I don’t know about all people, but I have personally had many many failed budgets and have many times failed to create a budget as well. It starts with looking at our spending habits. Unfortunately creating a budget and managing our spending habits are circular lines of reasoning. In order to budget optimally, you need to know how you spend and in order to spend, you need to have a rough budget in mind.

Sometimes I think about all the expenses I have had in the month and immediately get overwhelmed about the amount of nonsensical spends I have splurged on.

Sometimes I think ‘Okay, need to get this in order right now.’, and I actually get on it. What happens here is that I sort and categorize my spending into so many different sections that I’m again lost in the lonely island of ‘Overwhelm’.

There are moments, far and few, when I finally have the guts to look at my spending and take the time to understand the mess I have created.

After many tries, excel sheets, late nights and early mornings – from being notoriously frugal to spending money like I have millions stashed away, I believe I have figured out the art behind budgeting.

We need to do a little more in the beginning and then do almost nothing after that.

What’s a little more?

I have spoken about this earlier, you need to know where your money is going. You actually already know this. But you haven’t taken a big picture look nor have you looked into the details. You’ll have to do both.

What’s the big picture?

• Where are you spending the most?
  • Are they recurring, unavoidable expenses?
  • Are they random things that you buy because you’re a little bit of a shopaholic?
  • Are you spending regularly on things that you cannot control or predict? Is there a range for this? How can we be more accommodating of this particular expenditure in a way that doesn’t make you live paycheck-to-paycheck.
  • How much are you spending through your credit card compared to your debit account?
  • What do your recurring expenses look like in comparison to your one off expenses?
• What are your savings like?
• How much are you investing?
• How much do you make every month? (for people with irregular incomes)
• What’s the next big thing you are looking to buy or invest in? How do we change our habits in order to realise this goal?

What are the little things?

• How often are your one-off expenses occurring?
• What is your thought process before you buy something useful to you?
• Have you bought or spent on things that you regret? What are they?
• What was your state of mind when you bought these things?
• Do you feel shame or anxiety around your spending?
• Do you feel a sense of overwhelm when you think about your credit card or loans?
• Do you feel upset going through your expenditure?
• How can you be more mindful about your spending?
• What would you like to buy that will bring you joy but you have postponed?

Do the above exercise and see how you feel. I will repeat this over and over again, the key is to be mindful about your money. Don’t be scared of finance, don’t be avoidant with it. Take small steps and peel the onion behind your fears and your habits.

slowly remove the scary mask of budgeting and money to see what hides behind it. I assure you, the more aware you are the better it is for you.

Whats the nothing part?

Well, now that we have introspected about our spending. We need to come up with a budget that is easy to follow, and sustainable. Much like a diet, this needs to be your personal finance diet that you should be happy to follow. Not something you die over or hate yourself for.

A general rule for budgeting that has worked for me is to focus on wealth-building instead of insanely splitting the money into many different categories and tracking spending that way. This is, again more art than science.

So first thing you might want to do is – figure out how much you can save/invest. Cut that amount out of your salary account as soon as the money hits the bank. Remaining amount is for you to figure out. Be mindful here and give yourself some buffer in the beginning of your journey.

You might have lofty goals of saving over 50% of your income, but through the introspection exercise you’ve done, you probably realise you can only save 20%. That’s okay. Save the 20% and see how much is left over from your salary at the end of the month. Move the left over to your savings account. Now you have exceeded your goal 🙂

Even if you don’t achieve your savings goal in the first try, do not get discouraged, this is a marathon not a sprint.