Don’t give up on budgeting – find a method that works for you

Budgeting is not for everyone. For many it conjures up images of spreadsheets, feelings of denial and failed discipline. Some end up feeling frustrated, the same way they do with a New Year’s

Resolution that does not make it past February 1.

Others give it a go but find it does not work for their lifestyle and give up. Their finances drift along, maybe they get into credit card debt or become house poor (when mortgage takes up too much of their income), as money gets forced down the list of priorities because it is connected with negative emotions. They think it is easier and more fun to think of other things.

I get that. I’ve never been a traditional “budgeter”. Cue the gasps from my readers as they say “but Zach, you’re a personal finance geek. How on earth do you not obsess over categories and spending?” But we are all different and have different approaches.

Here are three budgeting systems, which may appeal to those averse to getting their finances in order:

The daily spending budget

This is the system I use. First, I figure out how much I will spend in a month on regular bills such as my phone, car payments and rent, and I deduct that from my monthly income. Then I deduct how much I want to save, treating it like any other cost. That leaves me with an amount of “spending money” I can use for groceries, eating out, entertainment, etc.

I then break that monthly spend into a daily spending amount. I make a game of it, so if I’m under for the day, I feel a little jolt of happiness. I also give myself more to spend on the weekends, because during the week, I’m at work and have less time to entertain myself. With my income, this works out as Dh150 to spend each weekday, and Dh270 for each day of the weekend. If I go over from time to time, it’s OK, because I know that most days I’m under target.

I like this system because it’s easy to see if I am doing well and it gives me flexibility in case there are unexpected expenses. When a surprise bill pops up, I simply cut back for a few days by eating in or choosing low-cost leisure activities such as reading. Using this system, I’ve managed to save 60 per cent of my income over the past 12 months.

The traditional budget

Break your monthly spending into categories, then decide how much you want to spend in each category. Some people like to put cash into envelopes for each category; once they use all the cash in a particular envelope, they know they can’t spend any more on that category for the rest of the month. This is ideal for people who are very organised, know themselves well and have set amounts to spend.

The anti-budget

Figure out how much you want to save each month and automatically take that out when you get paid and put it in your savings account or investments. Enjoy the rest. I definitely recommend an emergency fund for this method, because if something unexpected happens, you’ll need reserves to avoid tapping into your savings. This system works well if you don’t want to track your spending but still want to save. You will get used to not having the money that you’re saving as long as you move it out the moment your salary drops into your account.

One of these systems should work for you but everyone is different, so if one does not work, give another a shot.