If you Googled “how to budget,” you would find a plethora of useful budgeting resources and information. That can be quite overwhelming for people new to budgeting and expense tracking. In this post, I will walk you through my monthly budgeting approach in an attempt to make budgeting easy. Grab yourself a cup of tea because this is going to be a long read!
If you are interested in learning about the different budgeting methods, this article is a great starting point.
1) Why do I budget?
I would be lying if I said budgets have always excited me the way they do now. I am glad though that I now love budgets because they have helped me achieve my toughest financial goals. These include buying our Amsterdam apartment, paying off my undergrad student debt, supporting a student’s private university tuition and living expenses in Pakistan, and planning for retirement. In working on these goals, I have come to see budgets as enablers instead of restrictors.
2) What’s my financial situation?
I was not always but am now financially much more privileged than a lot of people with a similar socio-economic background as mine in Pakistan. In the Netherlands too, my income is significantly higher than the average income for someone my age and I have a permanent employment contract.
I live in a two income household, which too is a considerable financial advantage. My partner and I proportionally split all shared expenses for e.g., mortgage payments, house bills, and holiday costs. Aside from that, our finances are operationally separate.
I do have family support responsibilities that perhaps not many 29 year olds living and working in the Netherlands do, but most people from South Asian backgrounds would recognize. I also have no generational wealth or inheritance to fall back on. Instead, in addition to planning for my own retirement, I also plan to ensure that my parents live comfortably in their retirement.
I wanted to share my financial context because it determines how I budget my income. If you draw inspiration from how I budget, remember to keep your unique financial situation in mind.
3) How do I create my monthly budget?
I use a combination of percentage breakouts and zero-based budgeting methods. The latter quickly became a favorite when I was paying off student debt and wanted every penny of my income accounted for. Many people find zero-based budgeting restrictive, but I appreciate the control and clarity it provides me at month end.
My monthly budget categories
Using percentage breakouts and zero-based budgeting, I divide my monthly budget into five categories:
I – Income
This is my take home pay after income tax (38% on gross monthly pay and 52% on all bonuses), contribution to my pension plan, and contribution to an occupational disability insurance scheme that protects me against loss of income. Due to a small caveat in my immigration process, I do not have–and never have had–the 30% tax advantage that a lot of expats in the Netherlands are eligible for. If you are a new expat, do check if you can apply for the 30% tax ruling to give your take home pay a nice boost.
II – Essential expenses
These include my monthly mortgage payment, utility bills and home ownership related taxes, health and life insurance premiums, grocery, public transport subscription and a couple other costs that I find are absolutely essential and cannot be avoided. In a typical month, I allocate about 35-40% of my income towards essential expenses. Some months it is more if I have payment due for a bill charged quarterly or biannually.
III – Non-essential expenses
These are expenses that I can live without if necessary but choose to indulge in to enjoy life. These include fun things like eating out, uber rides, gifts and donations, salon trips, vacations, etc. I try to allocate about 20% of my income towards non-essential expenses. The months in which I book travel or splurge on home purchases, this percentage is higher.
IV – Savings
My savings include an emergency fund and a save to spend account.
I have the emergency fund for well…emergencies like a burst pipe at home or sudden loss of income. The amount required for one’s emergency fund would depend on how much financial protection they have. The Dutch labor law provides me significant employment security. It is nearly impossible to terminate a permanent employment contract in the Netherlands. I also of course have occupational disability insurance with my employer that protects me against loss of income. As a Dutch national, I would also qualify for reasonable unemployment benefits. Considering all of these safety nets, I feel three months of essential expenses constitute a fair emergency fund for me.
The save to spend account is where I occasionally put away money so I can fund unforeseen expenses and / or any luxury purchases. I try my best to live within my means and keep my non-essential expenses in check. That said, I do allow myself a mindfully deliberated fancy purchase or experience once in a while. Recently, after I completed a three-month long intensive personal project, I treated myself to the Hermes Oran sandals from my save to spend account. It felt amazing to be able to treat myself to a piece that had been on my wishlist for so long, and especially as a reward for prioritizing a personal growth project!
V- Investments
This includes the money I put away in Exchange Traded Funds (ETFs), and occasionally in individual stocks and crypto. I have a few investment accounts (Revolut, Peaks, Degiro, Coinbase) that I have used overtime, but now I predominantly use Degiro. My emergency fund is full, which means I have more disposable income than if I had to still top up my emergency fund. So currently, my aim is to invest at least 25% of my monthly take home pay. A massive privilege, I know.
Monthly budgeting routine and habits
I receive my income on the 26th of every month. Prior to the 26th, I sit down and anticipate the amounts for each budget category for the following month. I then fill out my estimates in column C of my monthly budget sheet. I created this sheet eons ago. It is simple and requires manual handling, but I still prefer it over using apps for budgeting and expense tracking. I like the control it provides me to tweak things around.
After receiving my paycheck, I immediately move 25% of it to my investment account and pay bills that aren’t automated. I also record these transactions in my budget tracker. It sounds like a lot of work, but in reality it is second nature to me. I have the Google sheets app in my phone. So it takes me less than a minute to enter my expenses as they occur.
Throughout the month, I continue to add my expenses in columns F to H of my monthly budget sheet. When I enter the expenses, my actuals per category are automatically calculated in column D. This helps me easily assess how I am doing against the category targets I set myself in column C prior to month start.
Once a week, I take ten minutes to review my expenses and account for any changes required in my budget. At month end if I have money leftover then I typically invest it, or occasionally, contribute it to my save to spend account.
4) Tips on using my monthly budget template
I have been asked multiple times on Instagram to share my budget template. I repeat that it is nothing special and in fact requires a few minutes of your time each week to be updated. But I have been using it for years now and really appreciate its functionality. If you choose to use it, you can follow this link, click file on top left, and then select download to save.
It has two templates actually. One that I use to budget and track my expenses monthly and one that I use to understand my annual financial picture. To effectively use the monthly budgeting sheet:
- Make copies of the sheet for each month.
- If you change names of any categories in column B, make sure to reflect those changes in column K and in the formula running in column L.
- The charts on bottom right will fill themselves once you add the numbers.
- Expense category totals in column D will pre-fill themselves when you add your expenses as they occur in column F to I.
- If you run into any issues, Google is your best friend! I am happy to share my template, but cannot provide any support on personalizing it.
5) Final thoughts
This post is not financial advice. I have shared what I do with my monthly budget to inspire anyone interested in setting budgets and tracking their spending. Budgets come in all shapes and sizes depending on incomes, financial responsibilities, and long-term goals. It is not necessary that my budgeting strategy will work for you. So, instead of comparing your budget or spending to mine, assess what will be most practical in your unique position.
I wrote this post because money is still a taboo topic in South Asian culture, especially for women. Women are also disadvantaged due to both gender pay and wealth gaps, especially minority women like myself and the majority of this blog’s readership. We therefore need open conversations about personal finances. The ability to learn from each other’s experiences can help maximize our earnings’ potential and create long-term financial security. Along those lines, I also have written another post that consolidates my lessons learned from negotiating my corporate job offers.
Lastly, if I could say one thing, I would say to focus on learning and progress. Only two years ago, I was living with student debt and knew nothing about investing. That is on the record in this post where I reflected on the five years after graduation. Fast forward to now, I have my students debt paid off and I invest every month. Nothing happens overnight; stay curious and keep up those small but consistent good money habits.
If you have any questions or tips of your own to share, feel free to leave them in the comments.
Wish you a great start to the spring season!