Budgeting for Migrants, Part 1: What Goes Into a Budget?

Welcome to Rewire’s 4-part series about budgeting for migrants. Managing finances in two countries simultaneously is tough, but by creating and sticking to a budget plan, you’ll have an easier time saving your money. In this series, you’ll learn what goes into a budget, how to create your own budget, and some tips to help you along the way.

What Is Budgeting?

In simple terms, budgeting is planning how you’re going to spend your money. Part of budgeting is considering how much money is coming in and how much money needs to go out on different expenditures, like rent and the cost of food. The purpose of creating a budget is to find places where you can save money in advance as opposed to handling your income and expenditures every month on their own. 

Think of budgeting as a scale: you’re trying to balance your income with your monthly expenses and trying to get your income to come out on top. Budgeting is especially important if you’re a migrant and you need to save enough money to send home month after month. Creating a plan for your spending will allow you to see what expenses are vital, which ones are less important, and how much you can expect to save each month.

How to Calculate Expenses

Before you can sit down and begin to calculate your expenses, you’ll need to understand what is an expense. Expenses can be anything from your rent, utility bills, transportation costs, and even tickets to a movie. Essentially, an expense is any money you spend throughout the month. Of course, some expenses aren’t always planned, such as repairs or medical costs, so the expenses you budget for are usually the ones that repeat themselves each month and that you can anticipate.

It’s important to understand that not all expenses are equal. There are two categories of expenses: discretionary and non-discretionary. 

Discretionary Expenses

A discretionary expense is something that is not essential to your budget or your life. That being said, discretionary expenses might also be something you want to factor into your monthly budget and may not prevent you from your savings goals. Some examples of discretionary expenses might include:

  • Streaming services, like Netflix or Spotify
  • Meals at restaurants
  • Vacations
  • Entertainment costs
  • Gym memberships

Non-discretionary Expenses

Non-discretionary expenses are just the opposite: they’re expenses that are essential to your budget and your life. It’s important to consider all the expenses that might be essential to you as these are the core expenses that will repeat in all your monthly budgets. Some non-discretionary expenses can include:

  • Rent or accommodation costs
  • Utilities
  • Transportation
  • Phone bills
  • Medical coverage or insurance
  • Cost of food and groceries
  • Loan repayments

Of course, everyone’s discretionary and non-discretionary expenses will look different, which is why it’s important to sit down and make your own budget as opposed to borrowing one from a friend or using a template you found online. You might consider transferring money back home a more essential expense than the cost of entertainment, for example. 

To Wrap Up

Knowing what expenses to include in your budget as essential and optional is the key to creating your own successful budget. Next in the series, we’ll look at a popular way people choose to organize their income and budget so that they can cover all their expenses while still living comfortably and saving money.