I’m always harping on you guys about how important it is to have a budget. But I’ve heard from some of you who say you either can’t get the hang of it or just can’t stay with the program.
I know the feeling. It’s not something everybody gets on the first, second or 10th try. It’s all that number crunching.
Listen, I was an English major, I totally get it.
But what if I told you there are some budgeting methods that are more art than science? The Simple Dollar blog has some math-light alternative budgeting systems you might want to try.
They’re not perfect, and you might want to think of them as a stepping stone on your way to a “real” budget, but any one of these guys is much better than having no budget at all.
Here’s how they work.
• Subtraction budgeting. A lot of people without budgets already do this type of budgeting without realizing it. Just add up all your monthly bills, then subtract that total from your total take-home pay. Subtract an additional amount for savings. The amount left over is the amount you can spend on non-essential “wants” during the rest of the month. That will help you ration your money at the beginning of your pay period so you’re not scraping by at the end.
• Cash budgeting. This lets you budget in real, concrete terms instead of abstract numbers on paper. Mark envelopes with dollar amounts for bills and expenses, and sort your cold hard cash into the corresponding envelopes. You’ll see exactly how much money you have and where it needs to go. Since online billing is more convenient and prevents late fees, you might leave enough money in the bank to cover those recurring bills, and leave the rest out to be sorted into envelopes in such categories as savings, housing, food, transportation, household supplies, entertainment, etc.
• Proportional Budgeting. I look at this as sort of a post-mortem budget that helps you take a deep look at your spending and decide if you’re spending your money the way you want to. You split your spending into three categories: needs (mortgage, food, utilities), savings (Roth IRA, 529 college savings, banking account) and wants (movie tickets, new furniture, Netflix). You decide what percentage of your budget you want to devote to each, say 60 percent toward needs, 30 percent wants and 10 percent savings. When you really start to look at where your money is going, and how many of your so-called needs are really wants (a bigger house, a late-model car), you might find yourself spending more wisely.
• Automatic Budgeting. This is what really keeps my family out of trouble. We are de facto automatic budgeters. We have every single bill scheduled and paid automatically so we never worry and we never pay late. Our savings is automatically deducted, too. If you try it, just make sure you keep a good cash buffer in your account, and have good overdraft protection, preferably linked to your own savings account. This will keep you out of trouble if you suddenly end up with a larger-than-expected bill.
We keep a list (which is pretty much memorized by now) of how much comes out and when. Then we have a budget of how much money is left over for random things like cheeseburgers, new ballet shoes or a new corkboard to keep our week’s activities straight.