TheMoneyProfessors.com

The 3 Steps to End Budgeting for Good

Step 1 - The Automatic Account Solution

Download our Free Report

The Top 10 Tips to Improve Your Credit Score

We will never give away, trade or sell your email address. You can unsubscribe at any time.

Raise your hand if you hate budgeting. That should be everyone. Now, raise your hand if you hate running out money, feeling stressed about money, or feeling guilty about spending money. That should still be the same group of people. Now that I have described... everyone... let's talk about how to fix it.

I don't like budgeting and I am a personal finance guy. So what do I do? Well, I have employed multiple different strategies throughout my life so far, and have found that certain ones work and others do not. However, what I have found from my students is that different strategies work for different people. It's like dieting in the sense that some people swear by certain diets while others swear against those same ones. Everybody is different, although we all share the same basic psychology.

The Automatic Account Solution is the system my wife and I implemented several years ago allowing me to go from spending 3-4 hours per month budgeting to about 5 minutes per month. This amazingly simple transformation changed the way I see budgeting for good. Quite simply, do the following:

  • List your must-pay bills (mortgage or rent, insurance, credit cards, utilities, etc.)
  • List the likely-pay items (gasoline, food, etc.)
  • Setup 2 (or 3) checking accounts
  • Setup 2 savings accounts

Why 2 or 3 checking accounts? You'll see. First, setup an automatic transfer at your bank to move the amount of money into checking account #1 that will cover the must-pay bills. Next, if you want to deal with 3 checking accounts, setup a transfer to checking account #2 to cover the likely-pay items. Finally, everything leftover in your main checking account is yours to spend! That's all there is to it. If you want to keep it even easier, then leave the likely-pay items in your main checking account as well. If you spend too much dining out, it may mean you have less left over for clothes or groceries, but it doesn't take long to get used to your tolerance level.

What is the advantage to this approach? ​We don't even have a debit card for our must-pay checking account. Since that account is for all of our automatic EFT payments, all of the money in there is already spoken for each month so we cannot touch it. We never have to worry about accidentally using the wrong debit card, we don't have to worry about accidentally spending the mortgage or rent payment on entertainment, and we don't have to worry about individual budget categories.

Now, what about the categories that don't get spent each month such as clothing expenses?​ Well, we simply use one of the savings accounts to move a small amount of money into each month as well. That is for our non-recurring expenses. The second savings account? That is for our emergency fund.

Assuming you make $50,000 per year with $36,000 in take home pay ($3,000 per month) It looks something like this (depending on your expenses):​

  • Checking #1
  • Savings #1
  • Savings #2
  • Checking #2

Total Amount Transferred into Checking #2 = $1,875

Rent

Car Payment

Car Insurance

Other Insurance​

Student Loans

Credit Card A

Credit card B

Mobile Phone

Utilities​

$800

$300

$150

​$50

$250

$75

$55

$70

$125​

​As you can see, once you set up this account, it is very easy going forward. The only time you need to make adjustments are when your recurring bills change such as an increase in rent.

Now, does this solve all of our problems? What about replacement costs? What about paying off debt? What about large expenses?

That is why this a 3-step process. Watch for the next two steps in the coming week. Step 2 is The 20 % Solution. Until then, think about your list of expenses and how you would categorize them.​

Click here to see step 2, The 20% Solution to End the Need for Budgeting.

Download our Free Report

The Top 10 Tips to Improve Your Credit Score

We will never give away, trade or sell your email address. You can unsubscribe at any time.

Download Our Free Report


The Top 10 Tips to Improve Your Credit Score

We will never give away, trade or sell your email address. You can unsubscribe at any time.

Bill Pratt

Bill is an Assistant Professor of Business at Piedmont Virginia Community College. He speaks on topics related to personal finance on college campuses across the country and is the author of multiple books on personal finance. He left the financial industry to focus on helping people become personally and financially successful. He lives in Charlottesville, VA with his wife and their three pets.

Click Here to Leave a Comment Below