Minimalist Living: The Simple Budget

Source: psd on Flickr

This post is a DIY style article, with a “Problems and Solutions” approach that will cover the Minimalist’s strategies to simplify finances and implement simple budgeting.

I believe that money is one of the the primary drivers behind our decision making process, for better or for worse. Well, let me be a little more blunt – that’s a bad thing, a very bad thing. There’s a reason why many people (myself included) say that the love of money is the root of evil. Money isn’t, the love of money is  – money is not evil.

Money is nothing more than an instrument or tool; it’s entirely neutral.

The problems that are directly tied to money have more to do with how we go about getting money, and how we use it.

This is one of my goals of living the Minimalist Lifestyle; to eliminate any unhealthy mindset about money, and any unhealthy habits I have in the way I earn money/use it.

So I’ve developed a few methods to correct some of my unhealthy approaches/habits, and implement a stronger approach that takes away from the obsession our society places on money and things.

Problem #1: No Budget/Too Much Budget

Before I get into it, I’d like to clarify one thing: Some people truly enjoy personal finances and budgeting every cent they have to ensure financial success. I don’t think there’s anything wrong with that, it’s just not my style. I know that when I become obsessed with micromanaging every financial transaction  I make, I tend to spend more time than I should poring over details that don’t matter, at least not when you consider the time it takes from more important activities, and the relatively small impact those minute details have.

So I’ve come to realize that my budgeting activities typically fall under one of two categories:

-Too much budget
-Too little budget/no budget

When I spend too much time on insignificant details, I lose time that could have been spent on more fulfilling activities (time with my wife and family, time fishing, time enjoying life, time helping friends, etc.)

When I have no budget, my money goes away.

So of the two, it may be wiser to lean more toward over-budgeting, since money is one of the top 3 causes of relationship problems, and as a man, I consider it my responsibility to provide for my house (old fashioned I know :).

But there’s a better way! Taking a Minimalist approach on personal finances creates a healthy balance in your budgeting, and simplifies your life as a whole.

Solution#1: Minimalist Finances: The Simple Budget

The Minimalist Budget, once you set it up, will only take between 5-10 minutes a week of maintenance. Believe it or not, you can spend much less time than this, but I like to shoot for 5-10 minutes, one day out of the week to create a habit. Otherwise it’s easy to forget about the budget and let the finances spin out of control.

NOTE: Creating the budget is the most painful part of the process; once it’s created, again, the time you have to spend is very minimal. 

Step#1: Track Your Activity

Analyze your spending and your cash-flow. The entire purpose of your budget is to know exactly what is making your bank account increase, and what makes it shrink. This step is the hardest because you need to track your account activity on a weekly basis for a month. So:

  1. Track your expenses and cash-flow for Week 1 – Record it somehow (in a journal, sticky notes, excel, a word doc)
  2. Track your expenses and cash-flow for Week 2
  3. Track your expenses and cash-flow for Week 3
  4. Track your expenses and cash-flow for Week 4

Tip#1: Be as organized as possible and be sure to clearly separate the expenses from your positive cashflow. If you’re old school and like pen and paper, use a red pen for expenses and a blue/black pen for cash-flow. The same concept can be applied to Word docs, Excel, or whatever other device/software you want to use.

Tip#2: You’ll need to put this information into very specific categories in Step#2, so you might as well get a head start and organize your information into categories beyond Expenses|Cashflow. You may want to find the budget template you want to use first to get an idea of what those categories look like.


Step#2: Create the Simple Budget

Compile all of the “data” of the weekly expenses and cashflow into your budget.

  1. The bad news: Excel (or Open Office if your computer didn’t come with Excel and you like free stuff;) is the best way to do this.
  2. The good news: People have already created simple templates you can use – just fill in your collected data, and it will auto calculate everything for you! These templates are really easy to find online: Excel’s Simple Budget, or Open Office’s (I use a template I found here), or just search “simple budget template excel” or “simple budget template open office”.

It’s all downhill from here – Now you have a foundation to launch your goals off of – your simple budget.

Tip#1: You can also use your own template if you have the ability. I know that for some people, the more time they put into something, the more likely it is to stick. Kind of like paying for a gym pass – not many people are motivated enough to work out at home, but when I’m paying $50-100 a month for a gym pass, you better believe I’m going. The same concept can apply to budgeting – the more time and effort you spend, the more likely you are to take pride in your work and develop strong financial habits.

Tip#2:  I say this to balance the first tip – it’s up to you how you spend your time, but it’s important to remember: A simple budget is meant to simplify your life, lower financial stress, and minimize time spent on money. I’ll probably repeat this again later.


Step#3: Develop Goals

This is the easiest part and I think the most enjoyable. Now that you can see exactly where your money is going, and where your cash inflow is coming from, you can set realistic financial goals.

  1. At first, it’s likely you’ll have to make cuts in areas you didn’t realize you spent so much in (entertainment and eating out is a big one), but don’t stress – Literally – everybody, has to do this (Parks and Rec- anyone?).
  2. This is a highly subjective process, so I won’t go into too much detail – basically it’s up to you whether you want to set numerous, high goals or basic and few goals.

Tip#1: Remember balance – A simple budget is meant to simplify your life, lower financial stress, and minimize time spent on money.

Tip#2: Use the SMART goal system, especially if you’re hard core about achieving your goals.


Step#4: Maintain

In order for your simple budget to remain effective, you need to get into the habit of maintaining it.

  1. It’s easy, takes only 5-10 minutes out of your week, and the results are monumental.
  2. Some people spend a little bit more time than this, and that can certainly be a good thing.
  3. Personally, I spend a little bit less time per week, but I don’t advise it – just last week I realized that I had started slipping out of shape (I think I was on track to going $400 or so over my goal for the month) because I was getting too lax on my weekly check up.
  4. Get an online banking account if you don’t have one! This is by far the most effective way to maintain your expenses and cash-flow.

Tip#1: It’s more about sticking to the routine of a weekly check in than the time spent during that check in. You’re likely to spend exactly the amount of time you need to when you check in on a habitual basis.

Tip#2: I can’t really think of anything for tip 2.


Final Thoughts

If there’s one thing that I’ve repeated consistently throughout this article, it’s the words Expenses and Cash-Flow, and they deserve to be repeated one last time:

These are really the only two things you need to focus on to create a successful and simple budget. Pound your Expenses down to the bare minimum, and do everything in your power to increase your Cash-Flow.

If you create clear SMART goals based around those two principles, and stick to them, you’re pretty much guaranteed financial success.

Good luck and thanks for reading!