My Simple Money Strategy

It's been awhile since I talked about my personal money strategy here on this blog.  In the past I explained how I used YNAB (You Need A Budget) software to track my spending and finances, and I'll always post when I'm doing some sort of wallet watch or total ban on spending, but as I moved more towards a simpler lifestyle and buying so much less, I neglected to update on how that applies to tracking my finances.  And the short answer is: I don't.

I don't like my money to be complicated.  Spending, earning, saving, paying taxes, whatever it is I'm doing, I need it to be simple in order to stick with it.  Since I've never been great at math, I'm naturally averse to numbers so I can't do anything too complicated or I start to lose focus and commitment.  But that's the thing that works in my favor when it comes to personal finance - it's personal.  I can use whatever strategies I need to, even if they're incredibly simple and not what 'the experts' would recommend.  At the end of the day, when it comes to budgeting, the best system is the one the works for you.

There are so many ways to figure out budgeting and finances in your life.  There's methods where you use percentages of your income, cash envelopes, a weekly system, or zero based budgeting.  I have an entire Pinterest board dedicated to finances if you want to find something that will work for you.

I have used a number of those in the past and came away with the knowledge of how to run my own finances effectively and as simply as possible.  Essentially, how I keep it simple is to follow the Warren Buffet strategy: "Do not save what is left after spending, but spend what is left after saving."  That's it, that's what I keep in my head regarding my finances.  

How that works in reality is this: 

1. I figure out my absolute essential (almost) fixed monthly living expenses.  This includes our mortgage, the utilities (which I actively try to keep as low as possible, hence the 'almost' fixed, the bills are always very similar), health insurance, transportation (my public transit pass is $100 a month).  I make sure all of these are on paperless billing and payments are automated.  I've only had to do this step once, it doesn't change.

2. I figure out other expenses I deem essential, but aren't exactly fixed, and keep a figure in mind for those.  This would include groceries, which I refuse to spend over $300 a month on and includes dog food and things like contact solution and cleaning supplies.  I also factor in recurring yearly fees like when I need to renew my law license and when Hawkeye has to go to the vet.  Again, I've only done this step once as my recurring fees are few and unchanging.

3. I save everything else.  I put $5,500 a year in my Roth IRA, which is the max, a portion sits in a regular account at the bank, and the rest goes into various forms of savings and investing accounts.

4. I track nothing.  I keep an eye on my bank accounts to make sure there's no strange activity but since I know exactly what I'm spending, I don't keep track of individual purchases at all - whether I spent 85.76 at Jewel and $12.08 at Walgreens, I know how to keep that sort of spending at my $300 benchmark since the basics reoccur and don't wildly change in price, so I don't feel the need to track any of my purchases.

Now, you're probably looking at those 4 items and thinking 'what about clothes? Gifts? A hair cut? Vacation?'  I don't outright budget and plan for those things on a monthly basis, which is why the system is so simple.  I save everything else so I do have the finances available should I decide to buy something, but the fact that I have to take money from 'savings' (I have an account where a lump sum just sits, there is no penalty for removing it) makes me think long and hard about whether or not I actually need that item.  Trust me, using money from that account is a fabulous deterrent when starring down a new shirt or nail polish.  Or Taco Bell.  When things like Christmas or potential vacations come up, then I sit down and think about exactly how much I'd like to spend there and stick to that number.  But, again, since I've saved every other penny all year instead of trying to stick to a complicated 'fun money' budget, those funds are readily available.

I had great success with the zero based budgeting method, and Jordan's weekly method, when I was trying to get a handle on my spending.  Now that I've mastered it and quashed my spending triggers, cutting back the entire budgeting process was just the natural next step in simplifying my life.  Not tracking anything has definitely freed up some time in my day!  And my brain is happy not to have to deal with numbers all the time.  Spending only what's left after saving, that's the system that works best for me.
How do you handle finances?  Any other simple tips you would add to the list?

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