How to Budget Money Without a Budget

Can’t seem to keep a budget? Don’t be too hard on yourself — you’re not alone. Only one in three Americans say they have a detailed household budget, according to a recent Gallup survey. And the difficulty in sticking to a plan may have nothing to do with your willpower. According to a report by the JPMorgan Chase Institute, one in four people saw big changes in their income (as high as 30 percent from 2013 to 2014).  Given all the expenses you can’t predict, spending is rarely consistent.

To fit with this ebb and flow, it’s time to adjust how we think of budgeting — especially since money strategies are rarely one-size-fits-all. Here are five alternative ways to budget that fit your real life.

New Plan

New Plan

Instead of ushering in the new year with resolutions we won’t keep past February, let’s focus on what we can (and should) finally drop. This week, we’ll focus on quitting bad habits, toxic relationships, or whatever else is keeping you from living your best life. #iQuit

Can’t seem to keep a budget? Don’t be too hard on yourself — you’re not alone. Only one in three Americans say they have a detailed household budget, according to a recent Gallup survey. And the difficulty in sticking to a plan may have nothing to do with your willpower. According to a report by the JPMorgan Chase Institute, one in four people saw big changes in their income (as high as 30 percent from 2013 to 2014).  Given all the expenses you can’t predict, spending is rarely consistent.

To fit with this ebb and flow, it’s time to adjust how we think of budgeting — especially since money strategies are rarely one-size-fits-all. Here are five alternative ways to budget that fit your real life.

Think Yearly

Think Yearly

University of Southern California, Cornell, and NYU researchers found that setting a monthly budget is less effective than looking at the whole year. Month-long estimates of expenses tended to fall short, but when subjects were asked to create a yearly budget, they provided a more realistic financial picture — even overestimating their financial needs by 3 percent.

We’re less confident about long-term guessing, so we overcompensate with a nice cushion, as opposed to underestimating what we’ll need over the short term.

A yearly plan also helps handle those unexpected expenses that blow apart a monthly budget, from a big medical bill to a car repair. Because some periods may be filled with high bills while others are easier for tightening your belt, a yearly goal gives the wiggle room you’ll need to handle fluctuations.

Don’t Set Limits on the Big Stuff

Don’t Set Limits on the Big Stuff

It sounds counterintuitive, but you’re more likely to overspend when you’ve set a spending limit compared to when you walk into a store with no restrictions on what you’ll pay, according to research from Brigham Young and Emory experts.

Why is buying big-ticket items without a budget better for our wallets? Ultimately, the study authors believe that we focus too much on price when we compare models. So for example, if you decide you’ll spend no more than $500 on a new TV, you’re likely to choose the most expensive TV in that price range to fit what you want in terms of features and quality.

Instead, the authors recommend you focus first on quality and features when you shop. This way you might discover the best product in a price range you otherwise wouldn’t have considered.

Get Help From Someone Who Knows You

Get Help From Someone Who Knows You

When generic budgets fail you, try a personal touch. Close friends or family may be better at helping you set up a realistic plan than a financial planner or a standard budget you find online, according to a recent University of Washington study. The better someone knows you, the more likely it is that their suggestions will result in true behavioral changes.

If you’re worried about talking to a friend or asking a family member for help, it’s natural. Study subjects were concerned about the “social costs,” like being judged or sharing personal information. But the study authors are quick to note that “the costs of sharing information with friends are balanced by benefits,” like getting support and being held accountable. Just be sure to choose someone you’re fully comfortable with, someone you trust with this kind of personal information.

Who should you enlist for help? Most of the subjects chose someone who’d known them an average of 13 years. And it doesn’t matter what kind of plan your friend or relative chooses — the fact that they make one tailored to you is the key to success.

Bucket, Don’t Budget

Bucket, Don’t Budget

Lose the word budgeting from your vocabulary and replace it with bucketing. When you bucket your money, you split it into multiple accounts instead of following spreadsheets.

The most basic way to bucket is to funnel all your disposable income (both the money you’ll spend on bills and everyday expenses as well as your “fun money”) into one account, and put the rest (a predetermined, fixed amount) into a savings account you never touch.

With all your disposable income in one account, you’re free to spend that money as you’d like every month, since you’ve already portioned off your savings. Want pricey theater tickets? Maybe that means brown-bagging your lunches for a few weeks. Just paid off a lower-than-usual electric bill? Maybe that means more money to spend on new boots. Bottom line: You can juggle how you spend those bucketed dollars on a month-by-month basis.

If this appeals to you, don’t limit your buckets to just two. You can open multiple accounts for different categories of spending — from travel to food to clothes to car payments — and simply spend from each bucket until you hit zero every month (or, better yet, stop before you hit zero and put the rest into savings). Just make sure you have enough in each account to meet bank minimums so you don’t get hit with fees.

Carry Only Large Bills

Carry Only Large Bills

Does planning of any kind simply not work for you? Then make sure you don’t overspend by using only cash. Leaving your credit cards at home will ensure you pay only what you can afford.

If you want to go even further, start carrying around larger bills, according to a study in the Journal of Consumer Research. Researchers dubbed this the “denomination effect” and say it works as “a strategic device to control and regulate spending.” Basically, it’s a lot harder to part with a crisp $50 or $100 bill than it is with another $20 or $10. 

More from Quitting Week:
Quit Sabotaging Yourself
Stop Being Afraid of Investing and Start Making Money
7 Toxic Money Habits You Need to Quit

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