I know that some people squirm when they hear the word “budget” because maybe they think that it takes a lot of time and effort to maintain one or they probably feel that it is restricting rather than liberating. Well, every single thing that we commit ourselves to doing certainly requires time and effort, right? Also, how are we going to find out if something works if we won’t try and do it? When I learned about the JARS money management system [Necessities (50%) + Long-term Savings for Spending (10%) + Financial Freedom Account (10%) + Education (10%) + Give (10%) + Play (10%) = 100% (click here for an overview)], it only took me a few hours to list down all our regular expenses. I do my budget reconciliation twice a month (15th and 30th of the month) in roughly an hour or two using a simple spreadsheet that makes monitoring our finances super easy. It doesn’t really take too much of my time.
I made a list of common household expenses here that can hopefully guide anyone who wants to start a budget plan. Don’t obsess over your expense list too much. Budgeting is not an exact science so if you forget anything or if something new comes up (unexpected expense, extra income, new goal), you can always adjust your allocations anytime. Just come up with an initial list and once you have a picture of your current financial situation and you seriously commit to sticking to your budget plan, you will eventually find yourself making wiser spending decisions and working on setting or attaining your financial goals. If these don’t make you feel empowered or in control of your finances, then I don’t know what else will.
Now, let’s talk about our Play budget. Who says you can’t have fun when on a budget plan? If you take home $5,000 a month and you allocate 10% to your Play budget, then that’s $500 that you can entirely spend on a whim or save for future splurging ideas (like out-of-town trips which sometimes require a hefty budget). Depending on your interests and lifestyle, whether you have kids or not, single or attached, the list of things that you can do with this money is endless. Use this and have fun! I will not discuss the many benefits of leisure time here but go ahead and google it! 😀 Our Play budget usually goes to dining-out or night out with friends, sports and kid-friendly activities, movies (including On Demand movies and Netflix subscription), travelling, and other leisure activities.
NEEDS vs. WANTS
This is where we also charge things that we like to buy for ourselves but are considered non-essential or those that we can live without, or in short, our “WANTS”. I mentioned in my earlier post about Necessities that I set a budget (or quantity) limit on clothing and other things that we tend to spend too much money on in order to kind of draw a line between our needs and wants. I have friends who are obsessed with too many handbags, clothes, or sneakers, and that’s fine. I used to obsess over cameras and gears too until the convenience of uploading pictures direct from phone cameras happened. 😀 As long as you have the money to spend on something that will make you happy or will provide you with a sense of gratification, then go ahead, that’s what this Play budget is for. The good thing about this budget is that it shows you if you are having way too much fun or buying a lot of unnecessary stuff and you are forgetting about your other financial goals (or maybe not setting any goal at all). Here’s an example: If I already have nine pairs of shoes and I want another one but I have not saved so much or anything at all for our children’s education or maybe for an emergency fund, I might want to rethink my priorities, right? But if my Play budget screams “Use me!”, then I am definitely getting myself another pair. Let me warn you though that once you get in the habit of tracking your finances, you will soon become savvy spenders. I don’t know if that excites you or turns you off, but it’s one of the best things that ever happened to my purse. 😀
Again, keep in mind that sticking to our Play budget is not about depriving ourselves from luxuries that we think we deserve because we work hard, it is about setting our priorities straight, working on achieving these priorities, and committing to live within our means without sacrificing fun.