6. Don’t walk blindfolded: plan!

How was your week of mindful spending? Have you asked yourself “why” when you went shopping? Today, we are putting all the pieces of the jigsaw puzzle together.
Imagine you are lost in a desert with only one bottle of water. What do you do?
Decide where to go, estimate how long it may take you to reach your destination… and plan how much you can drink every day.
Let’s say you have estimated 5 days: so you draw 5 lines to make sure you control what you drink. Five lines make six portions: 5 days + 1 emergency. This is what planning is about.
Replace desert with time and water with money… Allocate your income to each expense you plan to incur.

Don’t walk blindfolded: plan! Write your budget. If you earn a monthly income, practise planning one month. When you get used to it, you can plan farther (6 months, 12 months).
Go from the easiest to the hardest (like with a jigsaw puzzle): what you know for sure, from what you are not sure about (but include it!):

• Plan your commitments (rent, electricity bills, other bills, debt instalments if any):  if they are fixed, that’s easy, if they are not, look at your past bills and put your best estimate.
• Plan your income: your salary if you are employed or your best estimate if you work free-lance.
• Then estimate your daily life expenses (that’s where your tracking really helps): food, transportation, hygiene, leisure…
• Include any other expenses (or income) you plan to pay (receive) this month: for example, you know that your bike needs a new tire, or it is your sister’s birthday.
• Then, include how much you would like to save for your future expenses (goals and commitments). Keep working with the numbers until they all balance.

Follow your plan! Don’t walk blindfolded. There are different ways to follow your plan – choose what works best for you.

1. Bank account: deposit what you plan to pay for your commitments and save for your goals in your bank account. Or, even better, have your entire income transferred to your bank account and only withdraw the amount of cash you plan to spend on daily expenses for the coming week.
2. Use envelopes: if you tend to overspend on going out for example, put the amount that you have planned to spend for the week in one envelope and only take from this envelope when you go out. Don’t cheat yourself! Don’t take from another envelope. You will have to wait for your next income to refill the envelope.
3. Check where you are: compare what you really spend (your tracking) with your budget: is it very different? Re-adjust your plan – for example, you haven’t planned any bike repair, and you punctured your tire and had to replace it this month, look at which other items you can change in your budget (reduce one expense, or use your emergency savings, or if you work free-lance, increase your income).
   Keep planning – the more you do it, the easier it will be. Don’t walk without knowing where you are going and how: don’t walk blindfolded!
   Your homework: write your own budget.

Let’s put this into practice

Here are some ideas on how you can work on your budget and plan your incomes, savings and expenses.

1. Spreadsheet: Use the same format and categories as in your actual tracking to make it easier: go line by line: how much do you plan to earn? spend? save? Use a pencil… you are going to change numbers several times to make all fit.
2. Computer: yes… a budget is a lot of numbers… so an Excel spreadsheet makes it easier (see example below) or a personal finance software (especially if you have several bank accounts, investments…).
3. App: there are many apps the same apps where you can type your ins and outsusually also help you budget. 

A few pieces of advice:

• Take it easy – you are not going to run 10 kilometres if you have never run before. You may not be ready to plan 12 months straight away. So go step by step: plan next month first. Don’t forget to include in your savings how much to save for yearly expenses.
• Find the right level of detail: if too detailed, there will be so many numbers, it will be hard to follow and you will give up. Regroup small amounts in others if it is easier. You want to focus on the big expenses (especially yearly projects or beyond, or commitments) and make sure you plan them.
• Be consistent: use the same categories as in your actual tracking: your tracking tells you what you have spent, your budget tells you what you would like to spend in the future. Use significant categories: if you include several important long term goals (studies, children, house…) and you have planned a tight amount on social expenses for example, calculate how many invitations you can accept in a month, how many presents you can buy, etc…

What is important is a tool that you are comfortable with and helps you calculate, follow your budget and update it. Don’t walk blindfolded: plan!