Have you tried budgeting before, only to give up on it within the first couple of weeks?
Maybe you started a budget and lost motivation after not being able to stick to it. You might have even tried budgeting and decided you didn’t feel the need to track your expenses, because you’ve got this money thing figured out.
I’m one of the weirdos who actually enjoys crunching my numbers and after doing it for a couple of years, I’ve come up with a way to make budgeting less of a hassle.
If you haven’t created a budget yet, I’d certainly recommend it. Having all of your expenses laid out in one place makes it easier to know where you stand with your money. If I didn’t use a budget, I’m sure we wouldn’t save as much money. Just acknowledging each expense makes me want to spend less.
Punching in your expenses every night will make budgeting easier
If you’re using a budgeting app or spreadsheet that requires you to manually punch in your expenses, I recommend putting them in every night. I use an app called EveryDollar for budgeting and adding my daily expenses each night only takes a couple of minutes.
If you don’t buy anything on a certain day, you don’t have to do anything! I also update my budget with any additional income the day that I receive it.
Doing my numbers every night has been the easiest way for me to keep our budget accurate. If I go a week without updating the budget, it’s a lot harder to know what transactions on my credit cards have been added to the budget and which haven’t. Usually, we only make a couple of purchases each day so there’s barely anything to add to the budget every night.
Be flexible with the money in each category
Instead of setting a fixed dollar amount for each of our budget categories, I set estimates and update them depending on how much we spend. Since I never know how much money I’ll make with my eBay and antique business, I have to update my income on the budget whenever I have the information.
Not worrying about going over the dollar amount for each category in your budget may seem odd to you. You’ve probably thought the whole point of a budget was setting restrictions on your spending. I don’t look at budgets this way. If we spend more money on eating out than I had set in the budget, I lower the amount I had for another category and raise the eating out category.
The reason I don’t worry about how much is set for each category is that our overall goal is to save and invest as much of our money as possible. If we spend more money than anticipated, we do so consciously and for good reason. I’m not going to sacrifice enjoying our lives in the present, just so we don’t go over a budget category.
A budget should only be used as part of your overall financial plan. If you’re just budgeting because you can’t control your spending otherwise, you probably won’t do it for very long. My big picture goal is to become a millionaire and be able to choose when and what I work on.
The budget is just a tool I use each month to stay on top of all the moving wheels to get me to that big picture goal. Since the quickest way to get to my goal is to increase income and decrease spending as much as possible, I’d be doing that even if we didn’t use a budget.
What’s the point of budgeting this way?
Even though I don’t necessarily use our budget as a way to restrict our spending habits, I still find tremendous utility in budgeting. Here’s my process for budgeting and what I get out of it:
- At the start of the month, I wipe the slate clean for income except for my guaranteed salary.
- When I start a new month in the EveryDollar app, it carries over the budget amounts for the last month. I keep the dollar amounts the same in categories like groceries, eating out, and transportation, since these don’t vary much from month to month.
- I have a miscellaneous spending category for any expense we aren’t expecting for the month. I usually set this to a couple of hundred dollars at the beginning of each month and hope we don’t go over it.
- As the month goes on, I update our income to reflect how much we actually make.
- If we’re earning more than we’ve spent, I put any excess income in a savings category.
- If we end up spending more money than I had set in any of the categories, I update the category to the amount that was spent. When this happens I have to either lower the amount we’re going to save for the month or sometimes we spend less than I had set for a category and we can lower that category to make up for the category we went over on.
- Since we tithe 10% of our income, I’m able to update the amount we tithe as income fluctuates.
- Because I update our budget in real time, I’m able to make sure every extra dollar we make is either spent or sent to savings/investing. This is called zero-based budgeting.
- I make a separate savings category for my side hustles because I keep that money in a separate bank account. I enter how much income I made for the month with the side hustles, subtract 10% for tithes and enter the remaining amount for side hustle savings.
- At the end of the month, I can see how we did in each category compared to the last month and decide if there are any changes we need to make with our spending. I can also evaluate our recurring bills and make note if I need to call other companies and shop for lower prices on things like insurance.
The process I just laid out might seem complicated to you, but it’s super simple for me. Basically, I keep a budget so I can know exactly how much money we made, how much I need to tithe, how much we spent and how much we saved.
Since I’m doing the numbers every night, this whole process takes me only an hour or two every month.
Do you have a different budgeting process that works better for you? Let me know in the comments!
Nathan created Millionaire Dojo to document his journey to reaching a million dollar net worth so that others may be inspired to follow the same path. He and his wife reached a net worth of one hundred thousand by the age of 25 and has been featured on Business Insider. His blog focuses on practical advice that can be implemented immediately in the form of saving money, earning more, and investing to create passive income.