On a recent episode of the highly respected, laudable, and deserving-of-awards Bitches Get Riches podcast, Kitty and I came out with a controversial take: You don’t necessarily need a budget.
Next to “You can buy a latte sometimes,” it’s just about the closest we’ve come to outright heresy in the halls of money writers. We expect to be shunned and excommunicated any moment now.
Yet I firmly believe that budgeting doesn’t work for everyone!
Yes, for some people it’s an incredibly useful, indispensable tool. I know people who flailed around with money like a noodly-armed fan man on a used car lot before they made a budget, and afterward approached their finances with the serenity and enlightenment of a monk.
I also know people who make budgets, fail at them, and enter a cycle of constant self-loathing and financial stress that ultimately harms more than it helps. Some of us chafe against the rigidity of a budget. Others thrive within its strict boundaries.
So budgeting ain’t for everyone. But that doesn’t mean you’re excused from managing your money altogether. Even without a budget, it’s still useful to have a system for keeping an eye on your money. Today I’m going to teach you my system: the spending tracker.
Here’s what I do instead
Instead of budgeting, I track my spending with a spending tracker.
I know that sounds a fuckova lot like budgeting, but I swear it’s different. Stay with me here.
A spending tracker is a sexy form of data visualization that helps me to frequently take stock of my income, my spending, and make minute adjustments along the way.
It’s sort of a live audit of your income and spending. It appeals to the gamer in me: I can see how my stats in different skill categories affect my game performance and can change them accordingly to improve my chances of winning.
Winning at life, that is.
A spending tracker is important for the very reason that knowing where your money is coming from and where it’s going are essential to controlling both. And seeing all that data laid out in a tidy spreadsheet, updated with every purchase and paycheck, gives you the information you need to make concrete financial improvements.
How to make a spending tracker
My spending tracker is a spreadsheet that lists my income and expenses every month. I use Microsoft Excel because I am an Olde Millennial and that’s what I’m used to, but you can use any system you want. Kitty uses a Bullet Journal because physically writing things down helps her commit to them—plus, they’re pretty. You can use a ledger book and fountain pen and pretend you’re Bob goddamn Cratchit if you want! But I like Excel because the formula function means I don’t actually have to do my own math.
At the beginning of every month my spending tracker looks a bit like this:
Each column represents a category of spending. You can change these up and add more to suit your own needs, but mine definitely break down into these very specific and definitely not made-up categories every month.
When I get paid, I fill in my income in the far left column, like so:
I’m a salaried employee, so my income is predictably the same every paycheck and I get two paychecks per month. But if you have multiple jobs, or if your paycheck varies based on your hours, your income column might be a lot more detailed.
And as I spend money, I fill in my expenses in the rest of the category columns. Each column then adds up at the bottom using an automatic formula, so I can see how much I’m spending in each category every month.
Then, all the categories add up in the far right corner to show my total expenditure for the month.
Now here’s the part that makes it all magical: using the formula function once again, I subtract my total expenses from my total income. That’s the money I didn’t spend that month. And that leftover money gets to stay mine. I deposit it into savings or I invest it. When I had student loans, I used it to pay off my debt. Whatever. The leftovers are yours to do with as you wish.
At the end of the month I can look back and see that while I managed to save $800 in leftover money, I clearly overspent on toy dinosaurs for the garden. So I should definitely plan to cut back on those next month.
I can also see that it was an unusually expensive month for lightsabers. It looks like the kyber crystal in my Darksaber malfunctioned twice, necessitating multiple repairs. I’m not going to sweat this, as the repairs were successful and I shouldn’t expect to spend this money on lightsaber repair again next month.
But I’m going to call only $300 spent on cheese crackers in a single month a major financial win.
“Pay yourself first”
Once you track your spending, you can figure out some averages: how much you spend on groceries on average, how much you spend on transportation on average, etc. And most importantly: how much, on average, is left over.
Dear readers, you know how hot the term “leftovers” gets me. And it’s not just because my entire life is ruled by my stomach and I am but a slave to delicious food. For once you figure out your average leftover money every month, you then know how much you have to save every month.
Save your average leftovers. Do it first thing, as soon as you get paid. After that, who the hell cares what else you spend your fucking money on? You’ve saved your leftovers before paying any bills or making any discretionary spending. This concept is known among much wiser financial experts as “pay yourself first.” And once that’s done, a budget doesn’t really matter.
