Ask the Expert: A New Year’s Budget System (That Actually Works)

We have all tried to find that magical budgeting system that will make us spend less money. We sign up for apps that ask us to tediously track every dollar we spend or that sync with the bank.

At the end of the month, it reveals the devastating amounts we spent. Fifteen hundred on groceries? Three hundred at Target for back-to-school shopping? The data sends you into a tailspin that only a healthy dose of financial deprivation can heal. You put the family on a financial diet for a month, sending everyone to work and school with beans and quinoa.

But then — mutiny. You can’t take the complaints, the agonizing over every dollar. A grande soy extra hot latte with a shot of bee pollen and the cycle repeats.

We know our budgeting systems don’t work long-term, but we also know we need to control our money. We feel better when we do.

It doesn’t matter that we know how much we spend eating out, on babysitters, pedicures, avocado toast or popcorn at the game. What does matter is if we put enough money into retirement and the other stuff we care about (college, vacations, charitable giving) while not going into debt paying for the rest.

Where to Start

Start with retirement saving. That’s easy. Have 10 percent taken out of your pay and deposited into your 401(k). Retirement? Check.

Now, how to spend the rest? When your and your spouse’s paychecks hit your account, you may as well be walking around with a giant bucket of cash, just sprinkling it out until it’s gone: a few thousand for the mortgage here, a hundred for dinner club there, throw in the on-sale Louboutins, the last-minute guys’ weekend and a hefty private school payment. By day five, you’re worried your money may not make it.

There is a better way, but you must get your bucket of money down to a manageable amount that allows sound decisions.

Start with the monthly bills. Add them up — from mortgage to utilities to car insurance to lawn care — and take them out of the bucket. Consider these bills static.

What about the dynamic spending items that seem to happen in spurts? Maybe you want to take an amazing vacation every year. Simply start a new bucket. Open a savings account called “vacation” and put in a set amount every month.

For your kids’ college education, have a portion of your check auto-deducted and funneled into a 529 investment account bucket. Put some funds into a “home repair” savings account bucket for that new air conditioner you know you’ll need one day soon. Plan to give gifts at Christmas and throw birthday parties for your kids? Put some aside each month in a “gifts” account bucket.

Now the bucket that really matters just got smaller and easier to manage.

Your monthly income, minus your static expenses, minus dynamic expenses, equals your actual spending budget, or the money you need to control. Rather than doling it out over a month, break it down by week. Multiply that actual spending number by 12 months, divide it by 52 weeks and your once-complicated budget is now a guilt- and deprivation-free amount to spend each week.

Depositing that amount into a joint checking account funds your farmers market run, fuel, hair care, trips to Target, avocado toast and Louboutins. (Yep, you can get the Louboutins, though you might want to stock up on Ramen noodles that week.) Just spend that amount to zero every month with debit cards you and your spouse use.

No more judgment. No more cycles. Just a simple system that you control.

Sarah Catherine Gutierrez, CFP, is founder and partner at Aptus Financial.

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