Budgets and Why They’re Awful

Tracking Spending or Budgets and Why They're Awful

Few topics make a client's eyes glaze over faster than talking about budgets. They're not particularly fun, even for a spreadsheet and accounting software geek like myself. I'm not a fan of budgets.

Budgets are only good as far as they help you control & track your spending. I usually find that the time they take to monitor on an ongoing basis aren't worth the results. That said, knowing where your money has gone and having some way to control your spending is really important.

So what to do? Here are three options that I like:

Budget MugsOne way to set a hard cap on your spending is to use cash. It's so easy to spend more than we plan when it's on plastic. Use cash and you'll have a tactile sense of how much money is going out and how much is left. To keep an eye on where it's going, you can use a couple of envelopes like Groceries, Fun (restaurants, alcohol), Car (gas, repairs). When the envelope is empty, you know you've hit the limit in that category. Look, a budget!
No-budget Budgeting If you're like me, carrying a number of envelopes around might seem like a step back into last century. My personal solution (since I don't really like budgeting spending in categories on a daily basis) is to have two chequing accounts. I make one for my regular, fixed expenses (housing, internet, phone bill, insurance etc) and the other for variable expenses (food, fun, gas, transit etc.).

I know how much needs to go into the fixed account because all those expenses are fixed and have automatic payments set up, so I just make a monthly deposit from my savings to that account and I know those are all looked after.

In the other account, I make a deposit that's for everything else that's not consistent, then I know that's my hard cap for flexible spending for the month. While it's useful to know how much goes to groceries versus going to see movies versus eating out, I find that it's most important to have a bank balance to keep an eye on and how I spend that money month to money isn't too important. That's a dead easy way to have the basics of a budget without carrying cash or adding up receipts.

Now if you're still interested in knowing where the money has gone looking back, there are a couple of not-too-painful options. You can use these if you're using my fixed/variable accounts system or even if you're just using your debit & credit cards. When you make a payment, there is an electronic record that you can download from your bank or credit card company.

If you're a spreadsheet user, you can download a CSV file and track categories that way. Using a program like Quicken, you can download the transactions and enter them in an at home accounting program. Lastly (and most simply) you can use Mint.com. Mint connects to all your bank accounts and automatically enters transactions into categories. It's not 100% accurate, but you can always change a record and it tends to learn going forward. It spits out charts & reports letting you know where your money has gone. You can have it alert you when an account balance gets low.

To bring it full circle, you can even use Mint to ... set up a budget.

There you go. Budgets might be a drag, but there are a couple options to control spending without having to get in too deep.

Drop me a line if you'd like to talk over your options on the budgeting front.

No Comments Yet.

Leave a comment

Hey there!

Looks like you’re hungry for more ethical planning.

Subscribe to stay in the loop.