How to Budget — Without a Budget!
If you have trouble sticking to a budget—or if the very idea of budgeting makes you cringe—you’re not alone.
As reported in The Cut, Brad Klontz is a psychologist who also happens to be a certified financial planner. It’s a smart combination for someone who wants to help people find better ways to manage their money.
“I think the entire concept of budgeting is flawed,” Klontz said. “Your emotional brain responds to the word budget the same way it responds to the word diet. The connotation is deprivation, suffering, agony, depression.”
So, how can you stay on top of your money without triggering all that negativity? By taking a different approach.
Instead of a budget, Klontz recommends putting together a spending plan: a financial plan designed to help you reach your goals.
Why a spending plan is easier to stick to than a budget
Here’s the problem with old-school budgeting in a nutshell: it’s not flexible enough to survive the real world, especially not today. Traditional budgeting is based on strict categories: spend only this much on groceries, that much on child care, and so on.
The problem with that system is that it tries to pretend life is routine and predictable, when, in reality, it’s anything but. Here are 4 specific, real-world situations that demonstrate why a spending plan beats a budget hands-down.
1. A budget won’t adjust automatically when your life changes
Let’s say a pandemic hits the planet, and all your habits change overnight. There was a time that example would have seemed far-fetched. Today? Not so much.
A traditional budget forces you to adjust every category to stay in control: car maintenance and gas, take-out food, travel, child care, subscription TV, and so much more. But a spending plan flexes with you, keeping up with your bottom line without missing a beat.
Even in normal life, things change. You might have to move to a new job. You might decide to take up dance lessons. You might welcome a new addition to your family. Whatever life brings, your spending plan changes for you, automatically.
2. Budgets make it too hard to include everything
Let’s say your car gets caught in a hail storm. The damage is covered, but you have to pay your deductible. If you’re using a traditional budget, that probably wasn’t in there.
With a spending plan, you just pay the deductible. Your plan keeps track of that expense and adjusts what you have left automatically.
You can also build savings goals into your plan, including an emergency fund. So it’s there when you need it, ready to cover life’s surprises.
3. Budgets make it hard to splurge, even when it’s worth it
What if your friend invites you out of the blue to spend the weekend in a city you’ve been dying to visit? That’s probably not in your budget either.
A spending plan gives you the flexibility to take advantage of life’s opportunities. It doesn’t judge you when you decide to spend on the things that matter. It just shows you the trade-offs so you can make your own choices.
4. Budgets force you to do a lot of work
Finally, let’s say that same friend only invited you out to brunch. In a traditional budget, you’d have to check on your dining budget and see where you are for the month. You might even have to adjust that category up and find something else to adjust down. It’s a huge hassle.
With a spending plan, you’ll know at a glance how much you have left to spend for the rest of the month. It doesn’t matter what category that spending happens to fall under.
That’s why you need a spending plan—NOT a budget
Spending plans break free of those old categories to meet the constantly changing nature of real life. They still track your spending, so you can see where your money is going, but they don’t restrict that spending to specific categories.
That’s what makes spending plans so effective. They tap into real human behavior to help you track your finances and stay on top of your spending the easy way — by understanding the way you intuitively think about money.
But the power of automation can take spending plans a step further. An app like Simplifi can generate your spending plan for you, connect to your accounts to keep that plan updated automatically, and even learn your preferences, getting better over time.
In fact, that’s why we created Simplifi, to make spending plans even easier and add one more key factor — motivation — to help you stick to your spending plan and reach your financial goals with confidence.
Says Senior Director Kristen Dillard of the Simplifi project, “We’ve watched people ‘budget’ for years. The reality is, very few people commit long term to traditional budgeting. It’s restrictive, it’s nearly impossible to set accurately, and it’s time consuming. We truly believe everyone is better off with a plan, but that plan has to fit real life. And real behavior. That’s what Simplifi is all about.”
1. A spending plan replaces judgment with positive reinforcement
Instead of making you feel bad when you miss a goal, Simplifi focuses on helping you celebrate each small win, so you’ll actually look forward to checking in with your money.
Did you spend less this month than you did last month? That’s a win! Did you make a contribution toward one of your savings goals? That’s a win too!
Simplifi never judges you or your financial situation. It’s designed to help you by providing the information you need to make smart decisions about your finances.
2. A spending plan lets you spend your money however you need to
Let’s say you need new tires this month, so you decide to cut back on your take-out and eat in more often. That’s a great decision!
Instead of forcing you to recalculate your budget categories as they change from month to month, Simplifi focuses on helping you keep your overall spending in line with your income.
When you cut back in one place to account for something else, Simplifi recognizes that and celebrates it with you in your monthly spending report.
3. A spending plan helps you balance today and tomorrow
The basic idea behind traditional budgeting is to control ALL your spending all the time, saving as much as you possibly can for the future. But that just makes you feel guilty about every dime you spend—as if you should turn down all life’s opportunities along the way.
That’s no way to live — which is one of the main reasons people hate budgeting!
By letting you include as many savings goals as you want and showing you what you can still spend today, Simplifi gives you the best of both worlds. You can enjoy life right now, knowing that your future is still on track.
4. A spending plan doesn’t overwhelm you with information you don’t need
When you’re ready to manage your finances, you need a system that isn’t going to swamp you with details and huge tables of data you don’t care about.
A spending plan shows you what you need to know at a glance: how much you can spend, where you are in your spending plan today, how close you are to your savings goals.
Everything you need is right there at your fingertips, whenever you want to see it, without any clutter to get in your way.
And, with a modern personal finance app like Simplifi, alerts make your spending plan even easier to follow.
Set up your alerts however you want them, and the app will help you stay on top of your money the way you want to—without spending hours poring over your finances.
Final thoughts
Do you think you might want to watch a specific spending category more closely? Simplifi still lets you do that. Set up a watchlist to follow any category, payee, or tag you want to.
But with Simplifi, you never have to do that. The app is designed to be flexible to meet your needs, whatever those needs might be, and even if those needs suddenly change.
So if you want to be successful at staying on top of your money, you don’t need a budget. You need a spending plan.
Simplifi’s spending plan focuses on the things you care about, organizes your finances the same way you think about them, and sets you up to reach your financial goals with confidence.
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