Recently, I admitted that traditional budgets don’t work for me. I find them too detailed, and keeping track of all the categories and numbers overwhelms me. Even so, I need to keep my finances in order, save money, and ensure the bills are paid. Here’s an alternative for those who dislike traditional budgets.
Think about a reverse budget. Instead of allocating specific amounts for each expense and category, start with your income. At the beginning of the month, I know how much money comes in—my salary, rent from tenants, etc. Most of it goes out through automated payments for bills and investments. The remaining balance in my account is what I have to spend for the rest of the month.
Currently, I aim to have about $1,000 left after bills and investments. Any excess goes into home improvements or other investments. But what if unexpected expenses pop up, like car repairs or medical bills? I put those on my credit card and adjust my spending the next month to clear the balance. If it’s still too tight, I dip into a liquid savings account or consider the interest costs on my card versus the returns on any riskier investments, like cattle investments.
When I get extra money, I handle it based on the amount. Smaller amounts (anything between $300 to $500) go back into my main account as extra spending money. I might splurge on something I’ve wanted or buy a plane ticket to visit family. For larger sums, I try to allocate it quickly. For instance, after selling a flat and getting other extra income, I immediately repaid a loan and handled other financial obligations to prevent easy spending.
My approach doesn’t involve multiple small earmarked funds; instead, I view my finances as a collective net worth. By improving that overall figure, I avoid stressing over smaller expenses. This method helps me manage my finances without a strict budget.
How about you? Do you need a strict budget to manage your finances?