To Budget or Not To Budget – How to Track Our Spend

I hate budgets.

Budgets feel like arbitrary handcuffs placed on my lifestyle.

When I choose not to buy something, I don’t like to imagine it is because I put together a budget. Instead, I prefer to think it is because I step outside of the consumer matrix for a moment to realize I don’t need it. I channel my inner Tyler Durden sense of anti-consumerism.

Despite this, I’ve come around to giving budgets a chance after seeing the real world impact they’ve had on the lives of my girlfriend and myself.

Over time, developing a budget has helped my girlfriend and I to get on on a path to financial independence.

The benefit of a budget far outweigh how annoying they are. They say just because we like something, doesn’t mean it’s good for us. In this case, as it applies to me, the opposite is also true: just because I hate budgets doesn’t mean they’re bad for me.

And while I still hate budgets, I’m no longer on a mission to avoid them for the rest of my life.

Everything we do in life is about compromise. I have learned to compromise with my budget. Here is how I break away from the “standard” budget: My process works backwards.

Most of the books and articles I’ve come across talk about building our budget at the start of a month or the year. The protocol is to allocate X amount of dollars to different buckets. Our buckets are our cash cows and they only get replenished once a month/quarter/year.

What I do instead is track how I spend my money without using a budget. For ideas on how to track spending, scroll down to the next subtitle.

At the end of a quarter I review my spending trends and analyze them by identifying categories of excess spending.

As the new quarter starts, I remain conscious of the areas where I want to improve. By shaving money off of one category, I’m rewarding my future self. Any purchase that I decide not to go through with becomes a mini victory on my path to financial freedom.

Bottom line: figure out where your money goes.

Seriously. Figure it out. If I can find a way to make budgeting work for me, so can you.

How to Track Your Expenses
You can keep track of your spending by taking 5 minutes at the end of each day to write down all the items purchased that day. If you’re familiar with Excel, you can easily keep track with a few tabs.

If you prefer to have purchases tracked automatically, then I would recommend Mint is the shit because Mint is free. It will automatically track all your purchases and categorize them for you. For free.

At first, you may need to manually identify purchases into different categories, or design your own categories, but the software learns your behavior quickly enough that you only have to do this a few time You can also design your budget and track your spending.

Over time, Mint begins to understand your purchases and gives you all the data you need. It will also send you alerts when you have upcoming bills or are approaching a budget cap. In short — Mint will keep you accountable if you let it.

For me, early on, it was the amount of money I was spending on restaurants and alcohol. Like most people in their mid 20s, I was going out frequently and racked up high tabs. Even bought rounds or “covered it” because someone would “get me next time”. If we want to have a social life it’s gonna cost us, that’s no surprise.

As each quarter came to a close, I would look at how much money I spent per week. After identifying any unique purchases (such as Christmas gifts, or booking a summer vacation), I could forecast what my spend will be in the next quarter — assuming I maintain the same lifestyle.

We can then set goals around this number and tweak things here and there as we move into the next 3 months.

Using larger time periods means we can’t cheat the system by purging for a while or going all out Spartan-style before we break down and buy everything you missed.

In the end, you can use your personal expense tracker or an automated service such as Mint to create your own budget. Either approach will help you identify those areas where the expenses will stare you in the face.

The Bottom Line
Budgets at the very least let us regain some confidence and certainty around our financial lifestyle. This clarity resolves any stress around the inability to pay off debts or afford the luxuries we want.

Despite it being a messy process, budgets lead to better times.

When I use Mint to understand where my money is going, I’m better able to plan for the future. It is relieving to know where my money is going. Reserving this time for an hour or two each quarter leaves me more time to enjoy all the non-budgeting activities in my life.

How do you track your expenses? Do you use Mint or another free online tool? Share your approach in the comments below.

Master Distiller

5 comments… add one
  • Matic Mar 18, 2016, 8:45 am

    Hey Matt,

    I like your approach and attitude towards personal finances. Personally, I find the bucket system a bit too constraining as well. Having to plan for every single dollar (or euro) just takes too much joy and spontaneity out of life. While financial planning is important I’d rather leave it in more general terms and only budget for the spending categories where I feel I should pay more attention or that I’ve overspent on in the past.

    I also like to set my general budget for everything as (monthly income – X), so the budget adjust automatically to my incomes and X are my automatically deducted savings that I put aside each month.

    That way I can still take care to not overspend, save money, yet not sweat the small stuff.

    Being a co-founder of a personal finance startup I luckily have the luxury of tailoring our tools for such an approach as well. 🙂

    • Distilled Dollar Mar 18, 2016, 9:28 am

      Having those automatic deductions set up is a great way to essentially auto budget.

      Your (income – X) approach reminded me of this quote from Warren Buffett, “Savings are not what is left after spending. Spending is what is left after savings.”

  • amber tree Mar 21, 2016, 1:58 pm

    Budgets and I have a love hate relationship. After a few years, we got to realise how much we need each other. Our relation is quite high level: A dozen of categories keep us running, line by line details are not needed and there is room for fun money.

    As we talk as less as possible, we automate what we can automate. That is how we stay best friends.

    • Distilled Dollar Mar 21, 2016, 2:14 pm

      Automating savings was also one of the earliest moves I made when it came to budgets. It helps tremendously especially when lifestyle inflation starts to creep in.

      Haha, I’m not sure I would call my budget a best friend. Maybe my dark knight.

  • The Thing About Money Jul 20, 2016, 2:08 pm

    This is a lot like how I think of budgets. Being under budget in one “bucket” doesn’t mean much if you’re over in another. Spending categories are better used as diagnostic tools than category-by-category spending restrictions. I like how you use a quarter of information at a time. I always feel like using one month to predict the next doesn’t work well – too much noise to detect patterns.

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