Have you not already heard that great piece of advise? It sounds like a Chinese proverb, don’t you think?
I have. I have read it, heard it… tried it too.
This is the start of any attempts to control your budget:
- 1. Check where your money is going,
- 2. Get the controllable spending on a leash.
In order to do that, you need to make a list of all regular and unavoidable spending (rent, school fees, insurance premium etc.). Then systematically take them away from your earnings. Continue on with subtracting monies that are going out without your having control over them (petrol, food and clothes shopping, phone bills, electric bill payments etc.). What is left is a magical number: your available budget for the month.
From that point on, it should be easy, you should be able to divide the left-over in four equal parts and have a set limit of spending for each coming week. Sounds great, right? Wrong!
I have had a financial adviser do these calculations for me, and then he looked at me, amused: ” Where is the money? You should have xxx dollars left every month and instead you are struggling! Where is it?”
I have tried this method so many times. When I come up with a number, I declare “We are rich!” and hop to the supermarket to fill the fridge with my 10-year old in the back seat, both of us in a very good mood for spending.
Another episode unwinds when I calculate the magic number ahead of time (to be prepared and avoid surprises) and find out that I will already be broke already two days after pay day.
Then, depressed, I call the pizzeria and enjoy and evening of extravaganza with my son.
Can you relate to this?
I am a firm believer that the “magical number method” works for families with two wage-earning parents. Yes, these families might also have two cars and more shoes, but their safety “pillow” is softer and all big bills are split in two.
Sometimes I feel upset that I cannot go to the restaurant without having to suffer for the next two months. It is not fair!
So what is the solution? Earn more money?
Another Chinese proverb?
This is the suggestion an official once told me after he prosecuted me for not paying alimonies to my ex-husband. He calculated my budget, and said “Yes, I see the problem… you need to talk to your boss and earn more money!”
Ha! Don’t they just crack you up?
Planning is the key
In the mist of all the drama, I have found that it still helps to calculate the magic number, but not on a one-month basis, which is “budgeting”, but on one-year basis, which is “planning”.
So, calculate the amount of your riches for the civil year (if you start now, do it for the remaining of 2012 and plan a date when you will work on 2013). Then take away all the bills you know will come. Don’t forget to include savings (on a one-year basis, it sounds much better).
Every “leisure” (holiday for example) spending will sound less daunting. Budgeting this might put you in financial trouble on a monthly basis, but over a year’s period, you can balance it out and it won’t seem so frightening.
Planning for the year will also help you for all expenses related to the kids: school, after-school activities, ski camp etc.
When you enter them in your plan, you can also add a post-it “Present.” When a relative or a friend asks you about a sensible present for your kid’s birthday or for Christmas, you will know exactly what to suggest.
In December, a friend asked me what she should buy my son for Christmas. She wanted to make a useful choice. I had no suggestion because I had not planned anything. In January, when his new acting classes bill came up, I struggled to pay it. If I had suggested to my friend that she could present my son with free acting lessons, it would have been an enormous benefit for all of us. My son would have been thankful, my friend would have felt helpful and I would have been relieved.
Written by April Thursday