How you can end up with more money to spend without earning more
The power of budgeting and prioritizing
A couple of months ago I was completely done with the feeling of being short on money. I was doing a crappy paying internship and with the current circumstances, more jobs on the side were also not a feasible option. On top of that, I had no idea how much money I actually spent each month, that is why I made the decision to take control of my current financial situation and to finally get a good understanding of how much money was actually coming in and going out. By doing this I eventually got out of that miserable feeling and I do not feel I’m short on money anymore, I even have the feeling I’m able to afford a lot more even though my financial situation is exactly the same. I’ll explain how I came to this realization in three steps:
1. Get an overview of your income and expenses
Now this is the step that requires the most willpower from you to start. I think most people feel like they should have a better overview of their expenses, but how do you do that and where do you begin without much trouble? There are some really useful online tools that can automatically synchronize your bank account in a safe way, like You Need a Budget or Lunch Money. Super handy tools that help you with getting a perfect overview of what is coming in and going out, but it also costs you money. That was that tiny little thing I just wanted to avoid.
So, I did it differently with the help of…. spreadsheets. Yes. Something as simple as that. I use Apple Numbers, but I don’t see why Excel, or any other spreadsheet program wouldn’t work. Numbers gave me a full functioning templates that got me started right away and I kept perfecting it along the way. I’m not the most technical person out there, so there could be a way of synchronizing your bank account deductions with spreadsheets as well, but I do it manually. That might seem like a lot of work, but it is actually not and very rewarding. Because this way you really go through EVERY expense that you make, and you see that every little cup of coffee adds up quickly to a decreasing wallet. Furthermore, this way you keep perfecting your budget spreadsheet with more tables and graphs and that is incredibly satisfying!
So, this is the first step you’ll have to do, make a good overview of your income and expenses and track it every day to keep it accurate over time. I divided up my budget overview page in four important sections: Money in, Money out, Savings, and What is left. What you’ll do with the savings part I’ll tell you later, but when I got this overview done with my income and expenses, it blew my mind away. Each month I was left with over €300 and I didn’t even realize it. Before I started my budgeting overview, I thought I had no money at all, and now I suddenly had a spare €300? And why do I spend so much on takeaway food? I could even have more money left if I was a bit more thoughtful.
2. Determine what is important in your life
Now I had a good overview of my financial situation, I realized that my spending habits needed a good change. I am a reasonably okay cook, so spending so much money on takeaway food was not really necessary. The question was now, on what do I actually enjoy spending money on? What gives me value for my money? That was the question I needed to answer and is something you need to think about as well.
Spending money on food gave me some satisfaction, but the things that were valuable and important to me were other things. Travelling for example. I came to the conclusion that I was better off cutting back on the takeaway food to save up for a next vacation or journey. Technology is another thing, a big hobby of mine is keeping track of what kind of gadgets and phones are being released and those things cost a lot of money. Money I thought I didn’t have, but now that I had this overview I saw that I could have it, if I would just use my money better.
In my opinion, this is the next step you need to take after you’ve done your budgeting overview. Think about what you want to spend money on and on what you want to spend less money on. You might not find yourself to be in the position like I was with spare money, but here lies the challenge for you to identify areas in your spending habits that give you not as much satisfaction as you deserve. Once you’ve identified the things you value the most, you can start saving up for these things.
3. Set saving/spending goals
The thing you do next, is thinking of what percentage of your income you want/can put into your ‘piggy bank’ . I say can, because if you see you can cut back from unnecessary expenses, do it! Ideally you can continue with a normal, more conscious, routine, while ending up with a budget surplus.
For me my saving percentage is around 15–20% per month. There can be months that I spend a bit less on food so then the money I save increases as well. If you have calculated your percentage in your spreadsheet, you know how much money you can allocate to your personal spending/saving goals.
Now that you have your amount of monthly savings clear on paper, it is time to write down your specific goals. This is going to be your final step to end up with more money to spend because you are going to make sure that you’ll have the necessary money at the moment when you need it. To me, saving up money means I will spend it eventually. If financial independence at the age of 40 is your goal, that is totally fine and you should go for that goal!
However, my goals are not that long term. I want to be able to afford to travel when the time is there, and I want to be able to buy that premium phone or headphones when it comes out. In order to enable this for me I made a system of seperate ‘piggy banks’ that are linked to my goals. For me this specifically means that I want to have a vacation budget of let’s say €2500. So I’ll make sure I’ll have this amount set aside in a ‘piggy bank’ for when I want to go on vacation one day. For my technology spending goal, I’ll make let’s say a €1000 budget. So, when the time comes that I want a new premium phone, or when I want that new top of the line headphones, I can just buy it and start filling up the budget afterwards for the next purchase. This system also prevents these purchases from impacting my normal life and necessary expenses, I can just continue living the life I normally live.
I got to tell you, it feels great to be able to make conscious buying decisions and not regret a single purchase, and I want this for you too! In the end, I didn’t have to earn more money to be able to buy the things I really wanted. I just needed to identify how much was coming in and going out and I had to set my priorities straight. This way I decreased useless spending and ended up setting aside more money for the things I really appreciated in life, travelling and my technology hobby. Your spending goal might be clothes, art supplies, or you really attach value to not cook all the time but getting takeaway food 10x a month. When you got that all figured out for yourself, you are able to make specific spending goals and with some determination you will end up with more money to spend, without having to see a raise in your paycheck.
