I don’t have a budget. It just didn’t work for me (but that’s not to say they wouldn’t work for others).
Instead, I track my expenses without imposing firm limits on myself. Here’s how I got started:
In 2007, I started getting serious about personal finance. It was my senior year of college. I had my first full-time job and apartment lined up.
So I downloaded free budgeting spreadsheets and decided on one that I liked. It looked like this:
I wasted a lot of time creating a budget. I changed the design a bunch of times. I spent hours thinking up categories then changing them. And I made up different limits for how much I thought I should spend. I ended up not even using it that year.
Then in late 2008, I read Your Money or Your Life by Vicki Robin and Joe Dominguez. YMOYL has had more influence on me than any other book. It taught me to calculate my net worth: the monetary value of everything I own minus all debts. It taught me about real hourly wage: my actual earnings from work after taxes, commuting, work clothes, etc. And it taught me to track my expenses — every cent.
At the end of every month I answered three questions (from the book) for every spending category:
- Did I receive fulfillment, satisfaction and value in proportion to life energy spent?
- Is this expenditure of life energy in alignment with my values and life purpose?
- How might this expenditure change if I didn’t have to work for a living (Financial Independence, FI)?
Here’s what my monthly expense tracking looked like after reading YMOYL:
On the bottom I calculated my real hourly wage. YMOYL suggests we think about our hours in terms of life energy (LE). Dividing what I spent in every category by my real hourly wage ($22.80/hr) gave me the number of LE hours things cost me.
Example: I spent half an hour of LE on Fast Food — not worth it. So I put a -1 under all three questions. Local Food Groceries had a +1 for all three questions so I started spending more there.
I eventually internalized spending habits that aligned with my goals and made me happy.
I also tracked my net worth, savings accounts, investments, and student loans. But I got tired of using multiple spreadsheets. So one night in 2011, I couldn’t sleep and combined them all.
Here’s what it looked like at the end (basic version):
I have used this everyday since the day I created it.
The spreadsheets above are free and open to the public so please feel free to share. You can select “File” and “Make a copy…” to your own google drive. Change and personalize it. Your copy will be private to you.
Here’s how I use it: I have spending categories that give me the most fulfillment and are aligned with my values. Once a day, I enter everything I spend.*
I also enter any money that comes into my life. I change my checking/savings less regularly, about once a week (thanks to a weekly text from my bank telling me my balance). Other accounts are reviewed once a month. I write notes to myself on the side boxes. And I enter money goals with a timeline for each.
Being honest with yourself about spending is scary. It was for me when I started and still is sometimes. But you don’t have to go through it alone. I share my system with friends and go through how to use it with them, step-by-step. I know it looks complicated — but only until you actually try it.
Sometimes I wonder if it’s crazy to track in this much detail. But it’s helped me in so many ways. When I get worried about a money issue, I look at my spreadsheet. It reminds me that I have things in control. It gives me the complete picture of my finances, with one quick scan. And it keeps me sharp to help others with organizing their finances. I’ve taken a several risks in the last few years: taking time off from work, paying off student loans in full, and changing my investing choices. I don’t know if I would have had the confidence to take these risks without a clear view of my financial picture.
This daily habit has helped me tremendously. So for now, I’m not going to stop.
But I know that this system – like the others – won’t work for me forever.
I know my goals will change. So my tracking system will have to change too because tracking expenses isn’t a goal. It’s only one tool I use to meet my goals.
I hope you find these resources useful. And if you have any suggestions or feedback, please share.
*To enter expenses, type an equal sign “=” in the cell. Then type the dollar amount “=14.50”. The next time you spend money, add it: “=14.50+12.25”. Please comment below or email with questions or suggestions.