(Disclosure — this post is about budgeting and mentions my Android app for doing the same, so take that as you will.)
How do you budget your spending?
Apparently my way of doing it is strange –here’s what I do. I know my annual salary, and I know my paycheck amounts (after taxes), and all of the other relevant income numbers. I also know my recurring expenses — the mortgage, food, utilities, day care, and so on. (I break those into needs and wants as well, but it’s not really important for this post.) For the sake of simplicity, you can assume that I include my savings, Roth IRA contributions, etc, in the tally of recurring ‘expenses’.
When I subtract my recurring expenses from my income, I get my discretionary income. I have it in annual, monthly, weekly, and per-paycheck increments.
How do I budget that part out? Apparently the normal way to do that is to plan how much to spend on this and that, and then try to stick with it. Track expenses in each category meticulously, make sure everything adds up. That’s too much overhead, and I’ll never stick to it. Instead, I say to myself, “Self, you’ve got $200 to spend and you’ve got to make it last a week. If you run out before then, you’re out of luck.” The relevant numbers, then, are how much time I have left in my budget period, and how much money I have to cover it. I trust myself to look at my wallet and, based on those numbers, decide whether I can afford to go out to eat tonight, or order that book or electronic gizmo.
That worked when I spent most of my money in person. However, these days I spend most of my discretionary funds online, via a credit card. I’m not keen to use something like Mint.com (imagine if someone hacked Mint.com — they’d have all of your login information for all of your accounts — a single point of failure), and I don’t think it would let me do what I need to do anyway. One option is to have an amount of cash equal to my weekly budget, and set any aside that I’ve spent online. Then I could take it back out and supplement it from my bank account when my budget rolled over. That’s what I did for a while.
A second option is to keep a little notebook and tally expenses. I think that’s actually a great option, but I don’t like carrying a notebook and pen with me. I would prefer not to carry anything extra.
However, I am always carrying my Android phone. As such, I decided to write a little program for it that tracks my monthly and weekly budgets, and allows me to subtract from them by spending an arbitrary amount. On the weekly and monthly budget reset dates it resets and optionally rolls over any remaining amounts or amounts over-budget (as negative amounts).
So far it doesn’t seem to be a very popular app. It was suggested to me that that was because nobody budgets this way. Is it so strange? How do you budget?