Budgeting - 1

Live below your means. If you are to run a mile, what do you do? You give it all you got, you budget for a mile run pace, and you sprint your last quarter lap or something. But if you were in a weird race where they can unexpectedly say `well you gotta run another lap’, ask you to do push ups, or if you’re just generally running for an unknown distance, you should never go 100%. You strategically save your energy and time so that you can face the uncertain events in the future. Again, it’s about keeping control and not having it taken away. 

 

This is the robustness part, and also the minimalism part. People adapt easily. If you are used to eating out all the time, you get used to it. But the goal is to adapt yourself at the lowest standard possible, so you’re the most robust, or, there’s a lot of room for shit. So even if you have some terrible things happen to you, you can endure through it. It’s an engineered margin into your finances. For the actual budgeting, I am not smart, and I am lazy. I don’t have time to have an excel spreadsheet listing all my expenditures and shit. I like to simplify things. So what I have done is the following:

• List my monthly fixed costs (rent, car payment, insurance, savings etc.)

• Figure out how much I spend for semi-variable costs (eating out, amazon, groceries) for the last 6 months

• This can be done by looking at your credit card / bank account statement

• Pick the highest-spending month, use that.

• If this exceeds monthly income, reconsider life and try to reduce costs by:

• Get a roommate

• Get a cheaper car (also reduces insurance)

• Find cheaper insurance

• Lower savings amount

• Repeat.

 

The value of overestimation is that it makes your budget robust. This is, of course, a very crude way to do it and sometimes people cannot afford to have that room in their budget, cause their budget is already so tight. I can be an idealist and say `you can cut more on your budget! Just don’t use toilet paper!’ or some bizarre shit that some people say for effect but I know that’s weird. Perhaps a way you can mitigate your problem is to share things. Thanks to the advance of technology, you can basically connect and share anything, from cars, houses, or even time. You can rent your car on Turo, you can rent your space on Airbnb (watch out for laws on this one), and you can pick up odd gigs via Taskrabbit, or something. Also, you can share subscription services (Prime, Netflix etc) with your friends to save costs. Everything costs less if there’s more people.

 

If the costs are just unbearable and there’s too little income to hold it up, and you have no time to pick up side gigs, something’s wrong. I can’t give you a catch-all answer that will make it all go away. There are a lot of factors that’s far from our control like the unfair socio-economic dynamic and all that, and that shit’s messed up. But we have to admit that that’s not a sustainable way to live, that you’re one medical incident away from bankruptcy, and we don’t want that. I wish I could give you a clear-cut solution, but there isn’t one. Systematic change so that it’s not incredibly difficult to live would be ideal, but I’m going to focus on how to live in this broken system. The best advice I can give you is to really try to sit down and try your best to minimize your costs while using your time most efficiently.  

 

For your example, this is my budget for a `representative 2 weeks’:

 

Gross income	2264.25
Tax withheld	522.43
Automatic Investments	800
in my pocket	941.82
car payment	200
rent + utilities	300
groceries	200
subscriptions	25
insurance	55
incidentals	161.82
total spending	941.82

I try to invest more than 50% of my earnings, since I want to retire early and all, and also, I don’t really need much. It’s the whole robustness design.