How to Budget Without a Budget
Tuesday, February 18, 2020, 6:00 PM | Leave Comment
For whatever reason, the idea of a budget scares people. Perhaps it’s too much work, or they don’t really want to know where their money is being spent.
In reality, a budget is one of the most important tools to manage your money.
A budget is simply a tool that allows you to make sure you’re not spending more than you’re making, and that you’re tracking towards your financial goals.
If you don’t know where you’re going and don’t have a map to get there, you’ll certainly never arrive!
The good news is that you don’t actually have to have a budget to budget.
Let’s explore how you can manage your finances without keeping a spreadsheet or online budgeting tool.
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Step 1: Figure out your monthly pay
Do you have a good idea of how much you make each month? Is your pay somewhat variable, whether hourly or more commission based? If so, try to get a baseline average. Once you’ve figured out your ‘take home’, put that number on a piece of paper. That number is what you have to spend/save each month, and don’t go over it! Nothing is worse than spending more than you make.
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Step 2: Figure out your must-pay bills
We all gotta pay the mortgage or rent, and have other expenses that we must pay every month. Utilities, car payments, student loans and our phone bill are all things that we have to pay. Figure out your fixed and an average of your variable expenses (i.e. I spend $50 on the water bill each month) and write that number down. You’ll later subtract this number from your monthly pay.
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Step 3: Set a savings goal
It’s all fine and dandy to earn and spend money, but we all need to be thinking about the future. Perhaps you want to save up and buy a house one day, or go back to grad school and not pay for it all using student loans. Maybe you’re trying to aggressively pay off debt.
Hopefully you’re also thinking about retirement! Whatever your goal is, commit a dollar amount to it. “I want to save $100/month in my savings account”. Write this amount down too as your goal and then setup an automatic transfer. Most banks allow you to setup a transfer schedule on an ongoing basis. Set it up twice a month, maybe a day or two after you get paid. From our $100/month example, set a transfer up on the 16th of every month and then the 1st. The less you have to think about the better – automate your savings!
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Step 4: Learn your spending number
Take the amount calculated in step 1 and subtract the amount in step 2 and step 3. This will give you the amount you can afford to spend each month. Ex) Your gross pay is $2,000/month. Your total fixed expenses are about $900. You want to save $300/month. $2,000 – $900 – $300 = $800. That means you have $800, or $200 per week ($800/4) to spend on average.
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Step 5: Don’t spend more than your number
In step 4 we figured out that you have about $200 per week to spend; on restaurants, drinks, clothes, movies and gas. Keep a periodic eye on your spending, by logging in to your bank or credit card website to see how much you’ve spent. If you spend more one week, spend less the next, all with the goal of spending less than $800 in a month.
There you go! With just a little research, math and effort, you’ve made yourself a ‘budget’, and it’s one that you don’t have to record on or keep too much track of!
Happy budgeting!
Throw us a like at Facebook.com/doable.financeAuthor BIO
Ben runs the site YoungMoneyFinance.com where he seeks to provide modern, relevant and easy to understand financial knowledge to our readers.
