Build A Wealthy Spirit 143. Budgeting for Peace of Mind
Budgeting, or planning how your dollars are going to be spent in the future, is more tricky than simply tracking each expense. I’ve always marveled at zero-based budgeting software like YNAB, You Need a Budget. With YNAB, you take every dollar from your income and assign it to a job. Some money gets set aside for rent, groceries, savings, etc. However, as someone with a high savings rate, zero-based budgeting strategies seemed a bit overkill for my needs.
Not working complicated all of this. Budgeting and tracking my expenses is so much more important when you don’t have a job. At the same time, you can’t “budget” a non-existent paycheck. Was I supposed to assign each dollar of my net worth a job? That seemed insane and very difficult to predict so early on in my life.
Michelle and I took time this week to discuss simpler ways to budget. Our friend and fellow podcast listener, Arjun, told us that he has a general idea of what he spends on most things each month, so he knows how much he typically spends.
We took this concept and combined it with tracking your spending. First, we calculated our monthly fixed expenses; rent, utilities, health insurance etc. For me, this number is around 1600-1700. Next, we use data from tracking our spending to track our other spending categories and costs. As an example, my typical spending categories are groceries, gas, hanging out with friends, home supplies etc, which can range from about $800-3000. Spending at this rate would result in an annual spending of about $43,000.
I can use my typical monthly spending to estimate my next month's costs and consider any extra expenses I might have- travel, Christmas, etc. When I see how much I spent at the end of the month, I can tell if I am above or below my average spending which helps me decide if I am still on track.
Though this method may not be as accurate or stringent as zero-based budgeting, Michelle and I found that it helped paint a realistic picture of our spending which relieved money anxieties and our scarcity mindset. Listen to today’s podcast for the details of our method.
How do you all track your expenses and budget? Are you on a break from work or self-employed, how do you manage your spending? Let us know in the comments below.
Show notes
Community Time
- Thank you Joshua Lelon for your insights from our
episode 142 “What are you telling the universe”
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