I began the year with a post detailing our monthly household expenditures here in Mexico.
After that post, I received dozens of emails requesting a breakdown of additional common budget categories such as entertainment, eating out, gasoline and groceries.
Although I did mention those areas in the post, I didn’t assign them a set value.The reason that I didn’t is because those budget categories are flexible. We can easily alter our behavior a bit where needed in order to stay on budget.
When we moved to Mexico, we had to learn to live on a lot less income (about 67% less). That meant developing healthy spending habits and carefully tracking our expenses.
If you’re new to the world of budgeting — or if you’re just curious how we do it — here are a few tips to get you started:
Determine Your Disposable Income
The first thing you have to do is determine your fixed and variable household expenditures such as rent, utilities, car payments, insurance payments etc. Once you determine how much you absolutely have to spend each month, you’ll be able to determine how much discretionary money you have left over for food and entertainment.
For the purpose of this article, I’m going to use a monthly budget of $2,500 USD for two people living near the coast in the Riviera Maya (like us).
I’m also going to use the monthly household expenditures ($600 USD) from our previous article. That amount includes the following: water/sewer; health insurance; car insurance; internet; cable; electricity; and homeowner’s fees.
That means that we would have $1,900 USD for the month to use for everything else that we spend money on: food, gasoline, groceries, travel, entertainment, church, shopping, margaritas, medications, tips, parking, etc.
Track Your Spending
We use a phone application called Spending Tracker to track every single peso that we spend. We convert our discretionary amount into pesos and enter that into the app at the beginning of the month. We then make entries every time we spend money.
Determine Your Daily Budget
This one is very simple: at the beginning of the day, just divide the amount you have left by the remaining days in the month. If you spend less than the budget allows, then your daily budget will be higher the next day.
For us, it’s like a game to keep the spending low in order to watch the daily allowance increase. We know that if we do well, we can use the surplus for a staycatation.
I created a chart to illustrate how this type of budgeting works over the course of the month. Normally the chart would be in pesos, but I felt it would be clearer for demonstration purposes to leave it in dollars.
The Daily Budget category is the maximum that I can spend that day to stay on budget.
The spending used in the example is representative of our average daily spending. The amounts can fluctuate quite a bit depending on our activities that day.
For example: if we put gas in the car and then go out to eat prime rib at one of our favorite restaurants, the daily total is going to be higher than normal:
If we spend a lot of money one day, we try to compensate by being thrifty the next.
At the end of the month, you can choose to carry the surplus over to the next month or save it for a rainy day. If you spend too much, the only choice is to carry over your deficit. Hopefully, that doesn’t happen too often.
Let’s Wrap This Up
Although we’re very budget conscious, that doesn’t mean that we just sit at home counting pesos. We travel regularly, eat out almost everyday and enjoy a fun-filled Caribbean lifestyle.
Granted, we don’t have as many possessions as we once did — but the truth is, we don’t miss any of them. It’s more fun to spend money on experiences instead of things.