Can You Live On A Budget, Yet Not Compromise Much On Your Existing Lifestyle?

In these trying times, there is no denying that we really need to learn how to budget. Belt-tightening is a must, and there is no denying that drastic cutbacks on spending need to be made.

However, life loses its pleasures and delights when we live a totally spartan existence. Thus, there needs to be a balance between frugal living and enjoying life.

Q: Is it possible to live a fun, happy lifestyle on a budget?

A: Yes!

Q: Is it possible to live on a budget, yet not compromise much on your existing lifestyle?

A: It's up to you.

In order to make a budget work fully, there really is discipline involved. Not that you can no longer enjoy creature comforts, but you may have to cut back on certain things:

• Can you do without the maximum data plan for your cellphone?
• Can you live with only one tub of ice cream every month, instead of 4, or, well, 30?
• Can you live with a cheaper brand of nail polish?
• Can you scrimp on the bacon and choose to go for oatmeal for breakfast instead?
• Could you consider kicking that smoking habit?

When confronted with questions like these, most of us hesitate to face the truth:

• Most of us do not use enough hours of 3G or WiMax Internet to justify an unlimited or the maximum data plan that most carriers offer.
• All of us would suffer from weaker hearts if we have too much of sugar and fat. And ice cream is the mother lode of that. Skipping all that ice cream is going to help you kill two birds with one stone: Help you lose weight and live more healthily, and save you all that moolah.
• Some cheaper brands of nail polish actually offer the same strength and durability of the more expensive brands. And they come in cool colors too.
• Bacon lets fat accumulate in arteries, which may cause a myocardial. Oatmeal does the complete opposite: binds its gooey self to all them fat globules in your intestines and keep them from entering your bloodstream. It also helps lower the bad cholesterol, letting your arteries breathe easier.
• Is there anything good, health-wise, that you can get from smoking? I mean, really.

If you note, the questions we asked earlier are actually doable:

• Yes, you can definitely do without the maximum data plan for your cellphone.
• Yes, you can get through one entire month with only one tub of ice cream in your ref for the whole month, instead of 4 or 30.
• Yes, you can definitely live with a cheaper brand of nail polish.
• You can actually skip the bacon and choose to go for oatmeal. And yes, you can save your heart in the process.
• And kicking smoking is absolutely doable. And ultimately beneficial.

To be honest, in order to live a more frugal lifestyle, one DOES have to make sacrifices. It may be hard, but it is DOABLE.

To aid your frugal lifestyle further, a budget needs to be made. While there are a dozen ways to describe budgets, to get to the heart of it, a budget is: writing down a plan to tell your money where it should go. And then following that plan.

There are a few methods to creating a budget. One is a straightforward method: Write down your net income (after taxes and other deductions), and the other is a percentage method: divide your income into percentages with which you'll spend on the things you need, want, and your savings.

For the straightforward method, all it takes are these steps:

1) Figure out the net income that you receive every month. From that value, you'll deduct all your expenses.

2) List down all the expenses that you normally have, including the smallest ones: tissue paper, floss, car air freshener. Include the quantities of how many pieces of each item you buy every month.

3) Figure out the value of each item. Total all your expenses.

4) Check that figure against your net income. If it doesn't fit, you may have to reduce the quantities of the things that you use and consume. Else, you may want to purchase these things on a schedule. More on this point on this hub.

5) Don't forget to factor in an amount for your savings and emergency fund. This would help you create a nest egg for yourself, and to keep money for emergency situations, like appliances breaking down, a car needing replacement, or other mishaps that may otherwise kill your budget.

6) Though the concept of Tithing has largely been a Christian belief, there are other religious groups that agree that the more you give, the more the universe gives back. Most Christian personal finance experts recommend giving at least 10% of your income to charity. Some other sources advice to give above the Tithe, or the 10%. They say that it's based on the principle of "Sowing and Reaping," wherein the more you sow, the more you will harvest. Personally, I would recommend making sure that you give 10% to charity, then whenever you get the chance to help a needy person out, as your budget can allow, do be generous, and watch the universe give back to you your generosity. It may take a while, but the benefits are real. I have personally experienced the blessings of being generous, and it's something I am honestly getting addicted to, that's why I never take it out of my budget!

7) Don't miss out on setting aside a portion of your budget to your wants. Like eating out, purchases that you may need to make, like getting clothes, appliances, or money for your Cable TV. Or ice cream. Leaving out the wants would make you feel deprived, and this could be a factor why, after a month of living a spartan existence, you could actually blow your budget. So avoid that blowout by actually making room for enjoying your income.

8) Allot a portion of your income to debt repayment as well. For the urgent debts, include these in the "Needs" category. For those that you just need to work on faster, but are not as urgent, you could use some of the money you allot to savings. But always, always leave a fixed amount that should trickle in your savings account.

That being said, this brings us to the method of budgeting through percentages.

According to MSN Money, the best method to budgeting would be to use percentages to divide your after-tax income:

• 50% goes to your needs.
• 30% goes to your wants.
• 10% goes to your savings.

So, let's say that your annual income is at $42,028. That would mean that your disposable income would be at around $31,410. That would make your monthly after-tax income around $2,617.50.

So this is how you should spend your income:

• $1,308.75 should go to your needs: food, shelter, utilities, and urgent debt. Clothing should be classified as "needs" only on intervals: once a year, twice a year, up to 4 times a year or every 3 months only.
• $785.25 should go to your wants, including Cable TV, cellphone plan, entertainment, dining out, clothing, appliance and gadget purchases, and other things that could hardly be described as urgent and needed.
• $523.50 should go to your savings/extra debt payment.

Savings should include your emergency fund and your investments, especially possibly a high interest savings account. You should also save for general purposes, which would be your nest egg. You may be able to use it for your retirement, a portion of it for a major purchase, or you can just let it gather there and then eventually leave it as an inheritance for your children. As a proverb says, " A good man leaves an inheritance for his children's children."

So where do you factor in the giving? You could subtract 10% up to 20% from your disposable income before you apportion that to your Needs, Wants, and Savings.

While this isn't personal finance gospel truth, this is still a sensible way to administer your income. This is also a good measure to live by when making a budget, especially when the "needs" crowd out everything else. This helps you set boundaries between the needs, the wants, and make sure that you have money to plumb into your savings account.


The Secrets of Keeping A Successful Budget:

1) Have discipline in following it. Dave Ramsey said that "Personal finance is 20% head knowledge and 80% behavior." And indeed, unless you FOLLOW your budget, all of that would only be mere words and figures committed to paper, and not really lived out. Guess who'll lose if you end up wrecking your budget by spending too much, anyway?

2) Make sure that you live within your means. In fact, try living beneath your means. This may entail some sacrifice on your part, but it's not major loss. This may actually be rewarding as you see your savings account grow, and your debts diminish.

3) Get a high out of seeing yourself succeed in following your budget! Unless you shift your highs from being able to buy that next gadget (toy), that lovely $300 blouse (frivolity), or keeping your 100-channel Cable TV subscription (do you really need all those channels) to finally reaching $10,000 in savings (you're starting to want to go for more, don't you?), killing that debt (finally!) or being able to live beneath your means and still enjoy life, you won't succeed in keeping your budget. Again, shift your highs from being able to hoard through buying to being able to gather through saving. In the long run, guess which pays more?

Living a life on a budget is never easy at first. We really like pushing the boundaries on shopping, making sure we enjoy life on one more gadget, pair of shoes, clothes, makeup, power tool bought, one more vacation taken, or one more meal had from a fancy restaurant. But when you think about it, where has all that money gone, after all? To enjoyment, which lasted only a day or so? Even if it lasts for a whole month (in the case of vacations), money blown on pleasure is more money not in your bank account. Money that you could use for an emergency fund, for your retirement, or for your kids' future.

Yes, it does take a degree of sacrifice and a lot of adjustment, in order to get a budget perfectly executed. However, the percentage or the allotment for fun/wants should cover your need for pleasure. If you have little money left after paying your extra-snazzy phone plan or cable account, then you better think if you should downgrade. Are you *really* using all those minutes? Do you really need the data plan, when you already have Internet at home? How about Cable TV: do you really need those extra channels that you won't get to watch anyway? How about getting a plan with all the essential channels you normally watch, instead? No, you don't need the foreign channels you cannot understand anyway. Really.

Lastly, whenever you make a milestone: getting to save a certain amount, being able to pay off a debt, being able to finally finish saving up for a new computer or a vacation, do reward yourself! You can go out to buy yourself ice cream, have a good meal in a restaurant you like, or just do something fun for yourself. This way, you'll associate the financial milestone with a pleasurable feeling, boosted by the act of rewarding yourself.

Also, saving up for vacations, a new computer, a new car, is still a worthwhile exercise. However, just make sure that you never sacrifice your emergency fund or your other savings goals (especially your general savings goals). Just apportion the 20% to your vacation/purchases savings, emergency fund savings, then general savings, accordingly. Say you have $523.50. You can put $300 to your general savings fund, $123.50 to your emergency fund, and then the remaining $100 to your vacation month, every month, until you reach your vacation fund goal. This would ensure that you don't sacrifice your savings funds and become a nervous wreck later when calamity strikes.

Let's change the way we look at budgets. No longer should we look at it as a thing that keeps us from having fun and making the most out of our income. Rather, let us look at it as the way by which we can actually have more fun by being able to meet our needs, fulfill our wants (or at least some of it, anyway), while being able to start gathering a nest egg for ourselves. In short, nobody is exempt from the fact that you need a budget, and so do I.

Yes, sacrifices have to be made. But compromising on your existing lifestyle won't be so painful if you choose to have a good attitude about it.