I confess, I’m not a fan of traditional budgets! 

They require too much of my time. It takes too much meticulous work to track and record everything I buy.  And yet, I’m doing great from a budgeting perspective!  I know how much I spend per month and when my money go over what I have allotted.    

How is this possible?  I created a relatively automatic process that essentially emulates the basic goal of the traditional budgeting process years ago.  Since I’m a number cruncher, I created a spreadsheet (call Finances.xls) that has 16 separate sheet (and growing) about my finances.  I also have a House Mortgage spreadsheet that tracks the amortization of my mortgage loan, but that a separate post for another day… 

• First, I created a worksheet that tracks my income (this is a number at the A1 cell in my spreadsheet, then from there I subtract all of the taxes (federal, state, local, FICA, 401(k) contributions, life insurance ect.  Eventually, I get the Discretionary Income (the amount of money I’m actually able to spend from my checking account – per paycheck).
• Next I created an “Expenses Page”, this page has all of my non-paycheck expenses added up to a total monthly balance.  I cut corners here though,  instead of creating a ton of itemized individual expenses, I just have the following:
  • Car Insurance
  • My Spending Money
  • Mortgage Payment
  • Credit Card (catch all!)
  • House Utilities
  • Son’s 529 (this is pulled automatically)
  • Daughter’s 529 (this is also pulled automatically)
• I typically only touch the above expenses once a year to increase cost for such items as my credit card, house utilities, Car Insurance, etc!
• Next, I subtract the above expenses from the first page’s Discretionary Income (my income worksheet is really labelled “My Salary Pay Play” – I like to do what if scenarios :)) and I get a leftover number (displayed on my expenses page – which is labelled “Pay Allocation”).  This amount is used to fund my Roth IRA at the end of the year (sometimes there isn’t enough left to fund the entire amount, luckily I have until April 15th to fund the full amount for a Roth IRA).

Where does the automated budgeting part come into play?   

Well, everything that I have goes through my bank, so at the beginning of each month I get a statement of the previous month’s activities.  So I’ll do a quick scan of that to check and see if I see anything unusual happened (there aren’t too many things that hit my checking account directly… almost everything goes through my primary credit card).  This only takes me less than a minute unless I spot something extraordinary (which hardly ever happens).  Next, I check the balance on my credit cards!  As long as it is less that the monthly amount I pegged for it in my spreadsheet, I ignore it.  If  it’s over, my wife and I will go through the itemized list that  the credit card company provides with the bill.  Typically we know that around Christmas, the credit card goes over by potentially a thousand or so.  We make sure that the next year, we start out slowly by making sure the balance is lower than typical to make up for the previous years December costs…  

So in a nutshell, my month checking account inflow and outflow, and the Credit Card balance acts as a trigger to make sure we are within our automatic budget.  This works well for use since we are both frugal and live a fairly simple lifestyle.  

When I started this process over 10 years ago, there wasn’t any great online site like www.mint.com, www.Networthiq.com (yes, of course I have a Net Worth spreadsheet page…) or any of the other great new sites!  I’m pretty happy with my current setup, it’s quick and easy for me.  

Do any of you use any unconventional, “not quite perfect” means to handle your finances?  Or do you just go the newer, easier route, with www.mint.com and other similar financial online sites?  

As long as whatever you use get the job done, that’s all that really matters!!!  

-D