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The day I dropped doing a (complicated) budget

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A budget is telling your money where to go instead of wondering where it went.” – Dave Ramsey

I’m not a fan of complicated spreadsheets when it comes to budgeting.

However, there were many points in my financial journey where I would record all my expenses – down to the last peso.

It was not helping me

It was inspired by some financial advice I received before.

Several attempts after and I realized it’s not good for me and felt like it was just a waste of my time.

While an organized tool such as a spreadsheet is a big help when it comes to getting insights into one’s spending pattern, it was clear that the task in maintaining one is not, and will never be, my type.

I knew I just couldn’t have the attention and time to keep it updated, which made me really feel frustrated seeing myself not able to do it.

I tried several times but it’s was all the same.

In hindsight, I realized it was mainly due to my desire to focus and work on action steps what would actually lead me closer to my dreams, rather than doing a mundane task which felt like a waste of precious resources to do.

Interestingly, it was at this point that I also began to realize better the need of big corporations in hiring professionals to do this accounting for them.

They believe that just like in an individual case, this budgeting and accounting is an important routine for a company to survive in all its reporting and compliance tasks, with the same sense of the more important need to focus on key roles including decision making and strategic planning.

A Simpler Budget

So in line of simplifying my life as much as possible, I decided to drop the complicated budgeting and just adopt a simple one after several experimentation – which having a single sheet where I record down how much money comes every month.

When it comes to expenses, I no longer record any of it except the big ones.

Instead, I apply the 10-20-70 formula to contain and control my expenses.

10% goes to tithes.
20% goes to investment.
70% is left for expenses.

By doing above, my spending habits is forced to use the 70% to maintain the minimal lifestyle I have.

If I see at any point that I exceeded the 70% budget in a month, that’s the only time I’d dig deeper as to the reasons why it happened.

I reality though, I never need 70% of my income to live, which in turn increases the first two outflows. (Thanks to my decision to become minimalist!)

Choosing a better challenge

Having this very simple routine has led me to more productive financial life.

Maintaining a document where I would record only my income streams allows me to
(1) see how much my incoming cash flow is performing; and using this insight,
(2) Constantly pose a challenge to myself to keep it grow over time.

To live the life I want, that challenge to constant grow my income is actually the one I’d be more glad to take than cutting down on my others expenses – which most advisers usually give.

And after more than two years of practicing this, I can say I am heading to the right direction.

I no longer worry on money-related issues because the expense control is already in place.
I’ve managed to create other income streams because I’m constantly challenged by the simple insights I get.
I’ve met new people to constantly grow myself and find new ways to provide value and make money.
All these because I let go of a convoluted budgeting practice which once blinded me to the real and end goals I wanted to achieve.

Things just come better when they are simplified.
I guess it’s the same with money management.

Have fun investing,
oMeng  🙂

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