I did not title this article, "Adulting Is Hard", but I am including it in that series and my FI tangents as well. There is no one correct way to do most things in life, including budgeting. There are better practices than others, but any type of budgeting is better than no budgeting at all.
In my 16th overall article and first article in the Adulting Is Hard series, I explained how to properly budget. What I failed to do is better explain how to do a simple budget that may fit more appropriately into your lifestyle.
Please leave a comment if I am wrong, but when people think of budgeting, they are picturing sitting down handwriting all expenses or putting all purchases into an Excel spreadsheet. That is one way to budget, but not the only way. This thinking gives many an excuse not to budget at all.
Here are three simpler ways to start budgeting that will help you keep track of your finances.
One. Automatically save/invest "X" amount and spend the rest.
This is probably the easiest way to budget and stay on track with your retirement plans.
If you have kept up with my past articles, you know that I like saving 25% of our gross income. This number works for us.
Of course, what number you choose is important, but for this method to work, it is more important that you set up automatic investing. Here is what you will need to do.
First, figure out what percent of your gross income you want to save to invest for the future. Then, determine how much you will need to invest monthly to reach that number. Finally, make sure that money is being automatically taken out of your bank account (or paycheck if you are using an employer-sponsored retirement plan) before you get a chance to spend it.
Therefore, after the month begins, you know all the money in your bank account is yours to do what you wish. Just remember, this method of budgeting does not account for bills. So, make sure you spend the remaining money wisely and have an emergency fund set aside.
Two. Withdraw money at the beginning of the month to use for specific categories, such as groceries, fun, and gas.
This method is called the envelope system. This will require you to establish how much you will spend on your selected categories before the month begins. If you do this type of system, I would suggest having the following categories: groceries, eating out/fun, and other daily discretionary spending.
At the beginning of the month, you will withdraw the amount of money you decided to allot to each category from the bank. You will put the money in separate envelopes and label them. When you take money out from the envelope, write the new balance on the front of the envelope.
If you use this approach, you will not have to write down each purchase made. However, you will have to hold yourself accountable and only use the cash for the designated purposes.
For this method to work, all discretionary spending must come out of one of the envelopes. If you want to make a discretionary purchase but do not have the cash for it, you must be able to keep yourself from using your debit or credit card.
Three. Only have select days where you are able to spend money.
This can be a dangerous method for those who have issues with binging after going without for a period of time. Binging on your diet is one thing, but binging with your finances can have disastrous effects.
For this method to work, you will need to do the following:
First - Have one designated day a week for grocery shopping. No spending on food any other days of the week.
Second - Have one designated day a week for a PLANNED fun day/night. Do not decide on a whim to go out to a fancy restaurant. Plan a week in advance that on Saturday you and your partner will go out to eat at a specific restaurant and see a movie (is going to the theater still a thing anymore?)
Third - DO NOT spend any money outside of your spending days unless it is on unexpected emergencies or necessary expenses (think of things like gas to drive to work, buying an air filter for your HVAC system, pet food, or salt for your water softener).
With proper planning up front, this method allows you to go about your month without having to worry about any spreadsheets.
Final Thoughts
Actually tracking your expenses has a soft spot in my heart. I believe you must become intimate with your finances in able to gain complete control over your spending habits. But, with this being said, I am not delusional that there is a one-size-fits-all approach to how to handle your personal finances (as Andy Hill from Marriage Kids and Money says, it's called "personal" finance for a reason).
None of the methods above require any type of hardcore tracking. The methods only require you to do some planning up front and then to be aware of how your money is being spent.
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