Budgeting Without Bean Counting…5 Great Tips

As Janice and I have worked on our budget over the years, we have learned that the more we can automate it, the easier it becomes, the more we enjoy it and the greater our chances of sticking with it.

We want to feel like we are in control of our money, but we also want to relax, enjoy life and not be phobicized by every penny we spend. The following tips might sound sloppy to the nerds among us, but because of the simplicity they give to our lives, we are confident they will serve us well for a lifetime:

1. Actually make a budget.

None of you can escape the reality that you must take control of your money by writing down how much you have coming in and how much you spend. This budget must be realistic, it must reflect your values and goals, and, if you are married, it must be agreed to.

2. Use Envelopes.

If I could give only one hint for hassle free budgeting, this is it. The consistent monthly expenses aren’t the problem; it is those which fluctuate and are difficult to track (such as groceries, eating out and gasoline) that will bust your budget. Even if you painstakingly record each expenditure and then tabulate them at the end of the month, you still have two problems: one is that you don’t know if you are overspending until the month is over; the second is that the tedious practice of recording those expenses is not something most of us will do for a lifetime. Using envelopes solves both of those problems: you CAN’T overspend because when the cash in the envelope is gone, you are done spending for that category. Secondly, there is no tracking of expenditures; the envelope does it for you…simply count the money in the envelope at any point in the month and you will know how much you have spent for that category. Simple and effective…Envelopes rule!

3. Make it automatic.

Janice and I know how much money we need in our checking account after we take out our envelope cash, so we have just enough income directly deposited into that checking account to cover normal expenses (and leave enough buffer to avoid overdrafts). In this way, our checking account is a sort of envelope…we must be vigilant in guarding our checking account balance, but doing so will force us to live within our budget without doing any math or counting any beans.

4. Make savings automatic too.

We normally have an annual meeting to make specific savings goals (Save $10,000 for a replacement vehicle by October, for example). We put these goals in writing, then have other income streams directly deposited into a Savings Account and just let it happen. We track our progress periodically, but the beauty of making it automatic is that no discipline or will power is required.

5. Make investing automatic too.

Do you start to get the idea that we like to make things automatic? Well, you get the point…we have our investments withdrawn automatically every month. No hassle, no effort, no will power. We like automatic.

Concluding thoughts

• Although I don’t hassle with tracking my expenses each month, I can nevertheless track them when needed. How? Using Quicken to balance our check books gives me a simple tool to create category reports any time I need to. Other great money software or even free online tools such as mint.com might work for you.
• This system isn’t perfect (none is). Life happens and when we need money unexpectedly, we take it from our savings and then recalibrate our savings goals. Yes, it is a bit frustrating, but we don’t want you to think everything always works perfectly as planned. We have learned to roll with the punches, but even then, it is nice to know that we have planned for those punches.

Summary

Our philosophy is to put self imposed restrictions in our finances so we can live within our means without counting any beans. We might have a better bottom line if we obsessed over every dollar, but doing so does not match our personalities or our lifestyles. What we do has served us well…we have zero debt, we can easily live on less than we make, we are able to tithe to our church and also be generous to those in need. We have every confidence that our plan will continue to serve us well for years to come.

What tips have helped you to keep your budget simple, yet effective?