I can tell some of you are cringing at words like “average.” Yes, I see the flaw in my logic. Without a strict budget using exact numbers, how can you be sure you can save your average leftovers every month? What if you need that money for increased dog happiness but it’s already been saved or invested or—gasp!—spent on debt???
It’s a valid point! And its why you should a) first save up an emergency fund, and b) keep a comfortable buffer of money in your checking account at all times. If that still fills you with anxiety and a desire for exact, concrete numbers… then maybe you’re one of those people who needs the comforting restrictions of a budget. And that’s ok.
What should I do with my leftover savings?
Having a savings goal is extremely motivating. Saving money without an intended purpose for those savings feels a lot like… eating tasteless protein bars to stay alive. You know you have to, but there’s no joy in it.
One way we can help motivate you to save is with the patented Bitches Get Riches savings goal coloring book, which you can get at our Etsy shop.
So pretty. Much motivation. You’re welcome.
Why bother tracking expenses
For the datasexual among you, spreadsheets are their own reward. For everyone else wondering why you should bother tracking your expenses, I’ve got your reasons right here!
A spending tracker is more flexible than a budget. You can audit your spending as you go along, making minute adjustments accordingly. Notice that you spent way too much money on craft beer last month? Eliminate that from next month’s spending and watch the money move directly into the leftover money field.
A spending tracker will also allow you to see your largest categories of spending. This way you can home in on the most significant wastes of money to strategize how to lower them. And this will literally give you the biggest bang for your buck.
You’ll never ask “Where the fuck did all my money go?” ever again, because you’ll have the answer, right there in front of you. Your sins of overindulging at the bar will stare back at you accusingly as you wonder, in vain, why you saved so much less this month.
Those who don’t quibble over technicalities are like “How is this even different from budgeting?” To which I say: BECAUSE IT IS, DON’T QUESTION ME. But also, a budget is a way of planning your spending before you do it. A spending tracker is a way of making note of your spending after you’ve done it.
tl;dr: You should track your fucking spending through a spreadsheet and use it to inform your money decisions on a day-to-day and month-to-month basis. All the cool kids (read: the Bitches) are doing it!
Do you prefer to track your spending or make a budget? Tell us all about it in a comment below!
22 thoughts to “Budgets Don’t Work for Everyone—Try the Spending Tracker System Instead”
We (husband + me) use a mix of budgeting & spending: we do a good old-fashioned expenses vs. projections spreadsheet (in Google Drive).
Projections, aka Budgeting: we have a couple specific saving/debt slaying goals that we’ve mapped out over a year. We have those automatically taken out of our account throughout the month. We have a running projection, month by month, of how much we’d like to set aside for those things plus our estimated expenses. We have salaried jobs and very predictable expenses, so we have a good sense of what our flex money should be.
Expenses, aka Spending: at the end of each month, we put our ACTUAL expenses in each category to see both how we tracked and what we have that’s still available. We have joint finances/accounts, so we generally have a good idea of where we’re at any time (“hey, we budget $200/month for doggo but he had an unexpected vet visit that was $367 – why don’t we skip the movie & dinner out for a hike & bagged lunch this month?”).
We also have a high-yield checking account through our local credit union (nearly 3%, yo!) that is way better than our savings account rate that we’re using to save for a down payment. To avoid maintenance fees, we use it as a regular ‘ol checking account for daily transactions, so we also reset the “though shalt not spend below this” threshold each month. So, if I know our “don’t drop below” amount for January is $10,000 (for example) and I see $11,000 in the account, I basically pretend that the original $10k doesn’t exist and I only have $1,000 to spend.
I have a super variable income from week to week and month to month, which can make budgeting hard and also means that “average” numbers would still be difficult for me in some months. I also know that if I work on a “leftovers” basis without having a goal in mind, I will very easily spend all my cash.
My strategy for saving this year is to look at how much I want to save, and divide it into twelve months, and keep the resulting balance in my savings account each month as a goal; so if I’m trying to save £6k per year, I know I want to have £500 by the end of January, and £1k by the end of February, and so on (these numbers are made up but you get the idea). I have enough grasp of my finances to know whether it’s realistic, and enough buffer to be able to cope with minor emergencies and slow periods (coping with bigger stuff is one of the reasons I need to save). I’ll be reviewing my system quarterly to see whether I need to adjust my goal up (or down). It’s a little like the “pay yourself first” method but more handwavy: I’m not aiming to save some magical percentage of my income, or an amount that’s based exactly on what I’ve earned, I’m just picking an intuitive, ballpark figure and aiming for that. This way, my savings are yet another fixed outgoing, along with rent and council tax, that I have to cough up every month regardless of my income.
