Budgeting Trick That’s Easy To Implement

Let’s face it.  Budgeting is hard.  We sit down and make a budget on paper, but few people actually EVER follow the budget.  To me, the key to making a budget that’s sustainable is that is has to be easy, but also holds us accountable.  There are 100 different budgeting strategies and systems out there that are all good, but I’m going to share one trick that I like to use with clients that helps them stay on budget for important items.

I call the strategy “Lump, Segregate, and Automate.”  Basically, find the top 2 or 3 budget areas that you are most likely to go over budget on.  Some example areas might be groceries, restaurants, Amazon, home good purchases, clothing ,etc.  Once you’ve found the top budget items that give you trouble, set a REASONABLE budget goal for these items and lump them together.  For example, maybe you want to spend $800 on food, $150 on clothing, and $150 on Amazon stuff each month.  The total lumped together budget would be $1,100 per month for all three budget items.

Step 2 is to segregate these budget items into another account. So, you need to open another checking account that is just for these lumped expenses.  In our example, it will be an account just for food, clothing, and Amazon.

Step 3 is to automate this process; to do this, you should automatically transfer $1,100 each month into your new lumped account.  Now, you have a set amount each month to spend on the lumped items.  You’ll need to monitor the account towards the end of the month to make sure you don’t go over.  If you need more cash for the lumped expenses, you’ll have to transfer it and/or use another account – this is the part that keeps you accountable. If you go over, you’re going to have to manually move more money.  It helps to keep you on budget AND it’s automated AND it doesn’t require you to categorize all the expenses on your credit card bill each month.

What do you think?  Give it a try and see if you like this budgeting trick.

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