There is a pretty big battle on the internet regarding if someone needs or does not need a budget. Google (or Bing, if that is your thing) ‘why you don’t need a budget’ and 4 of the articles on the first page all declare you NEED a budget. There are some very different opinions out there on if a budget is necessary or not.
According to this Gallup Poll, two-thirds of the entire country use no budget at all. According to some 2012 research here, half of the country spends more every month than they earn. You can read all of the scary statistics about people not having the ability to cover an emergency expense, having no savings, or carrying credit card debt and see quickly that a large amount of the population uses no budget at all.
Any way you want to shift the numbers, they all seem to be scary.
My family uses a nicely detailed budget on Excel that I got from budgetsaresexy.com. I have modified it to fit our needs but it has greatly helped our finances, our marriage, and our long-term goal planning. I have talked all the time about how a budget was one of the smartest decisions I have ever made. There is no question I have more money now, and a better family life because of the Excel budget that I geek out on.
While I advocate for a budget that provides some flexibility, I also understand many people are going to scoff at the idea of a budget. They don’t want to take the time to plan it out, have a rigid spending plan, and find it complicated. You can keep it very simple and still get a majority of the benefits of a complex budget with this ‘easiest budget’ idea.
I understand it can be confusing to look at a budget and try to make sense of it all. There are different formulas, categories, and ideas when it comes to budgeting. That is why this budget is the easiest in the world, and contains only three rules.
By starting this budget and following the rules, you can cure overspending, pay down debt, and start building wealth!
The Easiest Budget in the World
Well without further suspense here is my easiest budget in the world:
Income: Positive Number
Expenses: Negative Number
Sum: Extra Savings or Work to Do (depending on outcome)
That’s all there is to it. The goal is simply spending less than you earn. No fancy sheets and only simple math. If you can handle this every month, you will have options to build wealth, pay off all debt, and have a bright financial future.
The point of this budget is to show you that it doesn’t need to be more complicated than this. If you set this up by figuring out your monthly income, and then figure out your monthly spending, you will see where you currently stand. Bust out the bank statements and credit card bills to add up your numbers.
After you have this knowledge, you will be amazed at how much you spend. You will also be far ahead of others that use no budget. I hear daily from people in my office that have very little clue as to how much money they have, only hoping at the end of the month they can pay their bills.
Here are the three rules you MUST follow to make this budget work, and slowly start to see positive results in your financial picture. If you won’t take the few minutes to calculate your income and expenses, and then follow through on these rules, then you only cheat yourself. Committing to this very simple plan is an amazing first step to creating a better financial future.
Pay Yourself First
Rule #1 is a different change of thought for most people. A major reason we overspend is because we think of saving money as putting away leftover money at the end of the month. Most people are posting pictures of their high yield savings account interest rate, or showing off their outdated furniture because they are saving money.
Even if the amount is small, you are putting away money that can grow with compound interest, and later in life you will thank yourself for this money. If an emergency comes up, you may have the savings to pay the expense right away, saving thousands of dollars in interest by not having to use a credit card.
The change here is save money first, before anything else in your budget. This is absolutely priority number one. Set aside an amount that is to go to a savings account, investment account, or some other place you won’t be tempted to spend it.
Hold Yourself Accountable
The next rule involves being honest and accountable with your new budget. You must look at your spending and add up ALL the expenditures. Yes, even the extra avocado toast you ordered, or the late-night Amazon order you made when you couldn’t sleep.
The other part about being honest and accountable is looking at your spending and prioritizing it. After you pay yourself and then your debts and monthly bills, you may realize there is not much (or nothing) leftover. While that is a problem you are solving, you must hold yourself accountable to spending less. This meaning cutting out those unnecessary extra rounds at the bar or the fast food meal after the bar closes.
If you do this, you will see your savings accounts grow, and hopefully your spending will naturally decline. You may also realize you need a second job (or side hustle, as the kids say) to earn more income.
Keep Pushing Yourself
There are only two ways to make the equation in this budget look better. Earn more money, or spend less money.
This rule relies on you wanting to reach goals faster and have more wealth. There is an undeniable high that comes from saving money and paying off debt, which tends to lead to people wanting to get better and do more to have better financial skills.
Push yourself every month to pay yourself more. If it starts to strain your budget a little bit in other places, then you are making progress, and you can cut out unnecessary costs. The reason I do challenges or play money games with myself is to constantly increase the amount I can pay myself. This will allow me to pay off debt quicker, and hopefully retire early.
Maybe after a couple of months you decide to add a category to your budget. For example, you can track you clothing purchases, and try to spend less every month. There are a variety of options when it comes to expanding your budget.
You can also start to read about investing, early retirement, or minimalism to spend less. Find what intrigues and motivates you, and then do that. Pushing yourself to just start is the hardest part for most people. Dipping your toes in the water with a simple budget is a great first
Sometimes we can overanalyze and complicate the hell out of budgets. That is fine for finance numbers nerds like me that enjoy Excel charts, formulas, and spreadsheets. For a lot of people, they want to simply live life, paying off debts on time, enjoying life as much as they can afford, and retire in 30 years. Nothing wrong with that if that is truly what you want.
Having a simple budget can certainly build that life for anyone. There is no real need to track to the penny the amount you spend on coffee, cleaning supplies, or dog food. If it fits into your budget, you follow the 3 rules, and you are on track to meet your goals, then spend away. Buy all the espressos you want. Splurge on a vacation if you want. Just by having this budget, and sticking to it honestly, you will get better handling money, and staying out of many potential financial pitfalls.
How detailed is your budget? Do you agree this is one of the easiest budgets? Thank you as always for reading!