Hate Budgets? Try This One!

Budgets have kind of a bad rap.  If you’re like most people, “budgeting” is probably not on your list of favorite things to do. In fact, if you’re like most people, the very word “budgeting” probably makes you cringe just a little.  After all, unless you’re a serious financial geek, there’s nothing particularly fun about creating those little spreadsheets and tracking all of your monthly expenses, down to the penny.

What’s more, even after you’ve managed to grit your teeth and work through a month’s worth of bills and day-to-day expenses, the end result is a rigid, nitpicky budget that goes completely out the window the minute you experience a change in your monthly expenses.

The problem, it seems, is that while the idea of budgeting sounds useful, the actual practice of budgeting leaves a bit to be desired for a lot of folks.  That’s why I’m excited about the emerging trend toward what I like to call “big-picture” budgeting.  Unlike some of the more uptight, detail-oriented budgets out there, big-picture budgeting allows you to set some simple, flexible ground rules that make it easy to live within your means.

No spreadsheets.  No down-to-the-penny monthly calculations.  Just a little basic math and a couple of hours.

Interested?  Here’s how you can create your very own big-picture budget in three easy steps.

Step 1:  Add up your total monthly income.

The first step to any budget is to find out how much money you have to work with.  Use this super-simple table to see how much you’ve got to work with every month:

Step 2:  Add up your monthly living expenses.

Again, this should be familiar territory to anyone who’s ever created a budget before.  In this case, “monthly living expenses” means typical things like bills, mortgage/rent, credit card payments, and any other financial commitments such as school activities or classes for the kids:

Your expenses might look a little different than the ones I’ve listed above, but this should give you a starting point.

Step 2.5:  Figure out what percent of your monthly income goes toward fixed expenses. 

Is it 50 percent?  55 percent?  60 percent?  How much of your money do you need to set aside each month to ensure that you can pay your bills, eat, get to and from work, etc.?

Step 3:  Once you’ve got that number, divide up the rest of your monthly income into additional, smaller chunks.

Here’s an example of a big-picture budget.  For this example, I’m assuming the person has no credit card debt.

One of the things that I really like about this type of budget is that it’s so flexible.  It can be adjusted to fit almost any lifestyle or financial goal.  For instance, let’s say you’ve got several thousand dollars’ worth of credit card debt.  You’ll probably want to put more emphasis on paying that down.

Here’s one way you could do it:

As you can see, in this example, I’ve taken out the “retirement” and “savings” categories.  Although it’s very important to save money for the future, paying off piles of high-interest debt is a critical part of a long-term savings strategy.

Once the person in this example pays off their credit card debt, this budget can be rearranged and that 30% can be used for other things – like saving for retirement.

This budget can also be helpful if you’re trying to save up for something special, like a family vacation:

This budget is really great for folks who want to save – but don’t want to account for every single penny.  With a big-picture budget like this, as long as you stay within your set amounts or each type of spending/saving, you shouldn’t ever have to worry about overspending.  And, because it’s so flexible, you can easily shift 5% here or 10% there if you want to focus on a specific goal.

So, there you have it:  A flexible, easy “big-picture” budget.  What do you think?  Would you try something like this?  Do you have any easy tips for simple budgeting and saving?  I’d love to hear about them.

Happy saving!