Personal budget as a kik by Shito-Ryu

As a teenager, I practiced a form of martial arts called Shito-Ryu and I still remember the moment I learned the first shot called "Seiken Tsuki". It's a basic punch, quite simple. Sensei taught us then that we have to practice this shot all the time to complete our technique. He told us that the great masters are often seen practicing this basic technique.

As in martial arts and personal finance, we need to get back to basics and techniques again and again. In the case of personal finance, everything starts with the personal budget and ends with the personal budget. You can't hope to accumulate wealth, become financially independent, or at least do well with money, without keeping a personal budget.

A personal budget that helps us

For a personal budget to be good and to support us on our path to financial independence, it must follow a few rules:

To highlight as accurately as possible the monthly income and expenses;

Savings should be the first element of "spending" - so we spend what we have left after we have saved and we do not save what is left after we have spent (if there is any left);

It is a tool for planning monthly expenses, not just for keeping track of them. Thus, at the beginning of the month, we plan the expenses by categories and we make sure that the money goes to the destinations we chose in advance, not chaotically depending on the momentary impulses.

As you can see, the technique of building a personal budget is very simple and as you can guess, there are tens and hundreds of excerpts, applications, and software that you can use. I use an excel income and expense budget. I know multinationals that have been operating for years based on budgets built in excel, and that has prevented us from making millions of euros in profits every year. Important are the people who use them, not the technology behind them, as you will see below.

How to practically manage the monthly expenses

Okay, I saw that a personal budget is relatively easy to build. However, in my experience, it is quite difficult to respect and keep consistent. In the last 10 years, I have started and abandoned personal budgets many times. It seemed boring to me and anyway I didn't respect the budget until the middle of the month when I started to violate it. I tried to use wallets, to make a simplified budget, to pay everything only in cash, but I either gave up due to lack of discipline or frustration that I could not respect it.

2 years ago when I found a relatively simple technique that helps me keep up with my business:

1. At the beginning of the month I largely plan my expenses in excel: first the savings, then the fixed amounts I have to pay (invoices, installments, taxes, etc.), then the basic variable expenses (food, transportation, clothes, etc.), then other variable expenses that are more related to desires than needs;
2. The first time I transfer the amount of money allocated to saving in a savings account (it must be at least 10% of the income, preferably more);
3. Then I pay the fixed amounts: installments, invoices, taxes, etc .;
4. Then I see what I have left and I relax knowing that what I have, I spend so much in that month;
5. Write down every day the expenses, as they appear, on a mobile application. I use an Android application called Handwallet Expense Manager. I only use it to write down my expenses, not for budgeting.
6. Every week I compare the current expenses with the budgeted ones (total month not by categories) and see how much money I have available until the end of the month. I adjust the expenses for next week so that I fit in my monthly budget;
7. When I see that I have reached the bottom of the bag, that is, I don't have much money in my budget, I calm down with my expenses and wait patiently for the end of the month;
8. At the end of the month, I write down my expenses on Expense Manager in excel and compare them with what I estimated, this time by category. I conclude and adjust either the budget or the behavior for next month. I came to respect the budget 90-95% and I am satisfied with that. I seek progress, not perfection.

Success becomes inevitable

This way I can't help but save or significantly exceed the budget since my savings are transferred from the beginning of the month, the fixed costs are transferred at the beginning of the month and I am left with an amount in which I have to, I don't want to Iframe. The only downside is that in the last week of the month I have to be very thoughtful. But it doesn't bother me, I focus on more spiritual concerns that don't require money.

Even if I don't manage to respect the budget 100%, due to the habit of preparing it and monitoring it every month, I ended up referring to my budget as a company's budget. I'm my CFO. And like any CFO, I make sure first of all that we have profit (savings), that utilities and other means of production are paid priority (needs), and then from what remains to do team building for employee morale (entertainment). In this way, the shareholders get their dividends, the factory goes ahead and the workers are also happy.

Success in implementing and respecting your budget and increasing your money!

With love,