Anytime someone hears (or reads!) the word “budget” they usually cringe. Mostly because a budget requires you to stay within a certain spending limit in order to stay on track and reach financial goals. But this can feel very restricting, and often doesn’t line up to your priorities.
I’ve never been a big fan of the idea of budgeting as it’s traditionally understood. I don’t like the idea of rigidly assigning spending limits to certain categories, since our lives have to be flexible for unexpected plans and so do our budgets.
Because of this, my husband and I have figured out a way NOT to budget but still have plenty of money to spend on things we want.
How We Track Spending Without a Budget
However, this doesn’t mean that we don’t keep track of our expenses, or plan our finances each month. Instead of a traditional budget, we have an automated spending plan.
Here’s how we plan our spending without setting up a monthly budget, and still stay on track.
Step 1: Set up automatic transfers to cover bills and expenses.
Each month, the following priorities are automatically funded via transfer from our joint checking account or from my husband’s paycheck.
- Rent payment
- Retirement account contributions
- Emergency savings investment account contribution
- Money for quarterly taxes
- Insurance premiums (health, renter’s, auto, life)
- Charitable donations
- Student loan payments
Other expenses, like utilities and our car loan payment, are paid via check and there are some expenses, like the Internet and TV bill, that are automatically paid using a credit card each month.
Step 2: Check-in with spending habits.
We make sure to have enough money to cover those priorities, so it doesn’t really matter where we spend the rest of the discretionary funds. So trying to fit everything into categories, and limiting what we spend in those categories, doesn’t really work for us.
But I still sit down and manually enter transactions into my personal finance software so I know where we stand, and what our spending habits look like.
Step 3: Reconcile and sync accounts every month.
At the beginning of each month I reconcile all of our accounts. I like to our software program, but I also don’t like to connect it to my bank accounts because I like the connection I get with my money from entering it manually and then reconciling my accounts later, to make sure that everything is in order.
This connection with my money is important to me, since it forces me to think about what I’ve been spending money on, and it encourages me to make the effort to spend on things that are important to me, rather than just spending it on whatever comes across my path.
5 Methods for Creating a Spending Plan
Of course, there are plenty of other ways to manage your money. But the point is to find a budget plan that works, and you enjoy using.
This will make it more likely for you to track your income and expenses, without the word “budget” filling you with dread.
- Zero-based budgeting. This type of budget plan resets each month (or quarter) and doesn’t take into account how much you spent, or didn’t spend, in the last period of time.
- Personal finance software. I have friends who like to connect their bank accounts to personal finance software, like Quicken or Quickbooks, so everything is automatically synced, updated, and categorized.
- Spreadsheet, or old school pen and paper. If you’re more old school, using a spreadsheet or even pen and paper is still a very effective way to create a spending plan.
- Checkbook and register. My mom has a checkbook and a check register she uses to record transactions and balance her accounts manually. She pays for most things with a credit card, and then writes a check to pay off the balance each month, and records it in her register.
- In your head. Finally, according to Bankrate, about 20 percent of men and 16 percent of women keep their budgets entirely in their heads. And while I don’t know if I’d like to keep track of everything in my head, with an occasional look at my bank account balance online, I guess it works for some people.
At the very least, know what works for you and find a way to track your money, so you know whether you’re spending money on things that really matter to you. It’s far too easy to lose track of where your money goes, and let your financial goals fall behind.
How you budget and track your finances depends on what’s comfortable for you. So whether you choose not to have a budget, like we do, or create a custom spending plan based on your personality, you always want to spend money on things that you value.
Now it’s your turn!
How do you keep track of your money? Share a few of your monthly steps and ideas for managing your money.