who feels like I need to scrimp and save on something like groceries, because I think it’s important to put good food in my body, even if it costs a bit more. I try to buy meat from a local butcher and try to not buy packaged foods. That’s a Need in my budget and not something I try to cut if I can afford it. The things I do need to cut out are things like pretty notebooks. No matter how cute it is, it’s a Want.
Making a budget is about making a personal spending plan for yourself and you should be making it personal.
To download my new budget template – click here!