The first step towards financial success is creating a budget to discover and track where all your money is going, right?
A typical (basic) budget includes things like rent, utility bills, subscriptions, health insurance, groceries, transportation, and bills to pay down debt.
But then you get into the really hard-core budgeting (the kind personal finance experts advocate) so every single month you’re dividing your yearly costs for gifts, clothes, celebrations, and travel by 12 and putting that exact amount aside into a savings account every single month and somehow keeping track of what amounts are in there for what purposes to magically balance out to zero when the year’s over.
That’s where I lose it.
( Ginger: Amen! )
I just can’t handle that kind of micro-managing… even if it is for my own money and personal finance experts swear up and down that it’ll revolutionize my savings goals.
( Ginger: She’s totally reading my mind! Ha! )
But I get so frozen when it comes to doing that level of budgeting that I never actually do it. I hate math, so I shamelessly shove that work aside.
The drawback to that is, by thinking that’s something I ‘need’ to do to have successful finances, I don’t do my finances simply because I don’t do that level of budgeting.
I got sick of knowing that I needed to be on top of my finances, but since I’d rather pull my own tooth instead of such a meticulous level of budgeting, I kept pushing it off.
But then, I realized, perfection is for idiots.
In life, you’ve got to pick and choose where you’re going to geek out it, and budgeting is not it for me. I hate math, so keeping track of every detail of my financial data in spreadsheets was not going to happen.
So, I gave up the idea that I needed a perfect budget and just pretended like that advice didn’t exist. I set up my own way of doing things to make sure my bills were paid, but I still achieved my financial goals.
Automated Payments for Bills & Savings, Cash Pillow for the Rest
Following some of Ramit Sethi’s advice, I set up automatic payments for my health insurance, the full amount of my credit card bills (I pay everything I can on credit cards for travel points), my Roth IRA, my tax savings account (I’m self-employed), and bank-based savings to build out my emergency fund.
For everything else: gifts, clothes, what have you, I keep a $1,000 cushion in my checking account. It’s rare that I dip below that $1,000 cushion, but by checking Mint at least once per week, I can see how I’m doing. If I ever dip below $500, it’s time to start seriously watching myself. And of course, I have to double-check it before making any major purchase.
This has worked wonders for achieving my financial goals. For starters, I’m maxing out my Roth IRA this year, which I’ve never done before. That’s a pretty big deal.
I’m also finally rounding out my emergency fund, and next year I’ll be able to move on to bigger and better things… further investments? saving for a down payment on a house? a wedding?
Only time will tell, and I’ll cross that bridge when I’ve met my current savings goals and I have money to start moving in that direction.
If I find extra cash building up in my checking account’s cash cushion, that’s more money I can move to a current savings goal.
Of course, I realize this is far from the perfect savings and budgeting plan. But it’s realistic, and for someone who’s a terrible budgeter, it’s exactly what I need.