I could probably save more if I used a more sophisticated and involved system, but to be honest at this point I think that time and energy is better spent getting to a point where I earn more than I do right now.
This is pretty much what I currently do!
You could also use apps that help you with spending tracking!! Much more manageable than spreadsheets for the regular user. Can also be updated from a smartphone if you are the type of user that is always on the go, harder to forget spending if you can add it using your phone when you spend it.
Personal Capital is one of the online options that helps you do this and links to all your accounts (read-only) which makes it easier to keep track of your spending AND your debt. I think mint is another one… for a while I used one called “Spending” on IOS, easy to add categories, would create graphs for you and you could import it to a spreadsheet if you wanted. I looove spreadsheets and formulas as much as you, but my /spending would require too many columns to get meaningful insight. Why not take advantage of free/fancy software that is already out there?
P.S.: yes, Personal cap will frequently ask you if you want to invest with them, but I can deal with that for the overall insight I get on the rest of my finances.
Neither. We save first and then pay attention to what is leftover each month. You can do this if you’re careful to make sure your spending is much less than your income or you have a large emergency fund (back when we made much less, I kept one month ahead of our expenses so we knew to cut way back the next month if we overspent). It doesn’t work if you have any sort of reasonable probability of running out of money.
Appreciate this viewpoint! My husband and I don’t budget but we transfer a set sum of savings/extra mortgage payment at the beginning of the pay period as well as transferring any leftovers. I also love that my banking app automatically shows my spending divided into basic categories (eating out, groceries, transport, etc). I often use this to review my personal spending and check how much went to books or random shopping… (I just love nail polish and costume jewellery so much!)
I started doing something similar last year based on the book Worry-Free Money by Shannon Lee Simmons. In her system, you immediately allocate your money to the following 3 buckets right after you get paid: Fixed Expenses, Meaningful Savings, and Short-Term Savings (you calculate fixed amounts for these buckets). What’s left over is your spending money for the rest of your pay period, and you can spend it however you want… groceries, dining out, shoes, books — whatever! You can spend it however you want but you have to be aware that it should cover all your variable expenses, including less-fun stuff like laundry detergent and deodorant.
Worry-free money is the best and has saved me so much stress with our money. Highly recommend!
We don’t budget or track expenses. I am a saver by default, and we also make enough money to feel pretty financially secure, so we don’t feel it’s necessary. We have automatic transfers every month for savings/investing/etc, as well as set “fun money” accounts for discretionary spending for each of us. We review our bank & credit card statements regularly for trends and accuracy, but otherwise as long as our accounts are generally trending up, we’re good.
I’ve been tracking expenses since 2007! I’ve got each month in a little notebook and am just starting a project to transfer the monthly totals to a google sheet so I can really see how things have changed in 12 years. My income has just about doubled since then (!! I just realized that) and a lot of fun spending has increased alongside that, things like travel and activism expenses.
I use the information as just that – it lets me know what is happening with my money, and since I’m fully funding my retirement savings and am fairly aggressively prepaying my mortgage, I’m fine with the rest of my money getting spent. But this also lets me know what I could cut with varying degrees of discomfort, if I needed to for any reason.
Turns out I come by this genetically ! My dad showed me the ledger he and my mom have used for 50 years tracking and categorizing all of the money they spend.
I use You Need a Budget, but I sort of use it more for spending tracking. Instead of determining an amount of money at the start of the month that I have to stick to, I estimate or put down something aspirational. Then I go on my merry spending way, and when I notice my budget doesnt match up with my actual spending, I change my budget around. The biggest things it’s done for me are ensuring I don’t spend my bill money on takeout (because for that I’d have to consciously take money out of the bill category), and starting with savings. I’m not sure a “leftover” would work for me as I tend to just spend what I have.
For people who don’t want a fullblown budget but worry about spending their money the wrong way, the spreadsheet could still accommodate for (recurring) bills. By setting the total or average amount of bills at the bottom and subtracting what was spent in the bills category/categories, you’d get a pretty good estimation of whether your leftovers are actually leftovers.
