Now I do realize that I’m a big nerd when it comes to my budgeting. I get that not all people will want to sit on the couch and perfect their budget while watching tv.
In fact, budgeting is sometimes a dirty word. It’s gotten a bad wrap.
Does budgeting work?
Is it realistic for you to be able to stick to a budget?
Recently, a new trend in personal finance that has been emerging is the conscious spending plan.
I love the conscious spending plan.
A conscious spending plan is sitting down and being specific about how much you want to spend, save, and give, and creating a system to stay within those boundaries.
In Ramit Sethi’s book, “I Will Teach you to be Rich,” Ramit lays out how to automate your finances so that you are achieving your priorities, so that you can spend the rest guilt free for the month.
In essence, you’re just trying to be conscious of your spending. You’re setting your priorities, but not sweating if this $5 purchase was a grocery purchase, or dining out, or home improvement.
So let’s say that you sit down and roughly figure out how much you spend each month. Then you take a look at your priorities for saving, investing, and giving. Everything else can be spent. It doesn’t matter how much you spend on what as long as you’re spending less than the amount that’s left over to spend.
You automate your short term savings like saving for a car, vacation, or new computer. You automate your retirement savings before it ever hits your bank. You automate your fixed expenses and your bills so that they automatically come out of your checking each month. Then, you’re free to spend what’s left on your debit or credit card guilt free.
I love the idea of a conscious spending plan because it’s setting your priorities and deciding the most important places to put your money first.
The thing about it though, is it’s really a budget you’re creating. A budget is a plan for how you want to spend your money.
Nobody said a budget had to be complicated. Actually…they might have said that. Budgeting has gotten such a bad wrap for being restrictive, over complicated, and unbending, that people are convinced that it won’t work for them.
But budgeting doesn’t have to be complicated.
In fact, the fewer moving parts you have in your budget, the better.
I’ve talked a lot about how the You Need A Budget(YNAB) software is the best for keeping your household on a budget. And I love how those folks talk at length about keeping it simple.
If a conscious spending plan is just deciding how much you need to set aside each month for your monthly fixed expenses, automating your savings and retirement, and then having the rest to spend-You can do that in your YNAB budget.
I encourage you to keep it simple.
I also encourage you to only use one account.
Just use your checking. You’re going to take the money that you have in your account, and decide how it needs to be spent.
So what does keeping it simple look like?
Well, you only need a category for things you want to track. So you could have categories for:
- Clothing
- Kids Clothing
- Starbucks
- Entertainment
- Babysitters
- New stuff for your house
- Star Wars memorabilia
Or-You can have a general spending category. This is the category for my money that isn’t previously occupied elsewhere. It’s the money that we have to spend for free this month.
Only create a category for things you need to track. With two small kids, we have a diapers category. It’s something I want to track. I want to make sure that we aren’t forgetting that some money needs to be set aside for those stinkin diapers.
We have a dining out category. We could just have a food budget category. In fact, food, paper towels, toothpaste, fun money-it could all just be lumped into a general spending category. But dining out is something I need to track, mostly because I have to watch myself in that category or it easily gets out of control.
There are things you need to track. I don’t want to have $800 left this month but have to remember that some of that needs to be gas, some of it needs to be grocery money, some of it needs to be household supplies that we need, and then the rest can be spent, just because I’m not wanting to bother with keeping a budget.
Make your budget as complicated as it needs to be, but no more.
So we have a category for everything that we need to remember to set money aside for. Everything else is in our spending category.
The part I love about the conscious spending plan is the intent for simplicity and freedom that it was meant for. But at the end of you day, you’re making a budget.
Remember that budget’s don’t have to be perfect. The point of your budget is to decide what your dollars need to do before you’re paid again.
So if you’re an old budgeter, have you thought about doing a fresh start and making things a lot simpler? Remember, make your budget as complicated as it needs to be, but no more.
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