FRUG1001 How to Make A Budget

Hello, everyone! This is Jerry, the author of this blog.

I decided to start a new series named FRUG1001. Yes, it is the freshman course of frugality. I will take about ways to lead a frugal yet fruitful life. This is the first 'lesson'. I would like to talk about how I draft my budget each month.

As we all know, in order to keep our expenses in check, making a budget is essential. As digital payment methods become more common, we become less sensitive to the pain of paying our bills and hence more easily over-spend. As a result, it is important to make a budget which make me more aware of the money we have.

I summarised into three easy steps of making a monthly budget.

1. Know your spending habit
First of all, you have to divide your spending into categories such as transportation, food, housing, clothes, phone bill, travel etc. You might not name all the categories at once but you might add some more categories later on.

Just one quick tip. It is better to separate one-off or irregular spending from daily spending. For example, I will have a category 'social gathering' and 'travel' instead of putting them under 'entertainments'. This allows you to track where your money goes.

2. Calculate the numbers
Then you calculate how much you will spend on each category. This is not a very difficult task for a full-time working class in Hong Kong as most of us have quite regular spending habits. For example, we take the same buses or train to the same working place on weekdays. We could always google the ticket price of the public transport.

As for food, lunch in Hong Kong costs around $30-50. You could simply multiply that with the number of days you will eat out. Similar method could be applied to hanging-out. You multiply the average amount of money you spend on hanging out with how many times you hang out each month.

3. Sum them up
last but not least, you could get the total sum by adding up the numbers of all categories. Personally, I will add an extra 10% as a buffer because usually there are some unforeseeable expenses. I have an Excel sheet to help me do this job so that I do not need to reinvent the wheel every month.

That's it! Making a budget is not difficult at all. It just takes some time at the beginning, but once you get used to it, it's a piece of cake yet a very powerful tool to keep your spending low and saving high!

Go ahead and try to make your own budget! Thank you for reading!