Learn A New Way of Budgeting

This article may include links which we may receive compensation for if you click, at no cost to you.

Budgeting doesn’t have to be a grueling task where you force yourself to decide how much you’re allowed to spend in a month and then somehow magically stick to it. Budgets comes in many shapes and sizes, which means that with all the options, you can pick an approach that’s best suited for you.
a new way of budgeting

Learn A New Way of Budgeting

While reading “Your Money or Your Life” by Vicki Robin (part of my Top 5 Best Books About Financial Independence), I came across plenty of great ideas about budgeting that I have begun implementing in my own life. One lesson, though, particularly stuck out to me: Keep track of every penny that leaves your bank account.

Now, wait a minute. Keeping track of the money you’re spending as opposed to managing the money you spend? That doesn’t seem like a budget…right?

I understand that it may not be budgeting in the tradition sense, but the endgame is the same. Over time you will reduce your spending if you follow these rules:

  • Keep track of every dollar you spend
  • Review your spending at the end of each month
  • Create a wall chart to visualize your spending over time

Keep Track of Every Dollar You Spend

This is a simple, yet difficult step. Simple, because all it requires you to do, is keep a list of everything you’ve spent money on. Difficult because it’s tedious.

At the end of each day (or every other day), write down all the individual items and services you’ve bought as well as how much they cost. Make sure to include a description. This can be best done in a notebook or on a spreadsheet.

By the end of the month, you should have a long list of purchases. Here’s an example of what our list looks like:

Beer and Burger King are my kryptonite…

This practice is a simple way to make your spending more visible. You’d be surprised by how easily money can disappear when you aren’t keeping track of it.

Review Your Spending at the End of Each Month

Now that you have a list of every purchase you’ve made for the month, it’s time to reflect on those purchases. Why look back? Because we need to see if we regret any of the things we bought.

Before reviewing purchases, it’s important to understand what your goals are. Figure out who you want to be in ten years. Once you have your ideal future-self molded in your brain, go through each purchase you made last month and ask yourself for each one:

Does this purchase get me closer to or further away from who I want to be in ten years?

If it got you further away from who you want to be, then put a big “X” next to it on your list. If your goal is to become healthier and lose weight, then all those fast food purchases should have X’s next them…as should beer. Probably. If you want to retire early, but you spent hundreds of dollars online shopping for clothes you really don’t need, then you have a few X’s there as well.

This exercise should only take 15 minutes or so, but once you’ve completed it, you’ll notice that there are plenty of things that you didn’t need to spend money on.

The next time you go to buy that thing or pay for that service, you’ll remember those big X’s. Those big X’s that bring you further from your ideal self. This is where the budgeting kicks in.

You don’t feel deprived by not spending your money on things you don’t need, instead you feel empowered knowing that every dollar you spend is getting you closer to achieving your goals. You begin to save money while feeling better.

Create a Wall Chart to Visualize Your Spending Over Time

This last rule is the fun one. You’ll now create a chart to show you how your spending has changed over time.

Seeing all your expenses month by month is one thing, but seeing the big picture of an entire year and its trend is another thing. The big picture allows you to see where you’ve been and the direction you’re going. If your goal is to lower your expenses, but the line is trending up, then you know you need to make some changes.

Your chart’s X-axis (horizontal line) should list the months of the year, while the Y-axis (vertical line) shows dollar amounts. If you began this journey in January 2019, then at the end of that month, you would have placed a dot directly above Jan-19, and directly next to wherever your expenses came in. Using the below chart as an example, it looks like we spent approximately $5,500 in January of 2019.

This chart should be constructed on large grid paper and placed where you’ll see it frequently. A common place is in a closet or behind a bedroom door. These are places that you see all the time, but your guests don’t.

If you’re comfortable with your guests seeing your monthly expenditures then by all means, throw this bad boy in your living room.

Down we gooooooo…

There you have it. The short and sweet version of a new, quick way to start budgeting. If you want a more comprehensive and holistic understanding of this type of budgeting approach, then pick up Vicki Robin’s “Your Money or Your Life.”

You can read my full “Your Money of Your Life” Book Review here.

Happy Budgeting!

Share on facebook
Facebook
Share on google
Google+
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on pinterest
Pinterest