For the past 20 years or so, I have used the standard approach to budgeting. You know this one, yes? Track your spending over the course of a few weeks to months to figure out what you're really spending. Then, write out all your fixed expenses (e.g., rent/mortgage, car payment, savings, blah blah), annualize periodic expenses (e.g., car registration), and use the tracking to figure out your flexible expenses (e.g., clothing, groceries, weed and booze). If you're living beyond your means by slapping crap on a credit card, stop it, and figure out where you can cut back. Easy peasy, amiright?
Not exactly. I finally had to admit it: Yanno what? This system really isn't working for me. It gives me an idea, yes, but I don't feel like I have genuine control. I'm sure the standard method works great for you, but you are more than likely a sane person with shit tons of self-control. I, on the other hand, have a tendency to spend my monthly clothing allowance on hot wings and champagne, leaving me in a lurch when I need to buy some new undies. I wasn't all that great at saving for annualized expenses either, and I tend to make major purchases only a few times a year (e.g., clothes, bulk meat) and did not do a stellar job of refraining from shifting money from one category to another, which was usually dependent upon my mood or want of the moment.
I could have spent a great deal of time and effort actually learning to be an adult with a hefty grasp on the importance of delayed gratification, but at the ripe age of 40, I'm pretty sure some aspects of my personality won't be changing. Also, I'm lazy. I have finally learned to embrace this and am developing tricks and tools that work with my laziness, instead of forever trying to rail against it. Lo, life is so much easier with the delightful art of acceptance.
A friend of mine took a Dave Ramsey money course at her church, and proudly told me that she had budgeted out the next two paychecks. I was a bit incredulous. Two paychecks? Shit. I budget out the whole year! (I felt impressed with myself. I may have even puffed out my chest a bit. Douchetastic!) But after I finally admitted that the standard advice just wasn't working for me, I remembered her statement. Hmm. What if I did a version of that?
So, this is what I've been doing as of late (get ready to be even more bored), and it is working like a charm, people! I get paid every two weeks, which means I receive 26 paychecks per year. Yet I figure my monthly budget on 24 paychecks per year, and have been figuring out expenses 2-3 paychecks at a time. I separate my fixed expenses between my two monthly checks, do my best to keep standard flexible spending within a range (e.g., groceries between $50-80 per week), note what needs are upcoming and budget them into the next couple of checks. For example, rent, car payment, other debt, gas, groceries, dog food, Annie's baby shower gift--bam. This check, with X dollars left over to spend as I see fit.When the money is gone, it's gone. End of story.
The two "extra" checks help to pay for bulk and infrequent purchases, debt repayment and annualized expenses. I no longer have to pretend that I have enough self-control to set aside a certain number of dollars each month for 6 months until I need to use it. I also budget out a monthly cost for car insurance, even though I only need to pay it 8 out of every 12 months. I treat the "payment free" months like I do my "extra" checks.
Expenses that are truly wants, such as eating out, no longer are restricted to a certain monthly dollar amount, because I never really restricted anyway. I just shifted funds from one section of the accordion holder to another. I have a chunk of money for "play," and I can choose to use it however I like. I still track spending, so that I can see where my money is going and have little conversations with myself. "Now Al, if you order that shitty delivery instead of making dinner, you're not only going to feel like puking and will likely end up with the thundershits, you're not going to be able to buy those new tennis shoes you need. Choices, choices, heifer!"
Oh, how I wish I would have adopted this system years ago. It's so much easier, has more genuine flexibility and works with my instant gratification-loving lazy self far better than the standard advice. Also? I'm sure all of that rambling made no sense. I'm helpful like that.
So, how do you figure out your budget? Or do you? (I assume if you read this blog, you are a budgeting master.) What system has worked best for you?