Budgeting tips

Introduction

I've been living with a tight budget for 6 months. From a point when everything seemed 'awful', I came to the point when it's at least 'manageable', and I'd like to share these points with you. There are some limitations though:

Ok, so, what do we have here then?

Let's go through this list!

Having a budget

By having a budget I mean creating a budget on paper or in a spreadsheet and sticking to it, otherwise, it's just a paper or a spreadsheet. In a budget you typically have:

The simplest way to create a budget is to take the next month, which means all your income was in the previous month. After that you subtract all the cost entries, again, that's what you must pay, like the rent, utility payments, internet, cellular, food, and your reserve (e.g., if you get paid late) you get the available sum. It doesn't mean that you are free to spend it, we'll come to this.

Just in case, I'd like to underline, that all regular payments should be in cost entries, including all the subscriptions. These sums will be written off automatically, so if a subscription is active, it should be there. Sometimes it's hard to remember all the regular spending, so take your time and check two or three times. If you mess up here, you can end up with a really big problem of having a cash gap. By the way, you can go through your bank statement for the previous month, it's legal and useful.

Then, you have a few more questions:

It's hard when the sum you get is next to zero or negative. At least, you know the reality, but, again, sometimes it's really hard to face it. I guess that more people avoid budgeting because of the fear of facing a reality, not because they don't know how to add and subtract – and that's all required at this stage! If the sum you get is next to zero or negative, you are in the shithole. Getting out of the shithole is hard and there's no receipt to do that. But there's exactly one thing significantly worse than this experience of getting out: being in the shithole and being unaware of that.

Buying multi-purpose stuff

As I live in a small apartment, I'm concerned about buying stuff. Stuff occupies my personal space and makes my life worse no matter how useful it is. That's how I live, and I don't expect you to agree with that, as well as with the whole minimalist philosophy. Although I can't admit I follow this philosophy all the time. I just tried to explain the choices I make from the examples below.

This hack came from a video about hiking. Just imagine you carry for several days the stuff you buy. Is a coffee machine worth it? I'm not a coffee fan, but I like to drink coffee sometimes, and my guests do too. I like brewing tea and I don't like teabags. How's that related to each other? Well, a French press allows me to have reasonably good coffee and brew tea in it. A French press is simple to wash, and it occupies a fraction of the space for a teapot and a coffee machine.

The same goes for tools. First, any multitool is great in terms of space occupied. Any wrench with variable head size is better than a set of fixed-sized wrenches. But my most beloved example is a drill: you can have a corded drill or a cordless drill that would replace an electric screwdriver, a drill, and a perforator... if it's good enough! In some cases, the perforator can't be replaced, but it can be borrowed to accomplish a particular work.

And I just don't care about having a multi-purpose table: it's a dining table, a writing table, and a computer table.

But that's not all, let's talk about storage. In a small apartment, I needed a cheap solution for storing tools, clothes, and some other stuff, including a vacuum cleaner and a set of bicycle tires, for example. A few shelves? Too much for me. So I bought the biggest shelving unit that could fit into one of the niches, and now I store everything there. It's cheap, it's divided by the levels, I have shoes under the shelves and plenty of space left to store something else. The design or the color? I don't care. It looks great to me because it solves so many problems. And I have a living room completely free of all that stuff at once, it's just magic.

Filter the demand even more

You think you need to buy something and you think you have a budget for that. If you don't buy it, you make some money ('A Penny Saved is a Penny Earned' ©). So, it makes sense to invest some effort and ask yourself a few more questions:

These questions can help you not only avoid buying unnecessary stuff but also can make you buy it later. And future costs are discounted! And I would emphasize using vs. owning because lots of 'lifestyle' gear fall in this category. And yes, you'll never use that 'EDC gear', so don't buy it 'just in case'. You'll manage to get out of any situation with what you have, that's what brains are for. And yes, it may involve some trauma not owing 'some cool EDC gear', but we're on a tight budget, right?

Set clear requirements for what you want/need

I'm not a fan of 'high-quality stuff', and in many cases, I don't see the difference. If you do so, there's a good buying method called 'technically acceptable/best price'. You need to have some requirements (what is acceptable), and then you buy the item that is the cheapest and fits the requirements. You are welcome to make some market research first to justify your requirements first. But once the requirements are set, you just buy the cheapest option.

