I’ve got a confession to make: we don’t record our purchases, carry around envelopes, fill up jars with anything other than home-canned Meyer lemon marmalade, or use excel to meticulously track our budget each month.
I’m just not that kind of a person.
Yes we have our finances worked out. And yes we know how much money we have coming in and approximately how much bills are going to cost each month. We’ve never actually overwithdrawn on our checking account, and the only bill we ever missed was during a ‘changing-of-the-guard’ experiment while working through financial friction in our household.
We have a solid handle on our finances without lots of the work people think is involved.
So how do we get away with this?
Instead of performing all the maintenance usually associated with the word ‘budget’, we do a once-and-done master key, set our internal thermostats to it, and check in periodically.
Set Up the Once-and-Done Master Key
We’ve set up a non-high maintenance money funnel that works for us as step one to our system. This means that yes, at some point we sat down with an excel sheet to work out what our monthly bills are (both fixed, like home mortgage, and variable, like electricity), what our income is, and how much we can automate towards our savings goals (income – spending = retirement + permanent savings + travel fund).
This was after plugging our info into Mint.com and associating each of our financial accounts. The cool thing about Mint is that they can bring in between 30-90 days of historical spending/earning data within hours of you signing up so that you automatically get a clear picture of your variable spending needs by category based on real historical data (love instant gratification!).
Based off of our figures, we set up automatic bill pays and automatic savings withdrawals so that we know each month that we will have $XXXX (or $XXX) amount of money left to cover those variable expenses.
Now the trick is to stay under this extra amount left in checking.
Then We Set Our Internal Thermometers to the Variable Values
For ex-environmental investigators like myself, this means we calibrated to our new numbers.
You see, your brain has these sort of internal triggers to know what is and is not normal. So you need to set your new “normal” for the various types of variable spending in your once-and-done master key so that you start getting the inner alerts when you get close to these numbers.
And by “set your normal”, I simply mean look at the numbers in your Master Key and sort of sear them into your head. For example, we’ve allocated $350/month for groceries. Since I go grocery shopping twice per month I know that each trip I can spend approximately $175. Or if I go crazy-with-the-cheese-whiz one trip (no, I don’t buy actual cheese whiz), I mentally subtract that from the $350 and know that I can spend $XXX on our next trip to even things out.
And let me tell you, this internal thermostat can get ridiculously precise.
I have a killer internal thermostat when it comes to things like grocery shopping. I’ve gotten so good that sometimes I come within a dollar of our $175/trip budget without having used a calculator or anything! It’s like… I just know that I’ll have to skip out on those Dove dark chocolate almonds this time because I picked up a clearance organic meat special (triggered by natural alerts set off by my internal thermostat).
It just balances out.
Check Up As Needed
It’s not a good idea to completely run your finances in your head — especially when you’re new to the process and your internal thermostat might not have been properly calibrated.
And when you start feeling those triggers, you should check up on things anyway (triggers can really be anything, like “that voice” or “gut feeling” telling you that you shouldn’t purchase X because you’re close or over your limit).
So you’ll need to check up on things from time to time. You can do this by logging into Mint.com if you’re on there, or simply by opening up your banking account/credit card account and taking a look at things weekly, bi-weekly, or whatever feels comfortable to you.
Just like seasonal changes mean you have to reset your home’s thermostat, as your life changes you’ll need to reset your money thermostat. A sure sign of when it’s time to relook at that master key is if you find yourself juggling between categories and robbing Peter to pay Paul several months in a row. It might simply mean that you need to allocate more money into the groceries budget and a little bit less money towards savings in order to relieve some of the stress that you’re feeling. But overall, once you set the master key, then set your internal thermostat, you’ll take a lot of the maintenance part of keeping a budget out of the equation. It’s really pretty cool!