Much like designing processes for other people, processes for yourself should be easy, otherwise you probably won’t have time to use them.
Many people want to save money but also go out and have fun. While there are ways to go out and have fun without spending money, especially now that it’s nice out, I won’t write about that now.
I go out a lot, but I also maintain a very tight budget.
My budget was developed by me for me. Many of you who know me and my profession / occupational history know that my cash flow has no always been that regular, even though I consistently generate wealth.
This system works with minnimal work and absolutely no bookkeeping or repetitious accounting-like work. It’s budgeting you can follow without even trying. While things like taxes are generally improved with complexity, budgeting is not because you have to deal with it more than once each year, plus it keeps you from giving away money, versus spending more on yourself, which isn’t a big deal.
Implementation Steps / Requirements
All you need is a savings account or line of credit, plus several checking accounts. Don’t worry if all you have is one checking and one savings account. Get more.
All you have to do is have a weekly budget. I setup my mortgage so it withdraws weekly. A great way to simplify is to have everything on auto-pay.
Transfer your budget to your main checking account each week. That’s all.
How It Works
This budget works because it takes no work to keep track of your expenses. If you pay everything electronically, the bank will update almost immediately.
It might be best if you setup your main account to automatically pull from another account, because if you go over budget, you don’t want your card to get declined because that’s just embarrassing.
By transferring your budget weekly, you can keep track of your spending by simply how much money is left in your bank account.
When you’re out of money, you’re out of budget. It’s that simple.
When you went out a few times during the week, when Saturday comes around, you’ll be able to see that you only have $12 left in your budget, so you can plan on cooking a delicious romantic meal for your date night, instead of going to a nice place downtown.
On the other hand, it allows for flexibility. For instance, your girlfriend mentions that it’s your one year anniversary, but you’re out of budget. Well, you talked about going somewhere nice, but you can feel free to transfer an extra $150 to your main checking account.
Yay for budgets that don’t restrict life!
Simple Example
I’ll give you a simple example, but I’ll change the numbers a bit for fun.
Suppose my mortgage costs $700 per week. Under my budget system, I would transfer $850 to my checking account. The net $150 each week is what I have left over for food, entertainment, gas, and anything that may come up (including house projects, etc., but more detail on the systems flexibility later).
I typically use cash to help manage the small expenses ($2 for a drink here, $5 for a HH there, or $8 for lunch, etc.). So my $60 takes away from the $150.
This system works well for me.
Details of Flexibility
This is a very flexible budget. The main thing for me is to use cash. When the cash is gone, so is the budget. It’s true, I can just pay electronically, but I know I shouldn’t.
Also, things come up. Sometimes I need to go to Menard’s because I’m going to completely change my landscaping, which costs some money. I can simply transfer $150 to my budgeted checking account, or what have you. However, this is where we can have a more controlled, more complex flexibility.
Suppose each month, I transfer $300 to my secondary checking account. Then, when I have anniversaries or house projects, I can pull from that account. However, I don’t try to do all my summer house projects in May because I’ll be out of overage money, too.
So the overage account is useful because it allows you to spurge occasionally, as one shouldn’t spurge too often.
But sometimes you need to. If you have budget at the end of the week, you can go ahead and transfer it to your vacation account.
This is what I do. It may not work for you because of your unfettered, undisciplined spending habits, but it generally helps me. Basically, once you make enough money / have enough credit facilities, budgeting becomes difficult because there is less of a need. But if you want to budget, this may work for you.