Makes budgeting so easy anyone can do it
The Easy Budget
by Craig Hinton
Why You Need a Spending Plan Instead of a Budget
A Different Way to Budget
Simplify Your Budget
Do you hate meticulously tracking every minor expense? Are you tired of being told that to reach your financial goals, you must stop buying fancy coffees or eating out for lunch? Perhaps you're one of the many people who just don't like traditional budgeting advice.
Instead of abandoning budgeting altogether, how about trying this simple daily strategy? It'll take you minutes to complete and will give you a very good idea of how much you can comfortably spend while still working towards your financial goals.
First: Open a new spreadsheet on your computer or phone.
Second: Calculate your monthly income. If you get paid every two weeks, multiply your biweekly pay by 26 and divide by 12. Type this figure at the top of the page.
Third: Figure out all of your necessary expenses each month. Look at your last few months' bank statements and credit card bills. What's on there? Look for things like rent, mortgage payments, cell phone bills, utilities, insurance, etc. Also, take annual expenses like property taxes, car insurance, and so on, and divide them by twelve. Write down these monthly figures, under your income.
For items like groceries or gas, the amount may vary month by month, so write down a good approximation. We're not aiming for 100% accuracy here, because life's not like that. But we want a good approximation.
You may even have some expenses that aren't completely necessary, but that you are very determined to do each month. These can be things like charitable donations or retirement fund contributions. Add them in too.
Once you have all of your necessary monthly expenses, total it up. You should now have something like this:
Mr. Example Person
|Car loan payment||$240|
|Cable TV and Internet||$50|
|Retirement savings plan||$100|
Fourth: Subtract your necessary expenses from your income. The difference is what you have left over for saving and discretionary spending, like buying coffee or going to see a movie. Looking at the aptly named Mr. Example Person, we see that he has about $800 left over each month.
Fifth: Take your left over figure and divide by 30. This gives you a daily number. In Mr. Example Person's case, it's about $27. If he wants to go out to see a movie or have a cup of coffee, he knows he has $27 with which to work on any given day.
Whatever your daily amount is, remember that number. On an average day, aim to spend less than that number on the little things. Every now and then something big will come along, such as a $300 veterinarian bill, that will greatly exceed your daily number. If you don't have a bit of a cushion each day, these odd big things will eventually drain your savings over time. But if you ensure you have a decent daily cushion, your savings will steadily grow.
Would you like to
pay off your credit cards
in less time
for less money?
This exercise is also useful if you're looking to make a major purchase. The payments on that new car are $300 a month? That's $10 a day subtracted from your number. Are you comfortable with your number being that much smaller and the impact this will have on your life? It is something to consider before making a big financial decision.
The beauty of this daily budgeting technique is that it doesn't require you to do any fancy bookkeeping or engage in blanket austerity measures. Instead, you have one number to casually remember every time you take out your wallet.
Take the Next Step:
- For more budgeting tips, visit the TDS library.
- Start a high yield savings account with Discover Bank.
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