how to budget without tracking expenses

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how to budget without tracking expenses!

*Disclaimer* I hate budgeting. 

For years the very thought of having a budget was an immediate turn-off. I mean, who wants to limit the amount of money they are allowed to spend after all of the hard work you put into earning it? 

Thank god I learned how to budget a better way!

Shoot, I used to blow through paychecks extremely fast. Whether it was alcohol, workout supplements, tattoos, cars, or adventures…I was definitely living paycheck-to-paycheck. 

In fact, I remember moving from Okinawa, Japan, to Camp Pendleton, California, and realizing how much more I had been getting paid for being overseas. One of my first thoughts was “Where did all that money go?” I didn’t have much to show for it besides a new Harley Davidson. Two years in Japan and a combat deployment in Afghanistan, and I hadn’t saved a penny. 

I was disappointed.

Not NEARLY as disappointed as I am now when I think back to that time. The opportunity cost of blowing all that money is huge, and I missed out on the best years of my life for multiplying my TSP.

To make matters worse, I didn’t really change until three years later! I did save a little more money, but I didn’t actively put money aside to invest or build an emergency fund for years. 

Enough with my sob story though—I’m going to help you learn from my mistakes!

First and foremost, I’m not an extremely strict budgeter. Personally, I don’t find tracking every penny to be sustainable over the long term. It is like participating in a fad diet and then wondering why the weight came back when you finally allowed yourself to eat again.

I break budgeting down into three extremely easy concepts: know what you spend, pay yourself first, and segment your spending cash. 

Know What You Spend

Like it or not, the first step to setting up your foundation is figuring out how much you spend. I have heard several personal finance gurus say that you need to write down every dollar you spend for the next 60 days and track it that way.

While I’m sure this works, I like to work efficiently. Waiting 60 days to figure out how much you’re spending is archaic and inefficient.

Log in to every bank account you own and print the last three months’ bank statements. Honestly, you can probably do this from just one month’s bank statements, but 90 days will give you a much better idea.

For your Excel gurus out there, feel free to export your bank statements and filter/sort all of your spendings that way. I’m just trying to keep this as simple as possible. If it isn’t simple, people will procrastinate, and this (incredibly boring task) is extremely important. 

Go through your bank statements and separate everything into categories.

For example, I currently have these categories in my budget:

  • Groceries
  • Dining out
  • Lunch/snacks
  • Gas
  • Barber
  • Entertainment (including alcohol)
  • Clothing
  • Healthcare/supplements
  • Gifts (monthly savings toward Christmas, B-days, etc.)
  • Toys/games (for the kiddos, or video games if that is your thing)
  • Miscellaneous 

It is important to note that you may not be spending money on these items every month. Christmas spending is an example of an item that happens once a year but would be smart to budget a little cash towards every month. 

Now that you know what your monthly expenses are, it is time to cut them where possible. Most people spend a lot of money eating out. According to the Bureau of Labor Statistics, the average American household spends $3,000/year dining out. Remember that even a single person counts as a household, so this number is probably much larger for families. 

Just by limiting yourself to eating out only once or twice a week, you could greatly reduce your expenses, sometimes by as much as several hundred dollars per month. I helped a Marine who was spending well over $600/month dining out while still living in the barracks and paying for the chow hall, whether he ate there or not! 

The point is this: go through your expenses and figure out what is a “need” and what is a “want.” Then reduce your wants as much as you feel comfortable doing so. I won’t tell you to slash everything from your expenses because, again, I want this to be sustainable for you. If one of your guilty pleasures is coffee at Starbucks, that is fine, but perhaps you can cut out one meal every week to compensate.

Just think of your household budget as a business and lower your expenses as much as you comfortably can. 

Now that you have slimmed down your expenses, you should have money left over at the end of your next month. That is no Bueno! 

If you have money sitting idly in your checking account, it becomes much easier to spend. If, however, you budget that money toward your emergency fund, investment account(s), or paying off debt, it will be much better served, and you’ll be less likely to blow it. You do that through the concept of paying yourself first, which has been a game-changer for me. 

Pay yourself first

Repeat after me, “I will always pay myself first!”

Okay, good…now let me tell you what that means.

Paying yourself first is the best way to ensure you save/invest every month.

