This video outlines a three-step system for budgeting for summer holidays: prepare, adjust, and redirect. It also discusses various budgeting methods like the 50/30/20 rule, zero-based budgeting, and the envelope method, emphasizing finding a method that works for you.
Prepare (Phase 1 - May) #
- Personal Finance Check-in:
- Assess current savings.
- Determine how much saved money is available to spend this summer.
- Estimate how much take-home pay can be allocated to summer plans in the coming months.
- Establish a ballpark summer spending figure.
- Estimate Summer Spending:
- It's easy to underestimate spontaneous costs (festivals, brunches, gifts, outfit buys).
- Review past summer spending (e.g., June to August of the previous year) as a predictor.
- Map Out Ideal Summer:
- Identify desired memories and must-attend events.
- Create an "ideal month" plan for the next few months.
- Include planned activities and potential last-minute additions (dinners, takeaways).
- Put a price tag on everything, including daily spending, activities, and potential outfit purchases for trips.
- Prioritize:
- Compare the ideal summer spending to the available budget.
- Break plans into three tiers:
- Absolute must-haves (non-negotiables).
- Middle tier (nice to have, but not essential).
- Low priority.
- Allocate the budget based on these priorities.
- Spend with intention by prioritizing and allocating funds upfront.
- Free 5-Day Savings Challenge:
- Mention of a free resource to help save more for summer spending.
Adjust (Phase 2 - June to August) #
- Stay Flexible Without Losing Control:
- Check in with the budget weekly or at least mid-month.
- Review spending pace and assess if adjustments are needed.
- Creative Budgeting:
- Find ways to enjoy plans at a lower cost if overspending occurs.
- Use credit cards with rewards (points, cashback).
- Book in advance.
- Continue social plans in more budget-friendly ways.
Reflect and Redirect (Phase 3 - End of Summer) #
- Regroup and Realign:
- Perfect time to get back on track with longer-term financial goals, whether on budget or overspent.
- Review Overspending:
- If over budget, identify where the extra money went.
- Evaluate if the spending was worth it.
- Note surprising expenses.
- Write reflections down while fresh to avoid repeating patterns.
- View Finances through a 12-Month Lens:
- Look at total income and expenses for the year.
- Determine target spending for the year overall.
- Manage financial ups and downs over time.
- Acknowledge that overspending in summer might mean underspending in other months, aiming for balance yearly.
- Redirect Spending:
- If off track, adjust spending for the rest of the year.
- Make small adjustments, cutting back on non-essentials.
- Funnel savings back into emergency fund or other savings goals.
- Targeted adjustments in September can help recover while maintaining long-term goals.
Budgeting Systems #
- 50/30/20 Rule:
- 50% of take-home pay for needs (rent, bills, food).
- 30% for wants (fun, entertainment, dining, travel).
- 20% for future use (savings, investments, emergency fund).
- Easy to follow, avoids last-minute stress, adjusts to income.
- Might not be enough for fast saving unless spending is adjusted.
- Can be challenging for freelancers with inconsistent income.
- Good for structure without micromanaging every expense.
- Zero-Based Budgeting:
- Give every dollar a specific job until income equals expenses.
- Prioritize fundamental spending and then allocate savings for holidays.
- Adjust by cutting non-essentials to free up holiday funds.
- Upside: Stops wasteful spending.
- Downside: Takes more time and effort, requires tracking every penny.
- Envelope Method:
- Cash system using envelopes for different spending categories.
- Allocate cash to each envelope; no more spending in a category when empty.
- Can be done digitally with budgeting apps.
- Good for people who lose track of spending or need visual cues.
last updated: