I have never been a fan of budgets. They carry a negative connotation and are not as flexible or followed as a cash flow document is. Cash in and cash out. As a Certified Financial Planner, the benefits of managing your cash low make up a solid 75% of my financial advice. Unfortunately, when it comes to taking this advice, many have tried and failed on many occasions. With dozens of budgeting apps and shareable spreadsheets available, there is not really a good excuse for these failures.
Most families have varying faults for their family’s lack of a budget, though. While one partner is usually more optimistic that the other in this regard. They always seems to have a shiny new cash flow app they’re certain is about to change their lives, But they typically give up as soon as the initial excitement has worn off. They usually can accepted their limitations, because If I were to distill the other unusual part of my financial advice, it would be know thyself.
Why traditional budgeting never works for us
Right or wrong, people have accepted that they’re not a person who will track their monthly expenses on a spreadsheet, in an app, or in a leather-bound journal, and control them accordingly. Traditional budgeting isn’t for me or them. I find the apps that connect to our bank account and break down our expenses with a handy pie chart more soul-crushing than helpful. One parter sees target and thinks Partner’s happy place. The other partner sees toilet paper, back-to-school supplies, and sure, a useless item form a retailer whose marketing team really knew what they were doing. They end up arguing, and since the app that was supposed to ease their conversations is mostly to blame, they never use it again.
I know not everyone can relate to our struggle. Many people have a budgeting app they swear by or they spend Thursday nights with their partner and a bottle of wine poring over a shared spreadsheet. But, if that’s not you. If deep down you recognize that you’re never going to magically wake up the kind of person who can account for every dollar to your name and a plan for how you’ll use it, let me share with you three ways some people overcome their inability to use a traditional budget while remaining financially fit.
Three step alternative to traditional budgeting
1. Setting financial goals
While examining the details of your expenditures can usually leads to arguments, and people will trade Thursday nights with a spreadsheet for a binge-worthy television program every time, staying financially fit requires us to expend at least some energy on strategy.
The first part of creating a strategy begins with goal setting. If having a couple thousand dollars saved up by the holidays is your financial goal, you don’t have to mark up a spreadsheet to get there; you can simply set aside $150 a month. A spreadsheet may help you organize your strategy, but if that isn’t for you, set up a monthly transfer of money to the appropriate savings account and move on.
For your financial goals to work though, they can’t just be lofty ideals, they have to be at the center of how you spend your money. Your financial goals can determine your financial priorities, and while these priorities may never get written into law in the form of a traditional budget, they do translate into your choices. First, pay your bills. Then, put money towards your financial goals (retirement savings, pool fund, vacation, etc.), and any money leftover determines how often you order takeout and whether or not your getting the name-brand toilet paper that month.
2. Staying aware of our financial position
Of course, this method assumes that you will have money leftover to live on after we take care of our bills and financial goals. This brings me to the second thing to do in lieu of a traditional budget: Make sure your financial goals are determined by your financial realities. This is where the personal finance advisors heave heavy sighs and say that’s what budgets are supposed to do. But most continue ignoring them.
Every time your financial situation changes, do the math. For instance, if one of you gets a raise or a student loan comes out of deferment, pull up a spreadsheet and calculate how this will change your finances. People do this infrequently for all the same reasons they can’t stick to a budget, but a rough outline of your position may work because a rough outline allows you to calculate how much money you earn and how much you typically spend. This is where cash flow comes in. Keep this number in mind when setting your financial goals and taking on any new bills to make sure you always have enough to live on every month.
3. We keep a careful watch on our bank accounts
I recognize that this loose system of thirds — bills, goals, and life expenses — may sound recklessly abstract, but that doesn’t mean you are surviving on hope, prayer, and a complicated network of credit cards either. You keep track of your finances. You can skip the budget part and get your numbers straight from the bank. You can do this by regularly checking your bank balances and signing up to have alerts sent to your phones every time money comes in or out of your accounts. This tracking method keeps you aware of the specifics of our financial situation in real-time.
The bottomline
I see traditional budgeting as a very effective middle man, which means by cutting it, people are agreeing to track and organize their money themselves. This hands-on approach to keeping your money on track in confluence with you’re broader financial position, all in service to your financial goals, functions as a living budget.
While this living budget doesn’t have the stamp of approval from the conventional wisdom that a traditional budget has, it works really well for some in a way traditional budgeting never did. And in the end, the best budget is the one you’ll actually use, even if technically, it’s not really a budget at all. It simple managing cash flow and that is Keeping Life Current.
