Budgeting made easy – stop budgeting, pt. 2
Question: I keep trying to figure a budgeting system that will work for me. But I keep failing. Do you have a favorite app to recommend?
Answer: Most people hate budgeting for the same reason I hate counting calories. Eventually, you just get tired of fiddling with all the details and in a moment of frustration, you fall back into old habits.
My dietitian wife recently had enough of me complaining about my on-again, off-again dieting failures and she handed me a glass. “Drink water,” she said, “and lots of it.”
Among all the other health benefits of this additional liquidity, she reminded me that drinking lots of water takes up precious room in my stomach. Room in which a cream cheese Danish may no longer take up residence and create fat cells (that’s how it works, right?).
My drink more, eat less journey made me think about budgeting. What is the “drinking water” equivalent for budgeting?
Separate your checking accounts.
You know you need to be saving money. I recommend 15% as an average, but you may need to do more. If you are older than 40 and have not been saving 15%, I can almost guarantee you’ll have to go through a season of saving even more.
So you can try the “calorie counting” method of saving money – that’s where you draw up a budget, examine all your spending, figure out where you are spending too much and reduce your spending accordingly. Do this until you have come up with enough to save15%.
But you’re still not done. Because now you have to track your spending (to make sure you are actually doing what you said you would do). And for most of the population, this exercise in recordkeeping lasts 60 days tops. Some of us find this terribly stimulating and exciting. The rest of us find the exercise about as exciting as cutting grass with toenail clippers.
An alternative to this approach is similar to me drinking water. Fill up the empty spaces first, then eat what you can.
Do this by establishing two separate checking accounts. You may even want to have them at separate banks.
Let’s call the first checking account your “personal spending” account (PSA). This is the one you live out of. You pay the bills, buy the groceries and generally live life out of your PSA.
On a regular basis (once a month, twice a month, every two weeks), you’ll have your paycheck deposited into your PSA. Immediately upon hitting your PSA (on the very day!), you will have instructed your bank to take 15% of that deposit and send it somewhere else…to your other account…perhaps at another bank.
Let’s call this second check account your “wealth coordination account” (WCA). You’ve instructed your bank to automatically transfer 15% of your regular deposits from your PSA to your WCA. The reason for establishing your WCA at a different bank should be obvious – you’re trying to make it inconvenient to access the money. Not impossible, not costly…just inconvenient.
Now, live out of your PSA and leave the WCA alone.
If this is your first serious effort at saving money, it’s going to feel weird. You’re going to run out of money faster each month. Things will feel tighter. Sometimes, it will be hard.
But if you’ll just move that 15% out of your field of vision and into an account you don’t regularly see, you’ll be doing what you do now – living on whatever comes into your personal spending account and slowing down or stopping when you start running out of money.
It isn’t nearly as precise as accountants want us to be, but it is highly instinctive. You can feel it when you’re running low on money.
I’m not promising ease, just simplicity.
And for some of us, simplicity is just what we need to get a hard job done.
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