Thursday, 30 April 2015


Count how much money you spend and count how much money you save. This is called having a budget but it is all quite simple.

Calculate all fixed costs that you have on a monthly basis. This is usually costs for house, utilities and anything that you have signed an subscription for. It includes everything that must be paid, regardless if you eat, drink or shop anything. It might take some time to figure out exactly what your financial obligations are, but there is no point imagining that you can live a frugal life or be rich unless you KNOW this. You show your maturity by knowing this number.

It is not easy and you may keep adding to the monthly fixed costs over a period of time.
Remember to calculate the monthly cost for fixed costs paid on an annual basis. Taxes, insurance, paper subscriptions, etc. are commonly paid annually but used and relied on every day. Know how much they costs you on a monthly basis so you can assess if it is worth keeping them.

When you have an estimated monthly fixed costs, you can simply subtract that cost from your monthly income. This is what is available for your monthly running costs. If it is a positive number, well done, you can eat this month. If it is a large positive number, you should have room for some savings.
If it is a negative number, you really, really, really, no, really! need to reach out for financial guidance and advice.

The annual spending is the sum of your monthly fixed costs and your monthly running costs (not including your savings).

The annual spending is variable, both between different years and different persons.
The spending can be used to calculate an annual budget. Your budget should be larger than your calculated annual spending in order to provide room for catastrophes and such. Calculate your annual budget as simply as possible. Be kind but honest with yourself and budget the amount of money you actually will need in a year.

And then spend all available energy on increasing your income as much as possible for the next few years. 

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