How to budget your money.

Budgeting is a very mundane topic but a very necessary one to financial independence. You can never save and invest if you do not master this.


Let me share you a technique that I have been using since 2015 that allowed me to have an overview of my finances.


I have been using a free spreadsheet template from google that is very easy to navigate. It is called google sheets monthly and annual budget templates. I tweak it according to my own finances. I do not even have to download it on my phone as this is accessible online and in almost every smartphone, google sheets is already pre-installed. So it means that I can also edit my sheets even if I am not connected to the internet. 


The Monthly Budget Template has 2 pages: the first one is the summary of your monthly income and expenses according to categories. The second page is the actual transactions that you have made. This is what it looks like. 


You can edit the starting balance, categories, planned amounts in both the expenses and the income list. All the others are pre-formatted and automatic according to the transactions that you have listed on the next page. The next page looks like this.

Basically, what I do is whenever I bought something, paid a bill online, or received something as an income, I automatically open the spreadsheet on my phone and put it in. This way, I do not forget how much money come in and how much go out. 

This is an actual monthly sheet that I have. I edited the categories according to what is applicable to me.

Big chunks of my monthly budget are the food, insurance, and remittances. Annual budget includes the vacations, taxes, and utilities since these are not reflected on the fixed monthly budget. 

Every start of the year, I make an annual budget on paper. At the end of the year, I compare the target and the actual results and then plan for the the next year according to the results of the last year.

For example, these are my target and the actual expenses in 2018.


                                         Target                                                     Actual

Groceries                         3,800                                                       3,673

Insurance / Health         5,100                                                       5,929

Transportation                2,209                                                       2,209

Utilities/ Tax                     5,700                                                      5,505

Travel                                2,600                                                       2517

Gifts                                      500                                                       6,114

Misc/Unaccounted          2,000                                                          890                 


What is good in having your financial life on paper is that you can always look back and analyze the things that you hurt you financially as well as plan accordingly for the next year. As you can see, I managed to follow my budget in almost all areas except for the gift. 


I also have a target number saved at the end of the year. This is divided into savings and investments. 


I do not have a fixed work plan so my salary changes year to year. So I make sure that I do a budget that takes this heavily into consideration. Luckily though, I have always managed my expenses and make a positive cashflow except for that year where almost half  my expenses was the gift category that rendered that year financial statement negative.

Budgeting for me though is a comforting feeling. As a foreigner living in another country, there are many levels of uncertainty (i.e, What if I get divorced?  What if I lose my job?  What if I get sick? ).

So in a way, knowing how much I would need in a year to survive gives me  peace of mind. 


Also, when you have tried to make a budget for many years, you can more or less plan for your retirement because first, you know your expenses and second, you get to save and invest and be prudent with your finances. 

Of course not everything is about money and penny-pinching though because really, what good is your millions if you cannot enjoy them? That is why it is always a good idea to have a vacation budget incorporated in your annual planning.

In the same way, happy photos and memories will not feel so good anymore if you are old, sick, penniless but has to continue working because of a YOLO attitude you had when you were still young.


Budgeting is really not complicated. It is an effort and work on our part but the advantages far outweighs the discomforts. Once we learn to really budget and see where goes every penny from our hard sweat, we learn to value our worth and think first because wasting money on unnecessary things. This is a small but important step on our road to financial independence.


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