my two cents

How to Make a Budget You Can Actually Stick To

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The first and last time I tried to make a budget, I was 23 and tired of feeling broke all the time. I downloaded an expense spreadsheet and spent a rainy Saturday yawning myself into a stupor as I wrestled with Excel functions. My efforts were rewarded with bad news: I was even broker than I thought. After tinkering with the math for hours, I finally threw in the towel because I was meeting friends for dinner, even though my spreadsheet said I should stay home. I never looked at it again, and continued to feel broke for most of my 20s.

“Make a budget” might be the most commonly typed cluster of words in the personal finance universe. It’s also the most obvious — don’t spend more than X amount on X thing — and weirdly nebulous at the same time. How do you create tidy little buckets for the many financial demands in your life and proceed to pour money into them, consistently, without spilling everywhere? There are countless budgeting schemes floating around the internet: the “envelope system” (which, as the name suggests, involves storing cash in envelopes); the “YNAB method” (which stands for “You Need a Budget”); the “zero-based budget” (which requires finding a line-item for every cent until nothing’s left over), and many iterations therein. These tactics have probably worked wonders for some people, but they all sound like chewing cardboard to me — rigid, time-consuming, and tough to sustain, like my one-afternoon spreadsheet dalliance.

When a woman recently asked me how to make a budget, I hemmed and hawed before mumbling about the widely lauded 50-30-20 rule (50 percent of your income goes to “needs,” 30 percent to “wants,” and 20 percent to savings and/or debts). “But how do you do it?” she pressed. Did I use an app, pre-plan each week’s expenses, or set specific goals? I had no answers. Besides trying to stay within a general amount every month — basically just a line in the sand — I’d never used a formal budget at all.

My lax approach has worked okay in the last few years, when I’ve gotten more thoughtful about spending and saving, but I still have plenty of room to improve — and structure could help. So, for the second time in ten years, I sat down to plot out my life in numbers, and came away with an actual plan. It doesn’t feel like a crutch for self-control; rather, it requires that I pay more attention to the ways I already spend — and think twice before I click on a random shirt and then find it on my doorstep $50 later. Here’s how I did it.

1. I looked at my past year of spending.

Instead of filling in a pre-plotted spreadsheet, I looked at my expenses from the opposite end: Where has my money gone? If past behavior is the best indicator of future behavior, I should get square with my habits, mortifying though some may be. To do so, I used Mint, a free tool that enables you to see all your credit card and bank balances on one dashboard (there are several popular alternatives, like Personal Capital and EveryDollar, so shop around). Mint’s “transactions” tab has a record of every single charge I’ve made since I set up my account in late 2016 — a scary sight. I gritted my teeth and dived in.

To parse my expenses, I categorized each and every one into various buckets: rent (my biggest), travel, health and fitness, food and dining, and so forth. (Mint tries to do this for you, but it’s not always accurate.) I also created specific subcategories for frequent purchases that added up (beauty products, restaurants, wine) to track my pricier tendencies. It was a sobering exercise, but once I got into it, it was like the financial equivalent of cleaning out my closet — I couldn’t stop until it was finished.

2. I examined the trends in my finances.

After I had exhaustively catalogued the damage I’d done in the past year and a half, larger patterns emerged. Mint shows your average spending in different categories and time periods, which taught me that I am shockingly, even disappointingly, consistent. I like to think of myself as having a spontaneous, adventure-filled life, but in reality, I go to similar stores, visit similar places, and eat similar things most of the time. This is neither good nor bad, but helpful to know.

I also saw a major difference between where I thought I’d spent a lot of money versus where I actually had. I thought I’d made generous charitable donations in 2017, but they only made up a tiny fraction of my cashflow. I also believed I’d spent a lot on workout classes, but at most, that sum never eclipsed what I spent on dinners out.

3. I looked at money well spent.

As I pawed through my transactions, it seemed like I was zigzagging between a crime scene and a scrapbook of great memories. I confronted clothes I bought last July and haven’t worn yet, Seamless orders I don’t remember, a surprise medical bill, and dozens of Amazon purchases between $9 and $14 that will remain a mystery forever. Other bills made me smile: There was the hotel where we stayed for a friend’s wedding, the restaurant where we went to dinner for my husband’s birthday, and a plane ticket to Colorado last summer.

With the perspective of a full year, I could see which expenses made me feel richer. It also rubbed in my face the things that made me poorer, literally and figuratively, even if they seemed inconsequential at the time, like $10 worth of snacks from the corner bodega every few days. The takeaway: I now feel more focused in where I want my money to go.

4. I set (moderate) goals.

I tried to examine my numbers objectively, like a scientist: This is my data, and it has meaning. What do I want to change, and are those changes realistic? Just because it seems absurd that I spent $676 on laundry and dry cleaning over 12 months doesn’t mean that I’m going to stop wearing clothes, be less dirty, or steal someone’s washing machine. So I judged myself briefly and then let that category be.

Most budgeting philosophies, including the 50-30-20 rule, force you to segregate your expenses between “needs” and “wants.” I find this distinction to be problematic because it’s so subjective. (I dedicate the recommended 30 percent of my income on rent, but who’s to say I “need” the space I have?) Instead, I looked at which expenses were functioning well and which ones weren’t. I may have spent stupid money at Juice Press, but I’m healthy and I feel good, so I don’t want to stop. However, my Uber charges seemed unnecessarily frequent; I noticed that I was infinitely more likely to order one on nights when I was wearing heels, so I’ve been carrying flats with me lately. I also signed up for online yoga — much cheaper than studio classes — to see whether it sticks.

In short, my “budget” now consists of many smaller lines in the sand instead of a single big one. My goal is to beat last year’s numbers, keep tracking my day-to-day expenses, and siphon leftover money into savings. After all, what is budgeting besides extra self-awareness? And I never had to look at a spreadsheet once.

How to Make a Budget You Can Actually Stick To