I get it: for most millennials, the “B” word can fill us up with a sense of dread. After all, budgeting wasn’t exactly a subject in high school, and your Gen X/Boomer parents led very different lives under very different economies.
It also doesn’t help that 21st century lifestyles require very different spending habits. But remember, while different folks have different strokes, budgeting is universal. This adage that I just made up means that, regardless of your lifestyle, you’re going to need to squirrel away money in a way that allows you to live your best life while not worrying about the bank taking away your house.
Of course, different lifestyles will require different budgeting strategies, but there are three very crucial questions you can ask yourself to create a basic budget that can allow you to live your lifestyle, have money saved up for a rainy day, and still have enough money for ‘luxury’ expenses like a weekend getaway at a B-and-B in the country or watching a Green Day concert.
Here are some questions you should ask yourself when budgeting for your lifestyle:
How Much is My Lifestyle Really Worth?
Your first step is to take a good, hard look at your lifestyle and figure out exactly how much it costs. Take an accounting of how much you spend in a month by reviewing your income, your credit card charges, and your spending habits per week. You will most likely need a planner for this.
This is crucial because it allows you to set a baseline on how much you’re spending and how much you’re earning and make adjustments to make sure that you still have enough money to put into your savings account. The best way to do this is to break down your expenses into three categories:
- Lifestyle Expenses, that is, stuff and services you buy for your lifestyle.
- Necessary Expenses, that is, mortgage or rent, insurance, utility bills, phone and internet bills, and other monthly recurring charges.
- Life Savings, that is, money you put away for future expenses like a house or a car.
Note that you can categorize your expenses however you want, but it’s always best to spend on necessary expenses and life savings before you start paying for your lifestyle.
Do I Really Need to Spend Money on This?
As a generation raised to ‘treat yo self’, we sometimes forget that unnecessary expenses, while fun and temporarily fulfilling, are just that: unnecessary. You don’t have to live like a monk, however; you can splurge every now and then, but you need to ask yourself: do I really need to spend money on this?
If you’ve categorized your expenses in the way we mentioned above, take a look at your luxury expenses and figure out which of those you could have done without. Take note of this and that way, in the future, you’ll have a sort-of guide to what you should spend on.
Do I Need to Go Into Debt to Pay for My Lifestyle?
Probably the most important question you need to ask yourself, and the one that only has one answer: if you say ‘yes’ to this question, you need to re-evaluate your lifestyle.
Look: we can’t all afford a new car, a new home, or even a college education, with money straight out of our pocket. Those expenses, you need to secure loans for because they are necessities of life.
But taking out a loan so you can buy a sports car you don’t need, or fund a trip to Asia just because you read Eat, Pray, Love? Those are unnecessary expenses that will put you into unnecessary debt and anxiety. Avoid going into debt just to fund your lifestyle. Remember: live within your means.