Bonus: utilities as they are directly related to your housing situation (e.g. bigger space requires bigger heating bills)
Order of operations matter, and most of us are doing it backwards
Here is how most people start their budget. I also used to do it this way:
Why are #2 and #7 in bold? Because I want people to get in the mind set of switching them.
Here is how I start my budget:
Naturally, if the number you come up with in #7 is completely out of scope of the city you live in then most people immediately just throw in the towel and go back to the status quo (the first budgeting tool). But really this is an opportunity to do something hard: really think about what is causing this outcome and make a change. Are your housing standards too high/fancy for the income you make? Is the reality that you simply cannot afford to live in the city/area that you want to live in? If your priority is not reaching financial independence, then you probably aren't reading this blog. But if you are reading this blog, then you can happily revert to the status quo and continue living paycheck to paycheck and cross your fingers for the future. But if you are serious about reaching financial independence, this is the most important budget reversal tool you can use to get you there.
Adjustments to housing, transportation, and food costs is really a once per year wake-up to go "wow, I have to make this huge change". Once you make these changes, you realize that overspending $50 on entertainment this week or overspending $30 on avocado toast isn't what's changing the needle and really just makes you feel shame when you don't nail the smaller line items every month.
When do I make budgets? When I'm moving
Moving cities or countries is the only time that a budget is useful for me. But I only use it in the estimation of what salary I need to earn, how much I can save, what costs are going to be surprisingly larger or smaller than I'm used to, etc. Once I have made the move, I am back to my default position discussed above. If my budgeting outcomes tell me that the amount left in #8 is below the price of rent in the area/city I want to live in, then I will reconsider even doing the move at all.
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Unfinished human, currently v.5.0. Expecting at least 10 more versions. Aspiring adult.