I'm not a budgeter. I'm not able to sit down and draft a detailed budget. I use a spending plan instead, which is a sort of road map to the where I want to go, but which does not contained detailed directions.
I recognize that budgets are valuable tools for many people, though. Dayana Yochim at The Motley Fool has some tips about budgeting for lazy people. She says that the secret to setting up a budget you'll actually follow is to make it easy. Your goal is to spend less than you earn. To do that, “take every shortcut possible”.
- Track your spending. This is the first step to every successful budget. Take a snapshot of what you're spending. Yochim recommends using your credit and debit card statements for an easy, unbiased look into your habits. If you're obsessive like me, you can track every penny you spend as you spend it.
- Plan your spending. Next, Yochim says, “Make a list of what you need to buy or do over the next three to six months.” Be as detailed as you can, but don't sweat it if you don't know exact numbers.
- Convert the numbers to monthly totals. Take your list from the previous step and divide by however many months you planned out. The resulting numbers are your monthly budget for each item in the list. If you think you'll spend $300 on Christmas gifts during the next six months, for example, then you'll budget $50 a month for this expense.
- Set up a savings plan. To help yourself meet your budget, Yochim recommends one of my favorite money hacks: set up a separate savings account specifically to save for your goals. (I use targeted accounts.) Because Yochim is creating a “lazy” budget, she suggests setting up automatic transfers from your checking account to your savings account.
- Stop overspending. A budget only works as well as the person following it. If you find yourself spending more than you've planned, consider using the envelope budget system to limit yourself.
Yochim's ideas aren't revolutionary, but her article describes an excellent way to create a quick and dirty budget. And she's right: the more you can automate it, the smoother it will run. Quite often, the weak link in the budgeting chain is you.
Author: J.D. Roth
In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.
another idea for non budgeters I learned from my Dad, two accounts, one for fixed expenses, rent/mortgage utilities debt snowball savings etc. And the other for spending. Divide fixed amount by you monthly pay (weekly bi weekly etc) and put that amount in each pay period, the balance is then yours to spend. Your bills are covered and no hassle with balancing the budget each month.
simple
I’m with you, JD. My wife and I enjoy saving and do a good job managing our money. However, neither one of us enjoys budgeting. We are both very good about not spending money that we don’t have. We have been very successful in managing our spending by making sure that all of our investment and savings accounts automatically pull money from our checking account every month. This way we are able to met our financial goals and limit our spending without tracking every penny (and believe me, we don’t) Often we find that we are able to slowly ratchet up the amount of money that we are saving each month.
RDS
http://financialvalues.blogspot.com/
I can’t emphasize how important #1, tracking spending is. I always found sticking to a budget difficult but that was because I had no idea how much I was spending before. Thanks for the list!
Budgets never work; however, tracking spending worked for me in the past. I wrote an article on this: http://adawnjournal.com/2008/05/06/personal-finance-software-part-1/
I hope it will be helpful. Cheers.
A Dawn Journal
http://www.adawnjournal.com
I’d like to move from a spending plan to a more detailed budget. Right now we pay ourselves first, we pay our monthly bills (mortgage, insurance, utility, anything with an actual bill), we put aside money for our savings goals and then we each have $500 for 15 days for variable expenses (grocery, gas, dry cleaning, entertainment, eating out, home improvement etc.) While I’d like to have actual budget categories for our variable expenses I don’t think Mr. Sam will agree. He likes to have $500 to spend without having to track it, think about it, etc. and since 90% of the time he spends his $500 on groceries, gas and home improvement expenses I can’t really complain. We’ve made dramatic changes in our finances since 01/01/07 (paid off all our non mortgage debt, better combined our finances, agreed on retirement and savings goals, agreed on spending plan) I’m pretty sure I’ve pushed as far as I can for now.
Any advice?
I totally agree on the idea of tracking. Most banks offer online account now, it’s much easier to do than before. Since I started tracking, I’ve been surprised at how much small amounts can add up, and thus trying to refrain myself from seemingly harmless $3 or $5 sales items. If I don’t absolutely need them, I should not buy them, otherwise, they will quickly bump up the bill.
I like the idea of the post. Budgeting is like dieting, evreryone know you should do it, but it is against human nature. In the end you have to be very dedicated or you will fail.
Sam,
Sounds like you’re doing really well. Since you asked for advice here’s a suggestion. You could move some of your basic categories (like groceries and gas) out of the $500 and into a budgeted group. (then reduce your $500 by that amount). This would put a budget to some of your needs but still allow Mr. Sam some undocumented cash for wants (eating out, entertainment, etc.).
