Budgets Suck. Do This Instead.

Step 2: Tell your money where to go

two Star Wars Stormtrooper action figures on gray surface outdoors

Setting up a personal finance app or downloading all of your credit card transactions is great for historical analysis of where all of your money goes. Looking forward, however, this data is less important.

What you need to know are your fixed monthly expenses. Things like:

  • Your rent or mortgage
  • Utilities and insurance
  • Loan payments (student, auto, etc.)
  • Minimum credit card payments
  • Desired savings, investments, or additional debt payments*

That last one is important. It’s vital that you calculate how much you want to save, invest, or use to pay down debt first.

To find what’s left, do the following:

Total your fixed monthly expenses.

Figure out your net (take-home) pay, per month.

Subtract your Fixed expenses from your take-home pay.

This is what’s left to spend, let’s call it your spending allowance. You can spend this on whatever: food, gas, beer, travel.

Of course, if something big happens, you may need to spend money on that and have less for fun stuff. That sucks, but it’s also why you should have savings set aside.

Then there’s the issue of having NO leftover money.

What do you do then?

If money is tight, it’s likely there won’t be much (or any) left to spend after you’ve laid out your necessary monthly expenses and what you hope to save. In the short-term, you can reduce–but not eliminate–your savings goals while at the same time trimming spending.

Forget about trying to trim your food budget by $10-20. Look at big places you can save, like:

Getting a roommate

Refinancing your mortgage

Earning more money

Cutting little things gets you a little bit of money. Making big changes gets you a lot of money.

Related: 10 Profitable Real Estate Side Hustles

Step 3: Put your money on autopilot

I first read about putting my money on autopilot about 10 years ago in The Automatic Millionaire by David Bach, and recently read the updated version. The entire book is devoted to setting up automated systems to manage and invest your money.

This does two glorious things:

It eliminates worry. You stop wasting time thinking about stupid things like, did I pay that bill yet?!

Stressed Woman, Stress, Stressed

It protects you from yourself. Automated finances make it harder for you to sabotage your money. No more late credit card payments (and the associated fees and damaging your credit score). No more skipped retirement contributions. And on and on.

The idea of automating your finances isn’t new. In fact, another writer who has taken the idea of automated finances even further is behavioral finance guru Ramit Sethi.

He lays out simple plans for automating your personal finances on both his blog, I Will Teach You To Be Rich, and in his book by the same name. He’s a vocal advocate of what so many other financial “experts” for some reason refuse to acknowledge.

Our generation doesn’t want people our parents’ age telling us to just “set up a budget” and “cut back on everything”. Instead, we want to be able to spend our money consciously, even when that includes things we want, like a latte.

And the key to that is automation.

Step 4: Spend the rest without worry using a spending allowance

The amount of money that you have left after your monthly expenses and savings is what I call your spending allowance. It’s how much you can spend this month (on whatever you want) without worrying.

Using whatever method you’ve set up for autopilot spend tracking, you can keep a simple eye on how much of your spending allowance you’ve used for this month. For example, by setting up a goal in Mint or using the single-card method for all of your day-to-day spending.

This is what I do: if my family’s spending allowance is $1,500 in a month, I can check our credit card balance throughout the month. If it reaches $1,000 too far before the end of the month, for example, I know it’s time to ease up on the spending a bit.


This is a lot to digest. Here are the key themes to take away:

Budgets are overrated. They work for some but for many others it creates stress and we don’t stick with them.

All you need is a spending allowance. Instead of tracking dozens of categories of spending, know how much you can spend per month—your spending allowance—after you’ve covered big expenses and savings.

Forget manual spend tracking. Keep an eye on how much of your spending allowance you’ve spent with Mint or by simply using one credit card for everything you buy. 

We are all different and it is PERSONAL finance after all. Find any of the many budget (or not) plans that work for you. I simply offer this path because it has worked for me and so many other as well. Let us know below what method you us and how it works for you!

4 thoughts on “Budgets Suck. Do This Instead.

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