Lifestyle Inflation- Do Not Stress Over Money With This

I have written about my start in improving my financial situation. You can read about it here.
However it was not an easy and straightforward transformation to actually care about my financial life, my budget, tracking it and actually sticking to it.
It took me a long time to see the value in it and see how it is holistically connected with other parts of my life. 
I felt it did not matter to budget, track or save. Every cent I had was needed somewhere. The money I got was the exact amount that I needed to cover my life.
Budgeting and tracking made no sense, so why do it? 
It would make sense though, once I started to earn more money. If I would have 1000 more that would do it. Then I could save.
Oddly enough, even when I got that 1000 extra it did not help. I found something I needed to spend that on so 1000 was not enough to save. But probably 5000 would be enough. If I would have 5000 more, I would for sure be able to save. It was never enough. 
So I had to look for more students to teach, more translations to do, and just more ways how to get those extra 5000 which I needed which left me working 12+ hours a day, as the rule and not an exception. Thinking back at it, I feel sad about it and how little time with my daughter I had. Spending it working and working. Each hour I increase, my stress and anxiety also increased. Never having time to fully recharge. I could not see how it was all hanging together.  How one part of life, influences the other. 
Only thing I was wondering was how come did I never have any money? I had those 5000 extra but I felt that I had less money than ever. 

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Never Having Enough Money- Lifestyle Inflation

 Many live their life like this. First time it hit me was when a friend of mine had her credit card declined. I could not understand it as I knew that her salary was in the 6 figures.
How could she have no money?

Lifestyle inflation happens when your expenses increase along with your income. As earnings increase, it’s natural to want to buy a better car or take another vacation. After all, it seems feasible. But if your savings rate isn’t at least keeping up with your rising expenses, you could end up worse off compared to when you earned less.

https://www.forbes.com/sites/kristinmckenna/2020/06/22/the-true-cost-of-lifestyle-inflation/?sh=720381212423

How I Started to Say No and the Path to Financial Stability


This was exactly what also I did.
I had a decent salary but still a deep pit in my belly every time I needed to buy groceries.
Would there be enough money in my bank account?
I very often felt that it did not matter how much money I received as it all only disappeared. How was I still struggling paying rent when I had more money coming in than in the past? It was obviously a rigged game and I was the loser.  This was my excuse. I did not want to look myself in the mirror and see what I did wrong. 
What made it change I do not really know. Somewhere the transformation towards a healthier mindset commenced. 
Maybe had I had the feeling of being sick and tired of too long? A life revolved around anxiety and stress and pushing it away with, mostly, food.
The humiliation, stress, worry, and sickening feelings had grown enough big. Something just had to change. 

I started to finally say no.

Stop Living Paycheck to Paycheck- Working Towards Financial Security

Living paycheck to paycheck: For many, this act of using most or all of your monthly income to cover your monthly expenses — with no money left over and none for savings — is a fact of life.” – Read more here

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I used to have huge problems with my personal finances. Especially after my divorce. I spiraled down into this black place of borrowed money and panic over paying rent. 
I once had a washing machine dysfunction and my entire flat was covered in water, leaking down to my neighbors. I ran to the janitor in the building complex to fix it. He had to turn off water in the building and to turn it on, I needed to repair the connection with my washer. It cost 200 Bolivianos, 30 dollars or 25 euros. 
I did not have it. 
This was not the last time something like that happened, but at one point in life I was exhausted by this. Exhausted by living one small accident from chaos. One tiny incident away from eviction. I had to do something. 

How to Not to Budget and Failing to Keep On Track

This is my first-ever budget. It is not a fancy program that you connect to an app that is connected to your bank account. I had KISS in mind.

Keep It Short and Simple. 

There was no point in adding fancy things and complicating it. I needed it as simple as possible, to actually do it and be successful. I have more categories now, and few more tabs now. Tracking all kinds of different things.  
And truth to be told, even this was too boring and complicated and the first 2 months I did not really know what the heck I was doing and mostly did I not do it.
I added some arbitrary number ideas to my excel sheet, expecting it all to come together. Deciding I would spends this and that amount on this and that category.I had really no idea what I had previously spent, but it sounded great to spend 100 euro on food. That is about right, right? 
It was all just a mess and I felt many times I would be better off just stopping. I kept on though and practice become the master.  At this point it was Youtube and blogs I watched and read to understand what I needed to do. 

 And with this structures and processes happened. It helped me understand how I can budget, with my type of income, better. I am a freelancer and I get paid a bit all over the month, so it is hard to think about my paycheck as my monthly income. I want the money to work for me, not me for my money. I need to create the life I want with my money. If I do not want to spend 100 Euro on money, why should I put this arbitrary number into my budget? 

Realizing that a budget is not one thing fits all was the big thing that helped me. I can make it do and work for me, how I need to to work.

One Effective Way to Budget to Make the Money Work For You.

Instead of budget for future money, and adding in some random numbers into random categories I decided to budget with the current money I have. I decided to go from 15-15 each month, and everything that was leftover would be treated as extra money and be added to savings and anything that came into my account after the cut-off date would be counted as the new month’s money. I also decided to only budget the money I actually had received and not money that would come in. 
I also sat down and looked where I wanted to go in life. What were my life and financial priorities.  When these were defined I looked if they were actually in my budget and what amount did I assign to this priority. 

I wanted health and active activities, but I, in my budget had 0 allocated for this. So I always felt short of money doing just this. On the other hand, did I have a HUGE category which was for entertainment and drinks.
Where were my real priorities?  All this is crucial to define. This can obviously change over the course of time, and I look at this every month. What do I want to do? What is my focus this month?
Having these defined I set up the plan on how to allocate the money received and nothing else. 

 

  • I have only received two payments this month and it is only these two I will budget out
  • The most crucial expenses are listed out and how much I need to pay for these. If these are paid first, I know that my obligations are fulfilled and I can sleep better at night.
  • You budget clothes and no food? I have a full fridge for another week and I know there is coming in more money for this, in one week. And I have to get snow protective clothes for my kid! This is what I mean by having the money work for me. Why put money in a food category if I do not need it now?
  •  After paying them, tracking them just by adding them to the right category.
  • When I get a new payment I will add this into the budget and give the money a job in the categories I feel and know needs to be contributed to. 

This way I have a clear view of what I can actually afford and not and at what time. 

Will This Make You Reach Financial Freedom?

Absolutely not. 
This is the first change and decision I made to create a better financial life and stop the vicious cycle of living paycheck to paycheck. Creating wealth and financial freedom is a lot of work, but one has to start with the first step.  It was far easier and better than I could ever have excepted.
It is now clear and obvious what I have to pay, what I want to cover, and how to get the money create the life I want. 
This has resulted in far less stress and anxiety which has left me with a feeling of relief that I did not for many years. This order in my finances created the space how to add new levels to my money and make them work even
It is sometimes strange not to stress over my finances and the disorder it used to be in. Strange but amazing more for me. 
Overeating and stuffing myself due to poor financial control is no longer my problem.
This is why it is so important to have a holistic view of weight loss, as it is all connected. NO machinery works well without all its bolts and gears.