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How to Budget Without Tracking Every Dollar

How to budget without tracking every dollarFor most people, 'budget' is an ugly word. Very often when we hear it on the news, it's usually about the government spending too much, followed by discussions about services or programs being cut to get the 'budget' back in balance. Personally, I prefer the term 'spending plan'. It sounds less restrictive.

In my former role as a debt counsellor, I helped many clients with their spending plans, usually trying to find out where their spending had gone off the rails and brought them to my office. What I learned from those days was that many people are not fully aware of where their money goes. Some were better than others, mind you, but it wasn't until we started putting things on paper that the light bulbs went on. "Really, is that what I spend at the coffee shop every month?"

Related: Why You May Not Need An Emergency Fund

After going through all of the items on the spreadsheet I used with clients to mark down their monthly spending, the bottom of the sheet had a number indicating what was left over at the end of each month, based on what the clients told me they spent. Sometimes the number was positive but other times it was negative, meaning the client was over spending. I would ask, "Does that number look right to you?"

Occasionally the answer was yes. More often, the answer was no, especially when the number at the bottom of the spreadsheet suggested the client had money left over based on the numbers he or she had given me. When the answer was no, I would tell the client, "Okay, that just means that something is missing from the list or some of these numbers are higher than what we have here".

Budgeting Can Be A Lot Of Work

Most people don't like doing a budget. If you're not used to doing one, it sounds like a daunting task. Add to that the idea of tracking every dollar to find out where the money is spent in the first place and most of us tune out. Tracking every dollar for a month or two isn't fun. It can be a necessary evil for some people, but then again, so are root canals!

Related: 6 Tips For Keeping Better Tabs On Your Money

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A Different Way to Track Your Money

I'm going to let you in on a secret: I don't make a budget – at least not in the traditional sense. I am aware of where my money goes and what bills needs to be paid, but I don't track every dollar.

The first thing is do is write down how much money is coming in each month from all sources. Next, list everything that needs to get paid on a monthly basis. This includes the mortgage, utility bills, car insurance, etc. If you regularly use your credit card for purchases so you can collect points or other rewards, then adding an amount based on your typical credit card bill will be part of this list too. Starting to sound like you're making a budget? Just wait, it gets better.

Don't Forget to Pay Yourself

I truly believe saving for the future is just as important as paying the bills that are due today. So, to the list of things you have to pay every month, let's add an amount to go into a TFSA, RRSP or any kind of savings account.

The general consensus is we should save ten* percent of our earnings. I don't disagree with that number but I do put an asterisk on it. Saving money is a little like a workout plan; it takes time to create the habit and discipline to keep it. For someone who has never been good at saving ten percent might seem like a really high number, so to people in that situation I say, "save what you can".

Related: Never A Better Time To Open A Tangerine Bank Account

Once the habit of saving is created, the amount you save can be steadily increased, much the same way people increase their workout programs as they get stronger and more physically fit.

You Deserve an Allowance

Here's the part of this spending plan I like best. Once all the other things listed above are covered, give yourself an allowance. You've earned it!

I've been putting myself on an allowance for a few years and it works. My favourite part is, I don't track it. I don't care what I spend the money on; the only rule is if it's gone, it's gone. When I first started doing this I would take the money out of the bank machine in small amounts every few days because I thought the temptation of having my entire allowance in my pocket would make me spend it faster. That part is probably still true!

To cut down on the number of trips to the bank machine, I started doing things a little differently. I took out the entire amount of my allowance every pay period and put away in a safe spot at home. Every morning I put that day's allotment in my pocket and that was my money for the day. Once it became more tangible doing that, I found I was more aware of what I was spending and after a few weeks I found that not only was I not using my entire allowance, I often had some of it left over going into the next pay period. But unlike businesses that reduce a department's budget if the entire thing isn't used, I kept taking out the same amount every pay period.

The thing about this money is it's mine to do with as I please. I don't track where I spend it and I don't feel restricted by it. If I want to spend it on a bottle of pop or some other thing I know isn't good for me, I can do that and I don't feel guilty about it. I know the rest of my finances are under control, and that's what matters. If I actually tracked that money I could probably use it more wisely, but I'm okay with things the way they are.

So if you hate tracking your spending and you cringe at the thought of making a budget, a spending plan like this might work better for you too.

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Peter @'s picture
Are there any apps you would recommend to help with budgeting? Also, in your experience as a debt counsellor did the people who used their credit cards all the time to 'get points' actually pay off the entire balance before interest charges apply?
June 01, 2014 @ 1:54 pm
Christopher C. Warner
Christopher C. Warner's picture
Hi Peter, great questions, thank you. I don't use apps personally. I prefer to do my tracking by spreadsheet so I don't have any recommendations for that. If any readers have apps they use for budgeting or tracking spending, please jump in. To your second question, the short answer is, sadly no. Many people I met in that role of ten had more than one credit card and rarely paid off the balances each month. Usually by the time I met them, they were on a mouse wheel of making a payment to the card(s) each month but then dipping back into the card to make ends meet.
June 02, 2014 @ 11:07 pm
sh's picture
exactly! If you can tell me how to get off the wheel that would be REALLY helpful!
June 13, 2014 @ 7:46 pm
Christopher C. Warner
Christopher C. Warner's picture
I will address this topic in more detail very soon but to get things started: 1) Write down everything you spend. If you've never done this before, you should track everything for two to three months living the way you normally do. 2) Once you've had a chance to analyze where the money is going, start looking for ways to reduce your spending. 3) You want to find at least enough to cover the minimum of your credit card, plus $50.00 4) Each month you the minimum on each card except the last one. Put an extra $50 on it each month until it's gone 5) Once that first card is empty, put it away and don't use it, but don't cut it up either (not yet anyway) 6) Take the entire amount being put on the first card onto the second card, adding it to the minimum you've already been putting on it 7) Repeat this process until each card is gone. The process takes time but it's effective.
June 15, 2014 @ 11:24 am

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