“Budgeting” has earned itself a negative reputation. People hear the word and think of strict limits, a spartan existence, and the guilt that comes from overspending.
There’s also the idea that your budget should look like other people’s budgets. I regularly get asked what’s a “normal” amount to spending on groceries or rent, or what’s a “normal” amount of savings. And while I understand where the question is coming from, it’s honestly frustrating for me to hear.
What’s normal is having credit card debt, because most Americans do. What’s normal is not having enough cash in savings to handle an unexpected $400 expense.
You don’t want to be normal. And you don’t need to live according to anyone else’s values or feel guilty about your spending habits, or even stress about adhering to a strict budget.
At its core, budgeting is simply about directing your money towards the things you actually care about, with “care about” being the key part of that mission.
You might care about one day having enough money to retire, but you might also care about having a wardrobe that makes you feel good about yourself. A good budget should, ideally, help you direct money towards each of those goals with as little effort as possible, allowing you to enjoy yourself today and feel secure about the future without day-to-day stress and anxiety.
Here are a couple of ways to make that work.
Automate the Stuff You Care About
You’ve almost certainly heard the advice to “pay yourself first”. There are some practical ways to put that advice into action and make your life a lot easier.
The key is purposeful automation. If every time you receive your paycheck, money is quickly and automatically moved into savings accounts specifically earmarked for the things you care about, then the rest of your money is yours to spend however you please, without guilt or judgment.
401(k) contributions are one way to do this, since those are taken out of your paycheck before you even receive it. But there are plenty of other ways to automatically set money aside for the things you care about:
- You can set up automatic IRA contributions that pull a set amount of money out of your checking account a day or two after you’re paid.
- You can do the same thing for fun spending goals, like travel or that wardrobe you want. If you automatically transfer the money you need for those things to a separate checking or savings account, you’ll be able to spend it guilt-free and know exactly how much is left over for your other expenses.
- You can also automate savings for less exciting — but inevitable — expenses like home maintenance and car repairs so that you’re prepared when they come up.
If you can get to the point where everything is automated and on track for the long-term, it doesn’t matter how much you spend on groceries, dining out, or anything else. As long as the leftover money is enough to meet your monthly needs, you don’t have to nit-pick and you don’t have to keep a detailed budget.
Pull Spending Money out of Savings
Imagine you’re sitting on your sofa, enjoying a good book, and there’s a bowl of M&Ms right next to you. You’re probably going to grab a handful or two, right? I would! Maybe before you know it, that entire bowl will be empty.
What if those exact same M&Ms are stored in a kitchen cabinet instead? If you’re really motivated you might get up and grab some, but in all likelihood the total number of M&Ms consumed will be a lot lower.
You can think of your money the same way.
The typical setup is to have your paycheck deposited into your checking account and then move certain amounts into savings. But what if you switched that around? What if you had your paycheck deposited into savings and you only pulled out what you needed to spend?
My guess is that you’d end up saving more and spending less, especially on things that aren’t actually important to you. Spending money that’s in your checking account is like grabbing M&Ms from the bowl right next to you. But taking it out of savings is like getting up to get them from the cabinet. You’ll do it if you’re really motivated, but you’ll have to think a lot harder before you do.
Making It as Easy as Possible
To be fair, the strategies above work best if your income is high compared to your necessary living expenses. Without that buffer, you might have to dig into the details and manage your budget a little more carefully.
But if you can implement either of these strategies, you’ll accomplish the triple feat of securing your future, enabling your daily pleasures, and ditching the stress and guilt of a traditional budget