We all know the benefits of creating a budget, and of understanding or spending habits. But if you’re anything like me, I don’t really have a strict budget, per se. I loosely keep track of my core and fixed expenses – rent, utilities, loans, etc. – but for my more discretionary expenses, I admit that I am not as vigilant.

To the extent I can, and for most expenses, I pay via credit card, which is convenient, and frees me up from having the cash on hand. At the time of payment I evaluate the purchase, and of course will decide whether it is too expensive or not, but sometimes, it can be a bit of ‘sticker shock’ when I check my credit card statement and see the total due from all of my ‘relatively inexpensive’ purchases.

Furthermore, and over the past few months, I have become aware of how much cost of living has increased. It is especially apparent with respect to groceries, as you tend to pick up the same things on a fairly regular basis, and so even if you are not avidly tracking prices, you are likely to notice some price hikes that have occurred.

It is also through this lens that budgeting has become a bit more challenging. Even if you were to allocate X amount for groceries, or for petrol, for example, the price for essentials are going up, and to some degree, you really have little choice but to cough up the extra cash and pay.

Having said this, there can also be a feeling of loss of control. I live a pretty modest life, but just to maintain my basic existence is costing more and more every month. In other words, the dollar figure I am spending every month is increasing, but for that amount, my life and lifestyle either has remained unchanged, or is being pared down in order to keep my expenses in check.

 

To Budget Or To Not Budget?

These days, thanks to the pandemic, and more recently, the Russia-Ukraine conflict, global supply chains have been adversely affected, which is affecting the cost of fuel, food, and consequently almost every good that is produced. As a result, and over the past two years, countries have seen sharp increases in inflation, and in the cost of goods, which in many instances, consumers have just had to bear.

To that end, and the reason why I am asking whether or not a budget is needed is because there can be a sense of futility around the exercise. As mentioned earlier, and as much as we do have some control over our spending, there are certain things we have to have, and so have to find the means to pay for.

To that end, creating a budget is particularly beneficial in order to understand how you are spending your money, from a macro level, and the adjustments you might need to make to maintain your life and lifestyle. For example, as your utilities, food and petrol prices increase, and if you are on a fixed salary, adjustments may need to be made. Understanding how your income is allocated will help you to figure out how and where you can make adjustments for whatever shortfall exists.

It is also important to highlight that in many of our budgets there are leaks – expenses and payments we are making that we really are not considering, either in terms of the amounts or frequency. Some frequently overlooked expenses are: how often we buy lunch or a coffee; or how often we go to the salon for a blowout, or a manicure or pedicure. These might be some of the areas in which we can cut back, if needed. However, it is only when we really start to see all of our expenses, figure out how much we are actually paying for discretionary expenses, and begin to interrogate them, that we may be able to make more informed choices going forward.

 

Just A Last Word On Credit Cards

As convenient as credit cards can be, as was noted in The Credit Card Gremlin, And How You Can Avoid It, it is easy for the charges to get out of control. Individually, a particular charge might be modest, but when they are all added up, a completely different – and very expensive picture – might be painted.

It may thus be prudent to also carefully examine your credit card statements, not only to confirm the charges that have been listed, but also to consider whether all of the charges are worth it, and whether they should be avoided in the future.

 

 

Image: RODNAE Productions (Pexels)