If you’ve heard it once, you’ve heard it a thousand times: To get control of your finances, you must create a budget.
So, do you have one? Why not?
Probably for the same reason most people don’t have a budget: It’s completely overwhelming to make one. You’d have to collect receipts or paystubs, and you’d probably have to go digging for records of your bills – all stuff you might not even have around until a new one comes in the mail.
The good news is that you don’t have to have a budget. Really.
What Is a Budget, Anyway?
At its most basic, a budget is just a math problem. It’s not even a hard problem: All the money you make minus all the money you spend equals no less than zero.
Budgets only start to blow people’s minds once they get into hundreds of little line items for every latte or night at the movies. You don’t have to keep track of every single item if you take the time to automate your financial life.
Making Your Budget Automatic
Almost everything having to do with money can be done online, which means you can set it and forget it. You can do this in just three steps:
- Start with your income. If for some reason you haven’t already done so, set up direct deposit of your paychecks with your employer. Most businesses actually prefer this method, but if your company doesn’t offer it, download your bank’s mobile check deposit app so you can snap a pic of your paycheck as soon as you get it. If you have more than one income source, set up automatic deposits to your checking account for all of them.
- Add up your bills. You will need to gather some paperwork for this part, so if you tend to throw away all that paper, set up a big envelope or basket that you chuck all your bills into for one month. At the end of the month, you should have a record of all your regular payments. Go through each one and set up an automatic payment. You can do this either through your bank’s bill-pay system if the amount is the same each month, or you can authorize the utility to withdraw the money from your account.
- Automate your savings. What’s left? Subtract the total you are now automatically spending on bills from the total income you get each month. This number is what you have left to spend or save. Take as big a chunk of this as you reasonably can and set up an automatic savings plan. You can do this by setting up a retirement fund that pulls money directly from your paycheck, or you can set up automatic drafts into an investment fund or other savings account.
Thinking About Spending
Now that you’ve set up your important bills and are automatically paying into a savings plan, what do you do with the money you have left? This is your spending allowance each month. You don’t have to keep track of any complicated budget items for things like groceries, clothes and entertainment. Instead, try a cash system for your spending. Hit the ATM on payday to get your spending allowance, and when it’s gone, you’re done.
That’s all there is to it.
Seriously, having cash in your wallet will give you some old school street cred, but it will also give you a powerful visual reminder of your limits. If you want to blow it all on a great new outfit on the first of the month, you can. Just remember that you’ll be stuck with ramen noodles from the grocery store in the days leading up to your next paycheck. It’s your decision to make, and you won’t have to pull out a complicated budgeting spreadsheet to do it. Just open your wallet and have a look.
Killing Your Debt
If you’re trying to pay off your car or a high-interest credit card balance, you can make that automatic, too. Just make sure your payments are set to be more than the minimum, and check in on the balance every few months to see how it’s going. When you pay it off, reassign your payment to a different debt, or set it up to be automatically moved into your savings.
It really is that easy, and all without the eye-crossing craziness of a traditional budget. What are you waiting for? Make your money work for you, automatically.