RAGS TO RICHES | Personal Budgeting

Written by Ragini Singh Khushwaha, Founder of ArtNowThus and subject matter expert on the arts, media and content, cats, random factlets from around the world, the entrepreneur life and productivity hacks.

With inputs from Sakina and Husein Merchant, Chartered Accountants who explore their creativity in multiple ways.

Husein is the co-creator of a weekly comedy podcast and was the lead guitarist of a rock band in his earlier years. Sakina enjoys reading, travelling, trying new recipes and origami. They attempt to bring out their best selves by combining their professional skills as CAs and their love of being around and learning from other creators through their personal finance management solution - Stash.

We’re tackling a big one in our first edition of Rags to Riches - personal budgeting *collective groan*.

I get it, nothing about budgeting and keeping those purse strings tied up tight sounds like fun. But stay with me through this and I’ll tell you why budgeting isn’t so much an exercise in financial self-flagellation and denial, but a path in a completely contrary direction.

We’ll try and help you understand why you spend on what you do, how to determine what gives you joy (Marie Kondo would be proud) and how to tailor your expenses to help with getting you more joy and less stress . Also, how building a money routine of your own through a budget can actually help relieve anxiety around money management, rather than exacerbate it.

What personal budgeting is is simple enough - it is a basic record of your income and expenses. This could be for you as an individual or for your household unit, whatever applies to you and your situation. The ultimate objective of maintaining a personal budget is to be able to track your weekly/monthly/yearly incomes and expenses, the knowledge of which can then be used to make financial decisions such as saving, investing etc. (pat on our back now for being a real financial blog by quoting every financial blog ever).

STARTING OFF… (drumroll please!)

If you’re anything like I was at the beginning of my financial journey, the idea of having all of my bad money behaviour laid out bare in front of me was painfully anxiety inducing. 

What I ended up observing though was that what I was spending on and what I thought I enjoyed, seemed to be very differently aligned. I’d figured my biggest expenses would be experiences or holidays or online purchases even (I genuinely believe anyone who says they don’t stress shop is lying). It turned out I was actually spending an exorbitant amount of money ordering in. My most expensive nights were my bingeing nights-in (zero guilt!) but closely followed thereafter by my bingeing nights-out (different bingeing, same big financial dent). And it was very clear that I was spending more than I was making almost every month. As enlightening as this all was, I have to say it really really was not fun. 

But effectively, this is what a budget does. It shines a light on what you know is going on deep down, but are unwilling to accept. I will emphasise this - each of us will realise we have our own financial black holes when we begin to map our budgets. But the way forward from here doesn’t have to be one that makes us miserable. My first few months of budgeting were hell. I drove myself to a complete panic and held back militantly on every expense I thought was frivolous. And finally I broke down, switched gears and made tweaks to my spending that felt manageable to me.

The first big Don’t of personal budgeting: 

Do NOT make behavioural changes in the first few months. These months are to simply observe. Once you know what you need to do it’s easier to do it, than trying to do everything together.

HOW THINGS CHANGED FOR ME ONCE I STARTED OFF

Ragini and Alcohol - Always a winning combination... until it came to personal budgeting.

And this is where budgeting gets fun - it doesn’t compel you to remove the joyful experiences in your life, on the contrary for me it’s enhanced the experience of doing the things I love. I now do more diverse stuff, I say no when I don’t feel like doing something and I’m doing all of it without that feeling of financial anxiety at the bottom of my tummy each month. 

The little changes I made in my life eventually compounded to bigger behavioural changes. Once I had a handle on my expenses, it became easier to set aside money towards savings and investments which in turn have led to some degree of financial independence through stability and gradual growth in the long run. I know everyone says this, but it is really true. It’s always the little things, y’kno.

Personal budgeting is the first step to achieving that dream life of financial independence. Whether it is to achieve certain income goals for yourself, move to the mountains in five years or to take a year off work to focus on realising that side hustle dream (it me!). Financial independence isn’t just about saving up for that rainy day or for when we retire - it’s about living our best lives in the manner that we want without letting money constrain us. It’s about giving yourself the freedom and the flexibility to make choices in your life.

Ragini and Box living their best life. 

So here is where we get you started in three simple steps!

Step 1

Fix a day within the next two weeks and take the afternoon off. Take yourself out for a cup of coffee (very chuffed to be a financial blog that’s recommending spending on coffee outside ngl) and sit down with your laptop and your bank statements. Spend the afternoon looking through your most recent bank statement, which is the statement of the last month just gone by (very easily downloadable via your netbanking or your bank app. If you don’t have your netbanking activated yet, or your phone app - let’s just say this is now a four step process for you.)  and identify broad categories of expenses. Once you have this, you’re ready to create a budget template. You can download a simple version of a template here. There are also a ton of these you can find online, and since you already have your broad categories you can use a sample and tailor it to suit your lifestyle and expenses. 

You don’t need that 100% accuracy to get the ball rolling, just get the ball rolling and if you hit an 80% accuracy (and you will with any simple budget) it’s a great start.

You could even take a buddy along and do this as a twosome. Be each other’s personal budgeting cheerleaders.

Step 2

Once this is done, outline a money routine for yourself. What this basically means is how often (daily, weekly, monthly) do you plan to update your budget and how frequently do you plan to take stock of your expense patterns. Putting your budget schedule on auto-pilot removes the decision-making fatigue around the when and the how and therefore, reduces the stress and anxiety caused by the uncertainty around when next.

If your monthly expenses are fairly regular (travel passes, subscription fees, rent, therapy sessions) and rarely vary drastically with more irregular expenses (holidays, outings, family and friends visits, medical bills) it’s good enough to budget once a month. If it’s more irregular expenses that are harder to track, it’s more helpful to log these in once every week or two.

Step 3

And finally, pay the bill for your coffee and log the expense in to your newly minted budget sheet. Calendar in your next budget date and head on home knowing you got a great day of work in! Hallelujah!

We all have our origin story when it comes to being our own financial superheroes - whether yours began with that CA exam your parents insisted you take, or after reading this blog. Regardless, I promise you, it’s never too late! It’s a cliche but it’s true. Do it for your future self - you and them both deserve it. 

The Big Fine Print:

We’d like to establish that while the principles outlined in this section should pertain to anyone, we’ve put this together with a focus on creative professionals and freelance workers. Also, while we do have Husein and Sakina consulting with us on this column and keeping us straight, we’re not financial advisors. This column is for informational and recreational purposes only and in no way meant to offer advice or recommendations.