How To Save If You Hate Budgeting

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A simple method to save and invest, without tracking every penny

There are those of us who obsess over every penny spent with an interest bordering on unhealthy. And then there are people like me, who hate having to track expenses or spend time budgeting. Does that mean I am doomed to overspend, take on unmanageable amounts of debt, and keep working for money till the day I die?

On the contrary, I have multiple financial goals, I have a high savings rate, and am on track in terms of investing to reach those goals. And I have no clue how much I spend where, month-on-month. There is a simple way to not be a financial mess, and retain your sanity. Many financial gurus might shake their heads at this, but it works. I don’t spend time and energy noting my expenses, stressing over how much I have left under what ‘head’, and I do not overspend. In fact, this method makes it all but impossible to overspend – which is not the case if you budget. After all (and I speak from personal experience), what is to stop you from overshooting your budget this month, promising yourself that you will cut back in the next one? But there is always another birthday, another reunion, another date night. And you see yourself cutting back on your savings, month after month. Till your financial goals, are all but unattainable. Goodbye, retiring at 40.

So what is this secret method? It is a hotch-potch marriage of two popular personal finance concepts – Budgeting and the Pay-Yourself-First mentality. We have already established by this point that you hate budgeting. In case you’ve never heard of Pay-Yourself-First, it is a mentality that emphasizes on prioritizing your savings, and treating it like an expense. Like you would pay your electricity bill, think of saving xyz amount every month as a recurring bill. Theoretically, great concept. But, how much should this bill be for? No one has quite the answer for this question – because the right answer is, it depends. On your present circumstances, as well as where you want to be financially, and when.

Let us then take these two concepts and make them into a method that works for our busy lives.

How to save without budgeting – The Method

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  1. For a month, and ONLY a month, track your expenses. I can hear you complaining under your breath about how this was supposed to be an article for those who hate budgeting. But hear me out, it is only a month. And then you’re done. FOREVER.
  2. Make three categories of these expenses. The first two would be your major two. For example, for most people, this would be housing and food. Include all the vaguely related expenses too. For housing, you would include rent/EMI, maintenance, household help, etc. For food, it would include groceries, eating out, ordering in, etc. The third category is miscellaneous – everything that isn’t included in your first two. If you think that your third category is also sizable, you can make four categories. For some people, transportation can be this third category. Don’t worry, I am not some sort of omniscient being – it is just that, in money matters, most of us are very boringly average. Let us work with an example of three categories. Suppose our expenses on housing, food and miscellaneous were 100, 80 and 60 respectively. Multiply it by 12 and you have your annual spends – 1200, 960 and 720 (hypothetical figures of course!)
  3. Now add a category of annual spends. Think hard, what expenses do you have during the year, that are not recurring? Some categories are – home decor/maintenance, gifts for birthdays, anniversaries or holidays, insurance payments – health, life, car. Travel plans. Suppose all of this adds up to another 1000.
  4. That is it! You now have a (very broad) estimate of your total annual expense – it is 3880. Round it up some and divide it by 12 again. It comes to about 325 a month.
  5. Compare it to your net income – the amount that actually hits your bank account every month. Suppose it is 400. The surplus that you have is 75. I would suggest that in the beginning, it is safer to keep a bit of buffer between the surplus and the amount you actually invest, because you are bound to forget some expenses. So in this case, let us go with 50.
  6. Set up an automatic transfer to your savings account, or better yet, a Systematic Investment Plan (SIP) to an index fund, or whichever investment you prefer. Set it so that the deduction happens soon after, not more than a couple of days after, your salary is credited to your account.
  7. The remaining money is all yours to spend as you like! You know broadly by now, that you need 100 and 80 for housing and food. That leaves you with 170 for miscellaneous, as well as other non-recurring payments. Do with the money as you will! But remember, if you get to the end of the money before you get to the end of the month, well, you will just have to twiddle your thumbs till your next salary. No overspending on my watch!

Soon, you will comprehend whether the surplus you are saving is too high or too low. More than likely, it would be too low, since we are leaving a good buffer every month. You can always modulate your surplus number accordingly, as you get more of an insight into what is optimum for you. With no budgeting and no one telling you where you can spend your hard-earned money!

The best methods are those that set-it-and-forget-it. And those that do not bind you to a number on the over-ambitious budget that you set, thinking you can suddenly become frugal after a lifetime of being, for lack of a better word, extravagant. But at the same time, not let you spend recklessly today, at the expense of future you. You really can have it all, and without the Big Bad B!

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