How To Reach All of Your Financial Goals Without a Budget
Budgeting is one of those financial tips that everyone gives. To be completely honest, having a budget is really helpful for some people. The structure and focus is a necessary part of managing their finances successfully. However, it isn’t the only method to personal finance management.
There is another way that doesn’t involve tracking every expense, if you can believe it. It revolves one simple concept: automation.
Now, it’s not a completely set-it-and-forget-it system. You’ll still need to do some set-up work and check in on your spending every week to make sure you aren’t spending beyond your means. Below, I’ll walk you through the steps of setting your finances up with automation.
1. Make an exhaustive list of your fixed expenses and monthly payments.
Let’s say you make $3000 per month. For this example, let’s say your fixed expenses are the following:
- Rent and utilities: $800
- Cell phone: $50
- Car payment: $150
- Car insurance: $150
- Internet: $50
- Student loan payment: $400
You may have more or less than these expenses and that’s okay! It’s important to keep in mind that personal finance is just that — personal. It’s very unlikely that any two individuals have the exact same income, expenses and spending habits.
Keep a master list of these expenses and amounts. This will make it easier on you down the line when you finish paying off your car or move somewhere new.
2. Set up automatic payments for these expenses.
Your next step is to go through each of the companies or services you use to pay for these expenses and set up automatic, recurring payments. When your bills are on auto-pay, you don’t even have to think twice about them.
If necessary, you may need to adjust your bill payment dates to sync up with your paychecks. If you don’t have your paychecks direct depositing into your bank account yet, set it up now!
3. Schedule an automatic transfer to your savings account.
This might be the most important step of all.
Going back to the example above, once you get paid and all of your bills are paid, you have $1400 left to spend. Make sure you spend some of that money to your savings account. It’s a good habit to get into for the future because building up your savings account means giving yourself freedom in the future.
My automatic savings transfers are initiated four days after I get paid. This leaves enough time for all of my automatic payments to leave the bank while giving me a day or two to check in on my account to make sure everything is doing what it’s supposed to.
If you have more than one savings account (I do), set up automatic transfers for each of these accounts.
4. Spend mindfully.
Now, your remaining money is the money you have to spend on all of your variable expenses. This might be things like groceries, shopping, eating out, gifts, gas money, etc. It’s up to you to check in on your spending and spend mindfully each week to make sure you aren’t spending beyond your means.
The whole point of not having a budget is to not have to track each cent you spend but rather your general spending. For many of us, each month’s spending isn’t exactly the same. Sure we may spend only $200 on groceries one month, but the next month we may be on a two week vacation and only spend $100.
This method does require self discipline. You need to make sure you’re not spending too much early on in the month and leaving yourself with too little at the end of the month. Alternatively, you also need to realize that it’s not smart (or practical) to spend $800 of your $1000 on a pair of shoes à la Carrie Bradshaw five days after you get paid. You’re only screwing yourself over in the end.
Check your bank balance every Sunday afternoon to see where you are for the week. Ate out a lot last week? That’s fine. Just eat in more this week. Planning to treat yourself to spa dat next weekend? Take it easy this week.
It’s not about living within strict constraints but creating a balance for yourself that keeps your bills paid, your savings topped up, and you happy while living within your means.
Are you a budget person or do you think this automation method could work for you?