• How We Budget, Part 3: The Analog $1,000 Countdown

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    Our last two posts have shown you how we manage our money in our various accounts and how we manage our cash flow. Today, we’re going to explain how we deal with our non-fixed expenses.

    If the other two posts left your head spinning about our budget, I’d have to agree with you. With all of the accounts, our money has been abstracted in a way that makes understanding exactly how much money we have at any given moment very difficult. That complexity has allowed us to make a simple system for tracking our expenses. How do we do it? By using a whiteboard and a box for receipts. Sure we could have used a piece of paper, but I love whiteboards, and we have one setup in our home office anyway.

    For our non-fixed category, we’ve allocated $1,000 per month. Our non-fixed expenses consists of dining out, entertainment, groceries, household, pet expenses, automobile gas, gifts, and any other expense that isn’t quite fixed. At the first of the month, we start at $1,000; as we spend money on non-fixed expenses, we write on the whiteboard the amount of the expense, rounded up to the nearest dollar, and subtract. Here’s what it looks like:

    whiteboard.jpg

    The receipts for those purchases go into a box; at the end of the month, those receipts are reviewed and the non-keepers are shredded.

    This system works for us in a few ways:

    1. We don’t have to ask each other how much money is available for purchases. We know exactly where to look to see if we have enough money for something. This seemed to have been a self-policed system so far; we’re astutely aware of how much money we have, what we have coming in the month, therefore we make better decisions about our money.

    2. Our receipts only pile up for a month, cutting down on financial paperwork. At the end of the month, we review the receipts, and toss the non-keepers. The keepers get filed to their appropriate location.

    3. We don’t have to worry about every single penny. If we blow some cash on eating out, guess what, we now have less for everything else. Again, this forces us to make better decisions so that we’re not eating ramen at the end of the month.

    For us, it is this simple solution that allows us to successfully reach our financial goals and maximize our dollars. How does your budgeting solution stack up?

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