Thus you avoid 'maverick buying'. For example, I want a sandwich maker. I come to the shop and see a sandwich maker for 13 € and... 3-in-1: a waffle maker, a sandwich maker and a grill, which costs 25 €. Maybe it's nice to have 3-in-1, but my requirements were a sandwich maker, so I buy it and save 12 €. These 'optimizing thoughts' right before you buy are great, but they will not allow you to cut the costs. If you have a need, you'd know it when you shape the requirements.

More than that, sellers often see when you are not sure and use it. Then if you are going to buy a knife you come home with a food processor. Will it make you happy? Perhaps sometime in the future. Will it cut the costs now? Probably not, if right now you need just a knife. By the way, a kitchen knife can substitute a lot of stuff (see 'Buying multi-purpose stuff' above), if you know how to use it. If you have access to YouTube, you can learn that for free, just a few fingers cut off... :)

Having a list of needs/wants and prioritizing it

We asked the question 'Will using it make me happy?', I didn't want to overcomplicate things right away. But the actual question is 'Will it make me happy than buying anything else?'. It's hard to do this mental exercise for every item, and at the same time if you don't buy something you need to get some satisfaction in exchange, otherwise you just get depressed that you can't afford it.

The truth is that even if you have a lot of money buying everything at once can put you in the shithole immediately. So, buying everything you want at once is just silly. Getting frustrated about it is silly as well, but quite natural. When we create a 'wish list', we 'do' something about it. And after that, some magic can happen:

I don't go crazy about my wish lists, they are not very long and they are not prioritized in a spreadsheet. Some items there are just to remember some ideas, which could be useful. And sometimes I tend to delete most of the items from the list. But when I decide to buy something, I look quickly through my wish lists and ask myself: 'Didn't I miss something important?' Choosing can be difficult, and a list makes it a bit easier, so it's better to have one.

Eating healthy food

I'm not sure that this idea will help anyone, because with food it works differently: sometimes you want to eat something for stress relief, or because you like the taste of it. By no means I'm going to encourage anyone to save on food for safety reasons.

Still, just knowing some facts can help you save without sacrificing anything:

Will it stop you the next time you'd like to buy some junk food? No, just go ahead and buy it. It works differently: when knowing this will make you write a shopping list without junk food with a feeling like you're not sacrificing anything, then it works. You'll probably change your mind in the shop, sellers of junk food are good at marketing.

Buying used stuff

The lifespan of lots of things is more, than two years. Especially for industries, where everything changes not so fast. A few examples:

One example when that's not applicable is printers. First, the new models are better and they do cost not so much. Second, HP has an 'Instant Ink' program, which is for new printers only. And ink cost is a lot more than the cost of the printer.

Postpone costly upgrades

Devices like laptops, tablet PCs, and mobile phones cost a lot. There are some options to buy refurbished ones, but still, they cost a lot of money. If they still work and you are on a tight budget, and they are not critical for earning money, I'd suggest postponing the upgrade. You can hope that this 'tight budget' period will end and after that, you'll be able to upgrade. Meanwhile, their price always drops as new models come out, so it makes sense to wait.

Buy on the internet

When you're on a tight budget, you're not going to buy low-quality staff, and reviews on the websites give you some confidence. When I read those reviews, I understand that I can't imagine all the situations when something doesn't fit my requirements or accidentally breaks down. So reviews are great, and it's better to have some of them, but for the local shops (especially selling private labels stuff) that's not achievable.

Again, I'd not go crazy ordering everything on the internet. Sometimes I just feel that on the internet I could have something that fits my needs better. It may be cheaper, it may be more expensive, but I need to be sure. For lots of items, my requirements are not that complicated and then I can buy it in a local shop when they have that item. Delivery also is costly, by the way.

But delivery is great when they deliver a 15 kg package of dog food to your door. No way I'd be carrying that myself.

Summing up

I hope you found some tips useful for you, please let me know in the comments. Saving for me is not a sacrifice with these tips, it's about being happier with the stuff I buy. And I also hope that it works the same way for you!