What do you think of when you hear the word “budget?”
Some people love it. To those people, a budget is a way to understand where their money is going so they can make better decisions. It’s an app that helps them track their spending, categorizing every penny and helping them decide whether their spending supports their lifestyle.
Others hate it. They see it as a restriction. It’s a warden watching their every spending move and chastising them for making bad choices. It’s a guilt trip whenever they pull out a credit card. It’s a reminder that they aren’t doing what they should.
For those in the first group, budgeting comes effortlessly to you.
For those in the second, it’s a horror show.
But it only has to be that way if you let it. Today, I will share five budgeting alternatives for people who absolutely hate budgeting.
Pay Yourself First
The goal of budgeting is to be intentional about your spending to save money towards your goals. Whether it’s your retirement, a house, a car, or a vacation, future funding goals require cash.
The simplest way to avoid budgeting is to “pay yourself first.” You save what you need to accomplish your goals, then spend the rest guilt-free.
If you have access to a 401(k), this means making automatic contributions from your paycheck so you never have to think about it. It means transferring money into your savings account for those future purchases once the paycheck hits your account.
Once you’ve paid yourself, you can spend the rest.
Envelope Budgeting
Envelope budgeting is when every spending category is given an envelope. It doesn’t have to literally be an envelope of cash, which can be cumbersome, but you can choose to implement it however you want.
When you get paid, you divvy up your cash into these envelopes. When it comes time to spend money, you take cash out of the envelopes. If expenses in one category are abnormally large, you can borrow from other envelopes.
There’s no need to track your spending because you’re limited by the cash in each envelope.
20-30-50 Budgeting Ratio
If you don’t want to track all of your expenses, consider following a simple rule of thumb when it comes to your spending – it’s known as the 20-30-50 budgeting ratio.
The rule says you should take your monthly income and allocate:
- 20% to savings goals, retirement, or paying down debt
- 30% to housing (as a maximum)
- 50% to everything else
This is similar to the “Pay Yourself First” method in that 20% is going to savings, but it establishes a percentage. It also identifies that housing should be, at most, 30% of your take-home income.
Side Hustle for “Fun Money”
When you work a full-time job, it can still feel constricting to stick to a 20-30-50 budgeting ratio or utilize the “Pay Yourself First” method. This is especially true if your income barely exceeds your expenses and you feel like you’re not getting ahead. Or you can’t have any fun.
It may be worth investigating if there are side hustles you can do to earn extra cash. By earning a little more income, you can allocate it completely towards fun things rather than more responsible activities like saving for retirement or an emergency fund. The extra cash is your fun money reserve.
And since this cash is extra and done in addition to your full-time job, you can skip the budget and spend it guilt-free.
With budgeting, there’s a limit to how much you can cut from your expenses. With earning extra income, there is no limit.
Knowing where your money is going is important but that doesn’t mean you have to stick to a strict budget. The best system is the one that you continue using and it’s OK to abandon financial practices that are no longer serving you. If you want to prosper in the long run, you have to use systems that will last that long.