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My take on Living on Last Month’s Income

Bully the Bear talks about finally being able to see a non-negative number for his March budgeting. I thought that is  an interesting share.

This rule comes from the famous budgeting software called You Need a Budget. Not many said a bad word about it. I find that it lets a person be responsible of every dollar he owns.

If no one explains budgeting to you, the first thought would be to budget what you earn this month. We some how find that it’s a bit like putting the cart in front of the horse.

Well, not always, its rather like in project management where you forecast each item in the future how much it cost per unit and get the budget for it.

YNAB’s take is to spend last month income this month.

I know you guys probably don’t have something to do envelope budgeting, so you  might want to try out this spreadsheet which I am monkeying around with. It does envelope budgeting like how YNAB does (since it’s a spreadsheet and not a full fledged app, there are limitations). Just go to File > Make a Copy to start monkeying around with it.

As I do this more (for the past 9 years) I tend to be accustom to spending last month’s income rather than plan forward. It makes sense that those are the tangible money I can allocate, versus not knowing about the future and depending on that. I believe this makes more of a difference if you are self-employed or have variable income.

In this example, planning for Jan 2014 budget means using Dec 2013’s income. If you are planning on a fresh, you might want to save up for at least one past month’s  cash in order to execute this.

You then proceed to spend what is “Avail to Spend”.


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Monday 3rd of March 2014

Oh man, you've no idea the kind of difference it makes for someone with variable income. It makes planning so much easier, because now, you just need to deal with one variable - spending your expenses within your budget. In the past 7 months, I not only have to deal with a unknown future budget, based on a unknown future income and try to balance all at the end of the month. It should be much better going forward.


Monday 3rd of March 2014

cart in front of the horse. to those regular income folks doubt they would understand that. but strangely after they said that it makes more sense. the jialat thing about project management is that you always need buffer or there will be inevitable overruns, which perhaps spending last month's income tries to resolve.

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