Sam,
The easiest way to save is to set up an automatic saving plan. Your bank can set aside an amount that you designate each month or every two week. This is the best way to “set it” and “forget it” … that means that if you keep it up month after month you end up saving effortlessly.
I like you point about not overspending…it’s soooooooo easy to do so it’s important to keep the what we “need” versus what we “want” in check.
Thanks for this excellent reminder!
Miss Gisele B.
I have been budgeting and tracking my spending since I read Dave Ramsey’s Total Money Makeover, and it has really been a boon to me. I do everything in Excel and can therefore easily add up what I’ve spent. It becomes a game to spend a little less than what I budgeted.
By facing the truth about my financial situation every month, I also have much less creeping anxiety about money; before budgeting, I always guessed and worried if my intuitive math was right or wrong.
A budget helped me track my spending. I have it set up in Excel, a column of what I spend on and how much in each– rent, tuition, food, books, things like that. There’s another column with an upper limit, and the difference between the two is displayed.
This wouldn’t matter, except that it makes me put the numbers in. When I didn’t have something to add everything up by category, I didn’t keep track. When I did everything mentally, I spent everything– not over, but I knew about how much I had and that I had a bit of wiggle room. This way, every month, I start a new pair of columns, and every month, I have money to put into savings.
Not a clue what to do once I get enough savings to mess with. But hey, it works.
This is so helpful. I am a quintessential lazy budgeter. Right now I use the cash envelope method. But this post has inspired me to take it all one step closer to organization. Many, many thanks.
I found that Motley article funny because the title makes the promise of a budget w/o work (at least that’s how I interpret ‘for lazy people’) and then their first suggestion is to track your spending.
That takes work!
But the value is there nonetheless and if there were just one step that absolutely needed to be done, it’d be that one.
A budget is basically your money priorities written down. It can be as rigid or flexible as you like, where you get down into the specifics and decide how much you’d like to spend on Toothepast:Minty or be as general as Savings.
The key is to be using some method that helps you ensure that your money behavior is in line with your values, whatever those may be, a la Joe Dominguez in Your Money or Your Life.
I completely agree about not setting a strict budget but a more generalized plan. This is because of my husband’s health conditions. He has *severe* eczema that flares up quite often and, lately, MRSA problems (because it loves eczema patches). So some months we see a doctor just 2 times at normal intervals. Some months, it’s closer to 8. At $15 each, that’s awfully hard to plan for!
Sam:
$500 every 2 weeks is a LOT of money. I make good money, and I use $400 a MONTH for gas, eating out, incidentals, etc. (that I don’t track).
If you can’t get him to agree to $100 a week, can you at least get him to agree that any future raises go to savings, while the spending stays constant? So you can make incremental progress that way.
Otherwise, the suggestion to move some categories that are included with that $500 into the “tracked and budgeted” part of your spending plan, and reducing your cash expenses proportionally is a good one.
Sandi
I hate saving money. When you know that there is a certain amount of money you can spend, you want to spend much more. That’s why it is better to buy only the necessary things.
That was quick and dirty, great for time management, the list is effective and I can get it done now, really I am implementing the five steps today. Thanks for sharing…
-Tabs
Budgets are tough to keep. It is very easy for me or anyone else for that matter to write about the importance of a budget. They are important.
Even if you don’t follow it setting up a budget helps you see where you are spending your money.
I agree, pay yourself first. Set up an automatic withdrawal to some account that you will leave alone. (If that is possible)
After all these years I’m finding out that what I’ve been referring to as a budget is a mere spending plan.
Oh well, it worked twice for us. once to pay off our credit cards and saving for a down payment before getting the house, secondly to get us out of debt very recently (except mortgage)
I do have 2 or 3 official budgets that I just fill in the categories to see how we’re doing, but it’s hard to work with a budget because you have bills going out throughout the month.
It’s now half a year later, but I just found this article so I hope the conversation’s not dead. I’m intrigued by Diatryma’s method of tracking expenses with Excel and having a running comparison between what’s been spent and the maximum allowable. However I’m having a hard time visualizing how you put all your expenses, within their categories, in one column. Could you ‘splain, please?
I agree. I write about budgeting all the time but when it comes to my own finances, I use more of a spending plan. I think critically about each expenditure rather than about which budget category I should be working on.
People react differently to budgeting, so people need different budgeting plans.