When Budgeting, Simple Beats Complex  

By Geoff Schaefer

Geoff is a Wealth Advisor with Intergy Private Wealth. He writes for The Steadfast Fiduciary to help people live with an abundant heart, open mind, and boundless generosity.

September 6, 2023

Budgeting is likely the single biggest factor to your average person’s financial success. It is also one of the hardest things to do effectively and efficiently. So, what are some ways you can make a budget and stick to it?

  1. A simple budgeting system that is close enough is better than a complex system that is perfect.  A multi-page excel spreadsheet with estimated versus actual expenses that you update from your credit card and bank statements weekly is awesome… IF you do it.  I know there are some of you who will do that, and more power to you.  The majority of individuals will look at their budget monthly at best. Find a system that is simple and provides a basic framework.  This “close enough” approach will allow you to put into practice some spending controls.
    • Example- have separate credit cards or bank accounts for your necessary and discretionary expenses.  Say you know your needs cost $5k and you budget $2k for wants.  Have a credit card that is only used for dining out, concerts, trips, toys, hobbies, etc. Once the card reaches $2,000.  You are tapped out for that month, pay off the card and wait until next month.  Some months you may only have $1,800 and some might have $2,100, but this is actually repeatable month after month. 
  2. Budget Backwards!  We all know saving for our future is important.  So, when you budget, make it a priority! Work backwards from the savings.  IF you want to save 30% of your income, start there and make all the savings automatic.  Then add it your needs and your wants are simply what is left over.  This aligns your goals and values with your income.
  3. Leave room for the unexpected.  If you have heard that you should budget to zero every month, go ahead and forget that.  When has a week of your life gone exactly as expected?  Much less a month?  You should budget a set amount of your income to go towards unforeseen needs every month as this will inevitably occur.
  4. Automate, Automate, Automate!  As much of your savings, investments, and necessities should be on an automatic draft set up as possible.  Rent or mortgage due on the 5th of the month- set it up on autopay. Cell phone bill and utilities.  Roth IRA and emergency fund savings should both be automatic drafts as well. We are creatures of habit, and we tend to put off even the simplest task if there are barriers to complete.  A step as silly as logging in and scheduling a Roth IRA contribution could be enough to completely neglect this simple task.  Automation allows your budget to function and your life to continue while your thoughts can be elsewhere.
  5. There are two ways to make room in the budget:
    • Trim expenses. This is looking at some areas of your life and determining you do not need to spend there.  If it is not in line with your values and desired future state, it could be an easy place to cut back and reallocate those funds elsewhere.
    • Make more income.  This one is overlooked and often ignored but is even more powerful than cutting back.  Is there an opportunity for one extra shift per month? Did you start a business? Do you have upward mobility in your current career? The ability to grow income is in the short term, much more difficult, but in the long term, incredibly more meaningful than cutting some expenses.  Put yourself in a position to make more income whether it’s a promotion track over the next three years, or a side gig you’ve been wanting to make happen.

This topic gets very little love and is often viewed from a dogmatic and small-minded standpoint. Every financial decision stems from your cash flow.  Investments do not matter until you have money in your investment account.  Debt repayment can’t be done quickly without extra cash to pay down the principle. The strict adherence to a spreadsheet or envelope can have some success in the short term but will ultimately lead to burnout and fatigue for the budgeter.  Instead of having the 100% solution that you no longer continue after 3 months, try a 90% solution that has staying power and can be replicated over years to come.

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