Saturday, May 1, 2010

Frugal Living - Budgetin Strategies

Budgeting always sounds a bit odd, like it's only done to bug someone, or like companies doing it in times of tension. Shifting the point of view budgeting is vital for everyone. First you need to know what you earn, so that you can truly enjoy spending that what's remaining ;).
The basic steps are easy:

  1. know your income (list everything that brings in money e.g. salary, aid money from the government (Kindergeld, Harz 4), pension, income from shares and bonds, etc.)
  2. check what has to be paid regularly (rent, car, food, etc.)
  3. calculate a rate of money to be saved for urgencies, holidays, that ugly final car holdback, annual payments etc. Make sure to put that money far away because although it's not used now you need to spend it sooner or later. I consider it as spend and put it on a short term saving bank account. By doing so I don't have to take care of an imaginary line on my usual bank account but I know people who are doing so.
  4. take off point two and three from point one and you have the amount of money you can spend freely
If you get a negative number you are in trouble because that means that you are spending more than you earn each month. If you don't want to end up being filmed by RTL for their reality show "Raus aus den Schulden" ("Get out of the debt") you need to check point two and three more carefully.
Maybe you can cut back on hobbies,  your car, clothing or luxury goods.

I'll keep this one short because there are well written websites and tools that help you get in contact with the principles of budgeting:
  1. Frugal Budgeting a description on how to set up and maintain a budget
  2. WikiHow How to Budget a description including an example
  3. Better Budgeting free budget forms for the ones who want to do it on paper
  4. Dough Roller 75 Painless Money Saving Tips a more or less serious list of tips
  5. Dough Roller 10 Online Budgeting Tools  here you find  a list of budgeting tools, some are free others aren't. Thus take care that you don't invest in something you don't need. I used to use a budgeting system but I could never convince myself that my data is save in such a system. As a result I played with the system and found it helpful but I never entered my real financial data and kept it running. If you consider to use a program be careful because financial data is nothing to be light-hearted about.
You can find tons of articles about budgeting just use google ;). You don't need to track every little amount you spend unless you have financial difficulties at the moment or you are planning to buy something really expensive. The whole budgeting issue should not be pure pain, it should open a way to see your situation from another perspective. If you track all the money you spent in a month you will be surprised which areas cost the most.