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Question for the Money Doctors

Question submitted on Oct 1, 2013.


Hi, thank you so much for taking my question about using a budget. I have written out a realistic budget that includes 12 categories and plans for even some future unexpected expenses. All wonderful on paper. But it takes too much effort to write down all spending as it comes out of the categories. Am I making this too hard? What is the simplest way to keep up with a household budget? What is the minimum I must do daily to make the budget work well for me? Also do I need to check that the categories add up to the checkbook balance? How often? Thank you! Maribeth


There are many ways you can approach this. A budget with a lot of details can get too cumbersome. I prefer an easier approach.

Categorize your expenses in 2 categories: Nondiscretionary & Discretionary

Nondiscretionary are your required monthly expenses - rent, car payment, utilities, phone bills, credit card bills, insurance, student loans, groceries, food, etc. Add these up and they are probably about the same each month - set aside that amount for these required expenses.

Discretionary would be expenses that are optional, but you want to have them. This can include clothing, eating out, movies, entertainment, hobbies, vacations, etc.

You can give yourself a monthly budget for these type of expenses and when you get to that amount, don't spend it. You can also break them out monthly such as a vacation. For example, let's say you really want this outfit, but it costs $500. You can allocate a portion of your budget towards it, but it may take a few months.

The same for a vacation. Let's say a trip will cost $3,000 and you don't have that money now. If you plan ahead and it's a year out - you need to set aside $250/month to save up the money for the trip. If you have extra money, more can go towards this goal and you will get there quicker.

Don't use the Budget word - call it a Spending Plan. It's all about planning ahead and not be impulsive. Stay in control so you don't get in trouble with debt.

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