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I have never liked the idea of budgeting and frankly I think its overcomplicated. About five years ago I decided to do something different with my finances around automating it and it has worked tremendously. Here is what I have done:
-I allocated two types of expenses: fixed and discretionary. The fixed bills (rent, storage, phone, TV, Insurance) are constant each month: $1,574. The discretionary (gas, groceries, entertainment, household, dining out, charity, etc.) total $1,500. I stick to these totals each and every month of the year (they are locked in).
-I established Checking Account #2 for Fixed; Checking Account #1 for discretionary. My bi-weekly paycheck is split to allocate $750 into Checking Account #1. The remainder of my paycheck and my wife's paycheck goes to Checking Account #2, where every fixed bill is automatically taken out of the account each month. No other expenses except monthly Savings are taken from Checking Account #2.
-So, we live off $750 each paycheck for 2 weeks until I get paid again...yes, we are essentially living paycheck to paycheck.
The benefit with this method is that we spend whatever we want to spend every time I get paid as long as it doesn't exceed $750 every two weeks. We actually have it outlined as to what makes up the $1,500 a month, but we don't care. We know we have $750 to spend max. This approach creates a lot of flexibility to do what we want with our cash. It also avoids envelop systems while eliminating tracking. At the conclusion of each pay period, we just transfer any remaining money over to Savings. The benefits of Checking Account #2 is that I have the inflows and outflow in a spreadsheet and I can see how much money I will have in the account any date of the upcoming year since the inflows and outflows are constant each month.
This approach has worked for me. I am currently saving about 55% of my gross income and not overspending; however my question is: Am I really budgeting here ?
-I allocated two types of expenses: fixed and discretionary. The fixed bills (rent, storage, phone, TV, Insurance) are constant each month: $1,574. The discretionary (gas, groceries, entertainment, household, dining out, charity, etc.) total $1,500. I stick to these totals each and every month of the year (they are locked in).
-I established Checking Account #2 for Fixed; Checking Account #1 for discretionary. My bi-weekly paycheck is split to allocate $750 into Checking Account #1. The remainder of my paycheck and my wife's paycheck goes to Checking Account #2, where every fixed bill is automatically taken out of the account each month. No other expenses except monthly Savings are taken from Checking Account #2.
-So, we live off $750 each paycheck for 2 weeks until I get paid again...yes, we are essentially living paycheck to paycheck.
The benefit with this method is that we spend whatever we want to spend every time I get paid as long as it doesn't exceed $750 every two weeks. We actually have it outlined as to what makes up the $1,500 a month, but we don't care. We know we have $750 to spend max. This approach creates a lot of flexibility to do what we want with our cash. It also avoids envelop systems while eliminating tracking. At the conclusion of each pay period, we just transfer any remaining money over to Savings. The benefits of Checking Account #2 is that I have the inflows and outflow in a spreadsheet and I can see how much money I will have in the account any date of the upcoming year since the inflows and outflows are constant each month.
This approach has worked for me. I am currently saving about 55% of my gross income and not overspending; however my question is: Am I really budgeting here ?
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