The Secret Art of Budgeting

I’m not against budgets. They are a useful tool, especially for people starting to understand and get a hold of their finances. But they’re just that – a tool. They help you design a lifestyle worth following, but once you figure that out, they tend to be able to go on autopilot.

If you’re going to do any one thing about finances, it’s tracking. Mint and YNAB are great tools that do this for you. Tracking can be a great way to figure out what’s wrong with your expenses in the first place – do you seem to spend an abnormal amount of money at Target? Were you unaware of how much you actually spend on sushi? Tracking can show some of the most egregious expenses you have, which are – thankfully! – often very easy to cut back on. The biggest gains can be made just by being aware of where your money goes.

Now, your budget is your realistic ideal of how much money you will spend each month. Forgetting about the numbers you found by tracking, think about what would be a reasonable amount to spend in each category. Don’t be afraid to do a little research – the USDA has low/moderate/high guidelines for how much the average individual spends on groceries. Check local market rent/price for the smallest house/apartment you would be comfortable living in, and don’t pay more than that. Allot a modest personal allowance for entertainment, eating out, and consumer goods.

Once you have your budget, now you can check it against tracking. If they are virtually the same, great! You can pretty much go on your merry way, or only concern yourself with the obvious gains you found earlier. But if your finance goals and your current financial habits don’t line up, it’s time to take a hard look at your lifestyle and habits. Once you find a sustainable habit to be more in line with your budget, you should generally be able to actually forget about the budget, as long as you keep to that habit.

For instance, groceries. Let’s say I look at the USDA chart and judge, that as a 22-year old city-dwelling female who likes eating well and grassfed beef, I decide my monthly food budget should be $300, or around $10/day. It’s pretty clear that making a habit of buying lunch or dinner out is Not An Option. Just a sandwich these days costs $7. So I make it a point to bring my lunch every day – and the internet has advice for me! I could bring in easy to make mason jar salads, fun bento boxes, homemade freezer meals, or simply bring in leftovers from the previous night’s dinner. The same thing goes for dinners – I might be able to fit in a take out night once per week, but I should get in the habit of cooking dinner every night with in-season produce and quality but inexpensive cuts of meat. Again, the internet is full of frugal recipes and tips on how to optimize grocery shopping.

The glory of this approach is that, after having designed my budget and finding a sustainable habit or guideline, I just have to follow the habit and the finances will follow. Try applying it to big purchases, too! Home location and size can make a big difference in lifestyle costs (be they financial, physical, or environmental) by forcing certain habits and tangential expenses.

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