Reader Story: Negative Budgeting and a Healthy Outlook on Life

Nicely done. If readers seek more information, they can look at Wikipedia for “accrual accounting.” The material is reasonably short and provides a tax viewpoint on the underlying record keeping system. Again, great post.

I love this concept! I use it but never knew it had a name. I labeled my bank accounts with the amount I fund every month, for example “Mortgage and Insurance 1500″ so that I never have to sit and calculate how to distribute, and so my husband could pick it up instantly if I were unable. I agree it reduces a lot of stress.

Budgeting or not budgeting? if you are reaching your financial goals, that is all that matters. I recently had to pay for an A/C repair of $387 that I did not expect. I have the money, but I hate the surprise. The unit is under ten years old.

We used to set aside money for irregular expenses every month in a saving account, but for us it was too much work as we have a very good cash-flow that will cover the irregular expenses (including vacations) from our salary.

What we do now is quite simply to invest more in the months we have no irregular expenses.

Saving over 40% of our take-home pay gives us flexibility and makes some things a bit simpler.

I do this same type of thing, but with extensive categories – I’m just that Type A personality, I guess. I’d recommend checking out something called Mvelopes @ http://www.mvelopes.com

Basically, you can download your bank/cc transactions and input your cash spending. You initially divide all your checking/savings account money into different “envelopes” (which are strictly imaginary), and then record your spending as coming from particular categories. You can easily check online, or with their mobile app, what your remaining balances are in each envelope.

It basically simulates the idea of having cash in separate envelopes at home and when the envelop is empty, you stop spending in that category. It’s been really useful for our family in knowing how much of a larger checking account balance is available for spending on clothes, books, etc…

It works better for people who like to track, yet doesn’t take much time since most transactions these days are by check or card, and download automatically each day.

I’m glad the negative budgeting is working for you. I, too, have an “envelope” for car repairs, since I know at some point or another, they will happen. Thus they are not an emergency for us, but a planned expense with an unknown due date.

Thanks for the post!

This is how You Need A Budget works. We budget $100 a month for repairs and maintenance. Oil changes account for $30 every 3 months, tires, etc. Anyway, when luck is high, our car doesn’t need much, so that amount builds up. It was up to $1000 a few weeks ago, then the alternator went out. Drop a few hundred out of this budget category. If times get real bad, we might have to budget more, which pulls from other budget categories, usually the one for electronics and furniture.

The beauty is that the software handles the money in each category. We have one account through citi (thank you points) which go up as we spend, and one account through ING which gets $ for not spending. The program has something like 30 budget categories. I only need 2 accounts to handle all those. It’s envelope budgeting in the 21st century. It’s also exactly what this article is about.

Good article. You write: I was able to simply sigh and remind my husband, “These things happen.”

In our budget, we actually have a category named “Life Happens” for unpredictable expenses like repairs, gifts, and medical.

My only reservation lies in the last paragraph: People and animals get sick and hurt (…)But it’s not an emergency unless you make it one.

I’m really happy for you and your family if you’ve never experienced horrendous medical bills because of an accident, disease, or chronic condition; but people do get hurt or diagnosed with really expensive problems. Please don’t make us feel like it’s a fault to dip into an emergency fund for a several-thousand-dollars-in-a-year surprise medical problem.

I 100% agree with you on this. Within YNAB, I can easily see where my money has been spent over the past year, and I can plan going forward based on that. For things like car repair, I just place a little in that budget each month, knowing that I’ll use it in the future. I also have a separate budget category for an emergency fund, which does not cover things like clothing, car repairs, etc.

So I’m feeling a little dim – is it you have a set amount to your Savings every month, but think of and track that total as broken down into Emergency, Clothes, Car, etc. as percentages of your total balance in that account?

I do this. I just didn’t know it had a name. I called it my “0″ budget. All my money is allocated to each category as soon as we get paid. Then I withdraw from each category as I use it over time.

I just use excel to track it.

I showed my DH the article and he finally believes I’m not totally crazy for doing this and I’m not the only one. Although he said I must be anal retentive to actually want to do this.