Spend consciously with a budget

September 7, 2021

What is a budget?

A budget is an economic plan. To budget is to plan for future expenses and income. In layman's terms a budget is usually the max limit you set for your expenses. A budget is a useful tool for a sustainable private economy for anyone who wants to save more, make ends meet or just keep track of their finances. Above all, it's easy to use and creates certainty when you're in control of your finances.

Here's how it works

The first step in setting a budget is understanding your own patterns. Find out how much you spend and where you spend it. Start by looking at previous months. (Psst… Did you know that you get a full year's categorized spending history with P.F.C. Premium?)

When you have a clear view of your expenses, it's time to divide them into three categories.

  1. Musts –  Here goes everything from rent, interest on loans, phone charges and food. Simply put: your living costs.
  2. Pleasures – Every cost that makes life worth living. From streaming services to travel costs. Also gym memberships, games, clothes and restaurant visits.
  3. Future – Your savings, short term and pension, investments and possible amortizations.

Sort your expenses

Sometimes you will be able to save more and sometimes not as much, the best type of saving is the one that gets done. First of all you need to make sure ends meet every month. The next step is to get started with your savings. We suggest a common method where the goal is a sustainable economy over time. The finances are split 50-30-20 and the goal is to put 50% towards musts, 30% to pleasure and 20% towards the future.

When the budget doesn't add up

If your ins don't cover your outs you'll have to find ways to reduce your expenses. A lot of small charges tend to hide up in the “pleasure” category, this is also where the easiest changes are made. Here you'll probably find luxury spending like eating out, impulse purchases or services you neglect. You could also have set fees that you would like to reduce when you realize how much it actually adds up to over time. There are short term solutions like terminating streaming services and switching to a cheaper phone plan.

One example is eating out. The cost of a lunch is at least 90 SEK, often more. Three lunches per week is 270 SEK. You can in other words save up to 7000 SEK bi-annually just by bringing lunch from home. Money you'd rather spend elsewhere.

The most important changes are however bigger and more complicated, but might be necessary if the budget isn't working. The problems might be in the musts or future categories. Rent or amortization can eat too much of your income. That doesn't mean it has to be as boring as just cutting down costs. You can balance your finances by tipping the scale the other way too, by increasing your income. You could get a temporary increase by selling unused items, or maybe consider changing jobs for a more stable increase in income. Regardless if the goal is sustainable finances long term, saving for a trip or the big move, a budget is a great tool for managing your money.

If you are a P.F.C. user you can also set a budget in the app.

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