Budgeting

Handling your finances is something I think isn’t taught enough, yet it’s the path to leading a comfortable life. Capitalism, as defined by ‘Investopedia’ - a financial education website - is the economic state whereby property and industries that have monetary value are controlled by private owners. This system can greatly disadvantage the working class, i.e. people like you and me - so I wanted to write about ways in which you make this capitalistic system work in your favour without compromising your values. I’ll start by writing about how to budget, and later delve into more complex financial topics like savings accounts and investing. I want to preface that I’m by no means an expert, this is just what I have researched, and would like to spread the knowledge - so please do your own research as well!


Budgeting is described by ‘Investopedia’ as a plan regarding the income and expenses for a particular time frame. This process, while tedious, will allow you to see patterns in your spending, and control it better in order to ensure that you are always on top of your finances. 


Finances have been a thing that I have been taught to fear. I can’t actually say that I’ve ever been at a place where money has not been an issue, and so it’s developed lots of anxiety around spending, receiving monetary gifts or loans from others etc. There may be times I needed to pay someone back but couldn’t until later on. This created a mentality that working is the only way I can create a sufficient and comfortable lifestyle for myself. A mentality that I have to work to survive. But I’ve tried to challenge that by taking control of my finances, rather than enduring conditions I don’t like, in order to keep my head above water. One way I was able to do this was through budgeting; I recently received my first paycheck from my internship and was able to use a budgeting technique to split up my income between needs, wants, and unexpected situations. Here’s how I did it:

• Use a budgeting technique
  

‘Money Under 30’, another financial education website, suggests a common budgeting technique to use is the 50/30/20 rule. In this, you save 50% of your income on essentials like groceries, rent etc., spend 30% of your income on what you want, and contribute the remaining 20% on your savings (including retirement) and investments.


So, hypothetically, if you brought in £1000 (with the consideration of tax):
Essentials - £500 
Wants - £300
Savings - £200
  
Money Fit’s 50/30/20 online budget calculator can work this out quickly for you, however, there are many alternatives online also. 


An important thing to note is that this is completely customisable to your situation, you can change how much you allocate to each section, so it requires a lot of self-discipline and awareness to understand how much you can distribute to each part. To practice self-discipline you have to be honest with yourself - I usually ask myself how beneficial a certain spend would be in the long run; could I possibly use that spend on something that provides me more gratification in the future? Here are some more ways to practice discipline:

• Keep track of your budget
  

One way to learn how to be more aware of your budget is to keep a basic excel sheet that breaks down your income and expenses. The Balance, financial education website, also has a simple template that you can copy and paste into a document and adapt to your circumstances. Alternatively, there are other free templates online that help keep an eye on your finances without the hassle of creating the template yourself (unless that’s your thing). I personally use ‘Aspire’, which tracks transactions as they are made - it’s a little technical but they have a Reddit account that you can ask questions on, and detailed instructions to get you set up. 

• What are you saving up for
  

Now you may be lost on what the “Savings” section of the budgeting technique might be made up of. Savings would constitute your emergency fund (saving if you unexpectedly lose your job, or something breaks etc.), investments, and retirement fund. Because of this, it might be easier to put your savings into a savings account. 

So far this technique has taught me that finance is not something to fear - granted, I’m not going to say it's not stressful, but budgeting has given my finances a lot more structure. I understand there is more to learn, but it's not something that has to control you, more so, it's the other way around. 

I think understanding finances is something quite empowering, especially when there has been constant worry about where your finances would go. However, it’s important to remember that your finances don’t have to define your life experience, especially because I found myself unable to do things I wanted due to financial constraints, like attending paid events, going on holiday, or simply eating out. When I had the time I looked for free activities I could do, and any financial support I could find online like grants or scholarships during university. I learned that with or without financial constraints, it’s still important to let yourself live, rather than just survive. I’m still learning how to do this, but it’s about ensuring that your finances don’t control you - both by learning about finance and by living in spite of it as much as you can.

Unfortunately, not everyone is equipped to find out more about this topic. Some may not know where to start with researching, or just don’t understand the admittedly complicated lingo in some of these sites. Weeks ago I didn’t know any of this information, so I don’t blame you for being unsure. Its absence in our education system means that we interpret finances as something that lacks priority, or at least, is too complicated for anyone to understand, let alone teach. I hope that this information gives you an idea about where to get started.

Here are some sites which can help you with this a little more
https://www.investopedia.com/financial-edge/1109/6-reasons-why-you-need-a-budget.aspx 

https://n26.com/en-eu/blog/50-30-20-rule#:~:text=The%20basic%20rule%20of%20thumb,money%20to%20work%20more%20efficiently. 

Stay Safe! - Rae




References

https://www.investopedia.com/terms/b/budget.asp 



https://www.moneyunder30.com/percentage-of-income-should-you-save-every-month#:~:text=Many%20sources%20recommend%20saving%2020,at%20least%2020%25%20for%20savings.  


https://moneyfit.org/50-30-20-budget-calculator 


https://www.thebalance.com/budget-worksheet-income-and-necessities-453596


Aspire Budgeting 

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Rae