Different personalities prefer different budgeting strategies, but I'd like to tell you about my method since it's worked very well for me.
Quite simply, I have a spreadsheet on my computer where I write down every single thing I spend and every single thing I earn each month, rounded to the nearest dollar for simplicity's sake. Though I do not live paycheck to paycheck, my budget is set up as if I did. I think this method helps me save more, since I force myself to work with what I'm paid each month rather than with the whole amount that's in my bank account or my credit card limit. It also helps me save more because instead of automatically saving a certain amount each month, which would have to be a low amount that could safely come out of my checking account each and every month, I adjust my savings monthly depending on my circumstances and usually end up saving significantly more than the 10% minimum (that's because I'm a natural saver, though).
Let me give you a general idea of what my monthly budget spreadsheet looks like. It's really just a simple list. Pen and paper work just fine with this system, but I make fewer mistakes using a spreadsheet.
2nd job income $xxx
Amazon/eBay sales $xx
Online survey income $xx
Other misc. income $xx
Regular Monthly Expenses:
Renter's Insurance $xx
Health Insurance $xxx
Cell phone $xx
Gas for car $xx
Gas bill (every 2 months) $xx
Electric bill (every 2 months) $xx
Fun Money $xxx
Total Income $xxxx
Total Spending $xxxx
Total Savings $xxxx
Underneath this chart, I write down everything I spend in one column and keep a running total of how much I have left in the column next to it.
Despite what the experts recommend, my budget has always been based around my income. You might think that this would cause the dreaded increased income --> increased expenses cycle, but for me that hasn't been a significant problem. I have increased my standard of living from uncomfortable to comfortable, but I haven't gone overboard.
Just I adjust my savings each month, I also change the amount of fun money I allow myself depending on what the month looks like. In the months after Christmas, I give myself very little since I've just received a bunch of gifts. Towards the end of the year, I give myself more to allow for plane tickets and Christmas gift purchases. Major purchases (i.e. a new computer) and unanticipated major expenses (car repairs, medical bills) generally come out of the same month's savings. If I exceed any pre-alloted amount for any of my recurring expenses (like groceries), that also comes out of fun money.
Writing down every single purchase may seem tedious, but I have to do it. During my budgeting life, there have been a couple of periods, usually only lasting a couple of months, where I chose to not track my spending. Both times, I ended up spending significantly more than I made that month and dipping into my savings for things I didn't really need or could have put off purchasing until I had more money. Both times I didn't realize what was happening until I went back later and did the math. I learned from those experiences that I'm not yet ready to try living without a budget. Those little things add up all too quickly, and having hard numbers in front of me keeps me on track.
My strategy does take a bit of time, but overall it's pretty simple, it's free, and I find that it works well for me. I update it in the evenings while I watch TV, so the extra time it takes isn't really an issue. What kind of budgeting strategy do you use?
Photo by wolfpix
Tags:Budgeting Personal Finance Spending Money