On the Philosophy of Budgeting

Outside of the saving section of my second book, I haven’t written much about budgeting on the site or in the newsletter.  To be honest, I don’t think about it all that much.  I don’t do any of the traditional budgeting – sitting down once a month and tracking all my expenses down to the cent and planning exactly what I will spend the next month.  I don’t even know generally how much I spend in most areas.

To me, budgeting is like dieting – you’re better off focusing on broad strokes (like avoiding sugar or not eating out very often) than you are trying to track each calorie or each dollar.

Over the next few articles, I will go over my key strategies for increasing the amount I save each month.  Each is incredibly doable by readers in just about any income situation.

To start, let’s go over the single strategy that has impacted me the most: only spending cash.

Throughout college and the first few years of my grown-up life, I used credit cards to pay for just about everything.  I didn’t use to them to spend cash I didn’t have, thankfully, the balances were paid off religiously each month.  It was a convenience thing and a get more reward points thing.

I still recommend using credit cards for many things.  I personally use them for anything I buy online (obviously), all my gas and good purchases and any other big non-recurring purchase.

Here’s the issue: when you spend with credit cards you don’t see the money leaving and you don’t have a logical limit.

When you spend cash, it hurts to see dollars get exchanged for perishable goods and, of course, there’s only so much cash you can rationally carry at any time.

My fiancée and I both take out $40 each week.  This is all the money we can spend on miscellaneous items for that week.  Things like afternoon snacks, eating out for lunch, getting McDonalds iced coffee in the morning or buying yet another pet.

If we have cash left over at the end of the week, it just means we get to have a more fun brunch on Saturday.  If we hit the limit on Wednesday, no more fun that week.

This constraint not only creates an actual ceiling on our spending, it also forces us to think through each purchase.  I have often walked over to a gas station during work and decided not to buy a $3.79 stick of beef jerky that day because it would mean I was running out of cash too fast.  I have also had a totally guilt free Cheesecake Factory lunch that cost over $25 because I had the cash left over.

In the past, I would’ve felt stupid about wasting money on the beef jerky but done it anyway and then I probably would’ve skipped the Cheesecake Factory because I thought it was just too expensive.

Where you start with cash depends on your own preferences.  I actually started with taking out $60 each week and found out I could cut it to $40.  A friend who read about this strategy in my second book started with $100 a week (and visited the ATM on Tuesday) because her priorities were different.

The key is not to guilt trip yourself away from buying things you like.  It’s to make sure you understand the actual cost of those things.

If you have a substantial income (see the last article for ways to increase this) and substantial tastes than taking out $100 like my friend did or take out $500.  Don’t let budgeting control you – use it as a tool to figure out superior strategies for living your life.

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