Sometimes I wonder if I’m the only financial planner who hates Budgeting. I’m a good saver, but I can’t imagine a life where I get an alert three weeks into March telling me that I spent too much on groceries. Don’t get me wrong – many people’s lives have been greatly improved through strict budgeting. But if you’re already a good saver, and the idea of a budget makes you go deer-in-headlights, here’s your workaround.
You don’t need to set a target for your spending. Sometimes, knowing where your money is going is enough. It may not matter now, but at some point you will wish you had this information handy.
By using websites like mint.com, over time you will get a clear picture of where your money goes. You will first need to add your credit card and bank accounts so that most of your spending information gets imported. Then, set a weekly calendar reminder and spend just five minutes placing those “uncategorized” transactions into their proper category. For you OCD types, it’s better than Tetris – you might actually enjoy it.
After a year, you can start playing with the “trends” tab to see where your money went. I was blown away when I saw how much I’ve spent on dining out and groceries (guilty as charged for letting my whiskey purchases hide in the groceries category). Will I change my current spending patterns? Nah. But I know where I can cut spending later if needed.
Budget Only Where It Matters
That said, we all have our spending blind spots. For some it’s impulse shopping. For others, it’s never being able to say no to a needy family member. Think about your blind spots. For me, they are travel and charity. In a given year, there’s a very high chance I’ll look back and wish I had done much more or much less of one of them.
To address that, I now have two additional savings accounts nicknamed “travel” and “charity” (same bank) that receive automatic monthly transfers from my checking. For now, there are no other categories where I feel I need to control myself – I eat what I eat and update my wardrobe when holes appear. I’ve heard of some people creating five or more of these types of “earmark” savings accounts. They can even be created for those short-term goals like saving for a home.
Talk to your advisor about your spending blind spots. It just might spare you from having to create a full-blown, gulp, budget!
The opinions expressed are those of the author and are subject to change without notice in reaction to shifting market conditions. This blog is provided for informational purposes, and it is not to be construed as an offer, solicitation, recommendation or endorsement of any particular security, products, or services.