Imagine this, you receive your paycheck on the first of the month. You pay your mortgage and utilities, buy gas, purchase your groceries for the next two weeks, spoil the kids a little bit, and spend a night out on the town. On the 14th of the month, you decide to save everything that is left from your first paycheck…only to discover you don’t have anything left.

This unfortunate scenario is a reality for entirely too many people!

According to CNBC, 78 percent of government employees live paycheck to paycheck…

Now, let’s imagine a better scenario.

You receive your paycheck on the first of the month. You have an automatic allotment set up that puts $500/paycheck into an account for saving/investing (that you do NOT touch). This will force you to adhere to a budget in order to cover your expenses for the month.

At the end of the year, you will have saved $12,000.

Let me curb your worries, complaints, and fears about this concept. The beautiful thing about paying yourself first is that you will find a way to pay for mandatory expenses, but you will have already budgeted for saving/investing.

In the first scenario, you would be tempted to spend this $500/paycheck because it is available…and thus hurting your financial future.

I know it is bad to speak in absolutes (they say the gods love to toy with people who use absolutes) but you should ALWAYS pay yourself first.

Stop what you’re doing right now and set up an allotment to pay yourself first.

…seriously, stop, and go do that right now!

The military millionaire will pay themselves first.

Segment Your Spending Cash

Growing up, my mom always had these red envelopes full of cash in her purse. I remember that she had an envelope for spending money, one for gas, entertainment, and on and on. I guess that was the norm in our household, so I never thought anything of it except that it was a weird place to keep your cash. Also, I may have been guilty of borrowing a few dollars once in a while growing up and neglecting to repay it. I probably still owe my parents some cash, but I digress.

What I didn’t realize at the time was just how powerful this “envelope system” would become for me later in life. The envelope system, or envelope budgeting method, is a great way to set up your spending cash.

How to budget: envelope budgeting system

The concept is simple, convenient, and most importantly efficient. What you want to do is take the categories you decided on in the previous section and create an envelope for each one. You do this by writing “dining out” on the front of one envelope, “clothing” on the front of another, then “entertainment”, etc., until you have an envelope dedicated to each category. Then, next to the label for that envelope, write the dollar amount you’re allowed to spend for each month in that given category.

For example, if you budget $400/month for groceries for your family, that envelope could read “Groceries $400/month” or “Groceries $200/paycheck,” depending on how you want to break it down.

Now, every month or paycheck, you simply withdraw the total amount of cash you need to fill every envelope and then divvy it out between the envelopes.

The final step in this process if you really want to succeed is to leave your debit/credit cards at home and only take out the cash you need for the day.

Need cash for groceries? Take it from the envelope.  

Need cash for gas? Take that cash from your budget envelopes too.

If you think you may go to the store and grab a snack during work, take out cash for that too.

What you do NOT do though is spend money once the cash is gone. This forces you to stay within your $400/month grocery bill and will cut back on the “ooh that looks tasty” purchasing that happens sometimes when you go shopping on an empty stomach.

This is the simplest way I have found to budget because it isn’t super strict but can still save you a ton of money. I have found that when I implement this budgeting method, I save a ton of money and almost never spend all of the money in my envelopes.

At the end of the month, you have two options with that extra cash. You can either A) withdraw less cash for your envelopes and invest the extra, or B) withdraw the same amount and grow the amount of cash in your envelopes. Then, once you have enough cash in the envelopes to skip an entire withdrawal, go for it!

The beauty of this system is that it is extremely simple and requires minimal discipline. You still get to spend money on whatever you wish, provided you stop spending once you run out of cash.

There are some online platforms like goodbudget.com that allow you to use this system without having to keep envelopes full of cash floating around, but I haven’t personally tried any of them.

That being said, I believe there is a definite benefit to handling cash instead of just using a card. Psychologically, people tend to be more apprehensive about spending cold, hard cash. Swiping a card doesn’t feel the same as pulling bills out of your wallet, and you will inevitably save more money by utilizing cash envelopes than you will online.

Look, you owe it to yourself to at least try this for a month or two. If you don’t like it or feel like it isn’t helping you save money, try the online version, or just stick with tracking every penny you spend meticulously.

I am positive that you will have great results cutting your expenses through this system, which will in turn allow you to save much more money as capital to fund your investments!

How to Budget

Learning how to budget without tracking expenses made my life so much better, and I’m positive it will help you too!

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David Pere

David Pere

David is an active duty Marine, who devotes his free time to teaching personal finance and real estate investing for service members, and the working class!

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