Budgets Suck. Do This Instead.

Budgeting sucks; it’s really boring and most of us never stick with it. Learn an easy way to (not) budget in only a few minutes a month.

Don’t get me wrong. I’m not saying you should just throw caution to the wind and blow your money on whatever you want. Becoming Financial Independent requires a certain amount of discipline, which means you can’t turn your expenses into a money inferno. BUT that also doesn’t mean you have to cut expenses down to the bone.

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Old-school personal finance books tell you that if you just create a budget and stick to it, then you’re all set and your money problems will be solved. But anybody who has ever tried budgeting knows it isn’t quite that simple or easy. 

In fact, only one out of every three Americans creates and follows a long term financial plan. Obviosuly budgets work for some but we will cover a different approach to manual spreadsheets, 50/30/20 , and the envelope method.

You know you should budget, but you also know you’re not really going to do it. Learning how to budget isn’t the problem, the information is out there.

You can visit any one of hundreds of personal finance blogs to read about budgeting techniques:

  • You can download free spreadsheets on countless sites
  • You can pick up one of hundreds of books
  • You can use any one of dozens of budgeting apps, many are free

Even if you track every dollar and dime you spend for 30 days… you’re still human.

Over the past 10 years in the navy, I’ve messed around a lot with my budget. I’ve set monthly budgets, annual budgets, and weekly budgets.

I’ve tracked my spending using paper and pencil, spreadsheets, and apps like Mint.com. And through this I’ve learned alot.

Tracking spending manually is pointless.

I never keep up or on top if it for very long. And I’m a financial blogger and nerd about this stuff.

Spreadsheet, Graph, Chart, Report, Theme

If I can’t do it, how can I expect you to. Monthly budgets are useless because it’s so easy to underestimate our monthly expenses.

There are some you pay for every month, such as housing, transportation, utilities, food, and debt payments.

Then there are things you pay for less often like car repairs, home improvements, trips and vacations, holiday gifts, and insurance payments. For you, these less predictable expenses may only be 10 percent or so of your total spending. But for me they’ve crept up to more like 30 percent.

And here’s what this means. Accounting for, and “pre-spending,” every dollar you make can be a financial mistake.

If you take your annual take-home pay, divide it by 12, and proceed to spend that amount every month, you’re going to be in trouble when that unexpected expensive repair comes up, or any of lifes financial curveballs comes your way. 

So what you need to do is stop obsessing over the detailed, track-every-penny budgets you’ve always been told were the solution and instead, you need to implement a simple spending plan that’s easy to set up and easy to follow. 

What is a simple spending plan?

A simple spending plan is an easy way to budget that helps you save money, get out of debt, pay your bills on time, and still allows you the freedom to spend money on things you value or keep you sane, within reason of course.

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Step 1: Track your spending automatically

Budgeting is simple: Subtract your bills from what you earn; save or spend what’s left.

Forget about manually tracking every beer, energy drink, coffee etc. The goal is to set up a system that keeps track of all of your spending electronically without any additional work from you so that you can access it as you need to.

An easy way to do this is by using the single-card method. This is when you use a single debit or credit card for all of your purchases, or as close to all of them as you can, and let technology do the tracking for you.

One of the best ways technology can help our wallets is by eliminating the need to use cash, and therefore, eliminating the need to keep track of our cash expenses. Now this is counterintuitive to what most of the old-school financial gurus say about cash helping you spend less.

Electronic payments are here, like it or not, and the number of times you need cash (for anything) over a debit or credit card are fewer and fewer. But the best thing about using a credit or debit card is that you automatically have a record of all of your spending.

So should you use credit or debit?

An age-old question. If you have a tendency to buy things first and figure out how you can pay for them later, stick to a debit card. But if you’re comfortable with a credit and only charging what you can pay back in full each month, credit cards are more useful than most debit cards for tagging and categorizing your purchases, as well as cash back and rewards that they offer.

Find the best credit cards, how to choose the best card for you, and how to use credit cards responsibly at Nerdwallet.com

If a single card isn’t for you, an alternative to the single-card method are personal finance management (PFM) tools. These applications link to your credit and debit cards, aggregate your transactions, and can even categorize them automatically.

You set spending limits, and they can send an email or text when you hit them. These apps are powerful and effective, if of course, you remember to login occasionally and make sure the categories are right, and view your spending.

But even if you don’t, that’s OK. The important thing is that data is there if you need it.

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