This Simple Budgeting Trick Changed Everything For Me

Despite loving numbers, traditional budgeting never worked for me. It’s often too complex and time-consuming. But I discovered a simple, effective system that takes just 10-15 minutes monthly to manage.

Why Budgeting Fails: Most people fail at budgeting because they treat all income as available to spend, ignoring fixed costs. Parkinson’s Law explains this – tasks (or spending) expand to fill the available time (or money).

Creating Clarity and Constraints: To avoid overspending, understand your actual expenses and limit your available spending money.

Our Budgeting System: We use a detailed spreadsheet divided into:

-Fixed Monthly Expenses: Mortgage, utilities, subscriptions ($4,650).
-Non-Fixed Monthly Expenses: Groceries, gas ($1,050).
-Discretionary Expenses: Dining out, entertainment.

We also save monthly for non-monthly expenses like gifts and vacations.

Using Technology: The app EveryDollar helps us track income, categorize expenses, organize bank accounts, and implement zero-based budgeting.

The initial setup involves creating multiple bank accounts, preferably with a credit union to avoid fees. Debit cards linked to these accounts simplify tracking. Once set up, maintaining the system is quick and easy. Knowing where your money goes helps in planning for the future.

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⏱Timestamps:⏱
0:00 - Why most budgets fail
3:04 - Create clarity and constraints
5:26 - Not-fixed and discretionary expenses
7:18 - One-off expenses
10:20 - The bottom line
11:39 - Creating constraints
13:25 - Debit cards and EveryDollar
16:48 - Making adjustments in EveryDollar
18:14 - Closing tips

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Worried about retirement?

[shawnbrennan]

Two comments:

Too many people forget to add CAR MAINTENANCE and HOME MAINTENANCE to their budget plans.

My best advice for budgeting: eating out is part of ENTERTAINMENT, not FOOD.

[summerrock]

The debit card in place of a money envelope system is exactly what I have been contemplating. I didn't know if it was possible to do this. I am thankful that I stumbled across your video--perhaps providentially. Thanks for sharing.

[sallyprzybil]

A couple tips: pay yourself first. The first priority in my budget is savings, it’s automated and I live on the rest. The next priority is the house payment. I budget $2, 000 for my house payment. The house payment is actually $1, 650. The extra I’ve budgeted for it goes as extra on the principal, about $350 a month. Homeowners insurance and property taxes are included in the house payment. Then I budget $1, 000 for utilities and $ 500 monthly for car and $500 for food. However, there is extra added into those categories. For example, my utilities don’t actually add up to $1, 00, they’re less. The extra margin is for safety. It stays in that account and after a few months I either move it to my High Yield Emergency fund savings account or into investments..into my regular brokerage account so it’s still available if I need it.

[RetirementbyDesign]

I absolutely enjoy building and tracking our budget. I have a workbook that has tabs out to 2060 and can see how our financial decisions today affect us next month, year, and so on. We are debt free (recently). We do use credit cards for groceries, gas, and our trips. But those trips have been budgeted beforehand so we make sure we’re not over spending and can’t pay off our credit card each month. Also, our spreadsheets show our pensions so we get to see how we can live our lives in retirement. We have an allowance and are free to spend it on whatever. We’ve simplified the number of accounts we hold and only have two cards

[garethwalters]

Completely agree with this approach James, my Wife and I use YNAB to do this, makes the annual or random one off costs very visible each month so you don't overspend.

[stevegrantham]

You look so young but are pretty damn smart and you are very skilled with your presentations. Much appreciated!

[hogroamer]

My budgeting is very similar. The exception is I use rewards credit cards exclusively. I love the rewards and feel using my debit card exposes me. I know most of the rules are the same but, I've had fraudulent charges on a credit card and it gets frozen. That can be much more inconvenient if the card that gets frozen is the one that gives you access to your cash. I'm debt free and my budget categories are:

3 credit cards, Pool cleaning, electric utility, health insurance, cell phone, Patreon, church offering, Netflix, food and gas. Other than that, I add car, motorcycle, and homeowners insurance to the month that it is paid and real estate tax to November. Even in retirement, I like to spend less than I make.

[sdmod]

I'm glad to see that you apply basic thought process, rather than gimmicks or locked into an 'app' without understand what's actually happening behind the screen. Folks really need to think about their spending and plan their spending. It's not hard, I've done it all my life. Thank you for another great video to educate us !

[rdgale]

I agree with about 80% of what you say in this video. My main problem is the use of Debit cards. I have found that if I have a fraudulent action on a debit card, it VERY hard to challenge that action because the money is already out of the account. If I use a credit card, then I CAN challenge the fraudulent activity and I don't end up paying for the item.

I understand why you use a debit card. If I have the money, I can spend it. If the money is not in the account, I can't spend it (unless there is an overdraft service on the account). People need to learn how to uses their credit cards properly. If you can't buy the item with cash, but use a card instead, don't buy it!

Good advice with everything else.

[chrislastname]

Great way of explaining it. I have kept an Excel spreadsheet for years, detailing my monthly expenses by category by month. I enter all the reoccurring expenses that happen every month, and then all the variable expenses in the rows beneath. It allows me to see a trend if I am spending more on groceries or amazon for example. It also lets me know what I need to live on realistically each month. It made transitioning from working to retirement rather painless because I knew what I needed to continue living as before.

[anthonyflores]

I love having our own fun money for me and my spouse. It’s separate checking accounts too. We also have different checking accounts for food, family fun, home and car reno, kids and a vacation checking. Love that system.

[MaPrajna]

Thanks for your easy going, clear, and practical approach to sharing budgets.

[dwalker]

With your channel I have finally found someone who is as obsessive as I am about budgeting. The work is worth it. I sleep very well knowing where the money goes. Works great for long term planning.

[janetbransdon]

I have budgeted all my working life and I love this idea... I am going to look into this method. Thank you. 😊

[arlenegregchin]

Hi James, I love the non-monthly expenses section on your spreadsheet. 😮Unfortunately those are most of the expenses, vacations, house maintenance repairs and car repairs that we have not been saving for regularly. You got me here and I am hooked to listen and learn more from you. Thanks for what you are doing here!! Plus you are a great teacher and speak plainly and clearly 😊!! Will watch more! Just had to let you know that that section made me think 😢, I need to make a budget!! Arlene 😅

[dutchcrunch]

Good info! Such a cute thumbnail pic of you and your wife too!

[sbayles]

Nice system. I wouldn’t give up my flight, hotel, and shopping points from using credit cards and have the discipline to pay them off every month. But, it does make it more complicated.

[befree]

Best budget advice is treat it like a business. Cut out as much crap.
Limit your wants to 10% of your income. 50 to 60% on needs. 30 to 40% on savings.

[blueberryma]

Great ideas here. I have always struggled with budget but did two things and now I spend my money as planned, and I spend it consistent with my values. First I use copilot money. It enables you to be on top of your budget by updating your as the transactions role in (not once a month credit card bills). It was a game changer for me. Second I structured my budget differently. I have top level, category for essentials ( which lets me, as a retired person know how far I can conceivably back off spending if needed. I have other top level budget items, s according to my values. For instance, “help others”, “learn and grow”, be healthy”, make life comfy”, “have fun”. Having a burger to remind me where to spend my money to live life as I have planned has been a big help. And yes, I know that is a total bizarre way to do a budget, but it works. Oh, and I do of course have a one off category.

[ericammons]

It’s hard for younger couples to live below their means and pay themselves first. But if you become good at it, you’ll be very happy with those results in 25-30 yrs.