It’s a very subtle difference between tracking spending in a spreadsheet and a budget in a spreadsheet, but the absence of pre-determined guardrails on that spending makes all the difference for some people. I think in both cases, you need some accurate idea of where the money is going, first, if you’re going to make improvement. Saying “I’m going to spend less at the bar,” only works so well if you’re only vaguely sure if you’re spending something like $50 at the bar or $500.
Piggy! This is a little bit “getting into the weeds” question, but for this kind of spending tracking, how do you (personally) incorporate gift cards and people paying you back? Do you just not add them because they don’t take away money from you, or do you add the giftcards and let’s say Venmo to the income column and record what you spent (and then got paid back) in the expenses columns?
Random stranger here following this post. I personally have a “returns” category in my income, it applies to people paying me back or when I return something I didn’t keep (i.e. amazon). That way I can see how much of my spending actually came back to me and have a clear idea that “returns” is not a steady income.
Love this idea! Thanks!
I just subtract returns or paid-back money from the category it came out of (so if I spent money on some new clothes and then took them back, I put in the cost of the dress and then subtract what I got when I returned it. If I happen to buy something in one month and return it the next, sometimes I have negative months).
I track my spending – that helps identify what we can trim. Pay yourself first, then spend the rest – is what we do. How much to pay? – till it hurts. Else you’re not paying yourself enough.
I like to use the Mad Fientist’s FI Calculator to track my spending. I’ve also added some conditional formatting to it to show how my account balances change over time (low=red, high=green on a gradient scale, this means past colors update as new data is entered). I also made it so that the spending category colors change relative to the average (so if I spend more eating out in one month than my historical average (which is pretty steady after having several years’ of data added), the cell is red, whereas if it’s less, the cell is green. I love this freaking thing. I love knowing when I’ll be able to retire. I love seeing how certain decisions affect my FI date. I tell everyone to use it (with the caveat that if they don’t love dealing with the minutiae of every single transaction, it might not be for them).
I think the bigger the earnings to spending gap, the less you have to budget/keep track of things. If you are already saving a large portion of your take home pay than what’s the real value in tracking day to day spending unless it’s something you enjoy doing.
I rarely track my spending that closely anymore…but was a spreadsheet nazi when I had 2 mortgages on fixer uppers and paying for 2 full time daycares. I will probably be more vigilant again when I retire.
I’m not that great at either budgeting or tracking, but I did find a solution that helps me with my goals! I have a separate checking account set up for my bills (house, car, utilities, etc.) that I have money direct deposited into each paycheck. I also have money directly put into my emergency fund to beef it up. The rest goes into my regular checking account, and that’s where groceries, gas, and everything else gets paid out of.
This is a great system! Thanks for sharing. I hope it helps others who aren’t into budgeting or tracking as well.
A good mobile app is “Buddy”, you can track your spending and split it into categories! It does have a budget option as well but you don’t have to use it!
I just read this post and it inspired me to finally re-download the app and try to crack down on my spending!
I’ve been living abroad in a cash-based economy with excellent public transit and a lot of things within walking distance. Expenses are a lot easier to predict than when I lived in a card-heavy economy and had to budget for a car.
Even so, I’m lousy at budgeting so use a variation on what my mom called the “envelope” method. She had a worn spiral notebook with labeled envelopes built in, and would use it to designate cash to different purposes. I do the same thing with a whiteboard and magnets.
At the top of the board, I write the most recent income, then divide the rest into four segments and use the magnets to stick cash to that square: (1) bills, (2) groceries (and dailies like paper towels), (3) needs (gas, doctor, new shoes, etc.), and (4) wants (rentals, takeout, etc.). There’s an emergency fund too, but that stays in the bank. I try to think of it mentally as a percentage. I have a transit card that gets it’s own “bill,” a bit like an allowance.
For (1) and (2), over the course of the month, I replace the cash with the receipt of the expense. The cash only goes into my wallet when it’s going to be spent. Any change from paying bills goes back on the whiteboard after until all bills are paid.
Since (3) and (4) are harder to predict, (3), needs, gets everything (1) and (2) don’t, but it actually helps if I leave this money in the bank so it “doesn’t exist” unless an actual need shows up. I write out the expense as I go every time I bring home a receipt. If I have to dig into the savings, I use a red marker to list the excess and try to put it back as soon as I can. For (4), wants, this generally waits until the end of the month. For example, January’s “wants” are actually the leftovers from December’s (1), (2), and (3).
I suppose it wouldn’t work for everyone, but it helps me to see the actual amount as something “real” waiting for its purpose. If any one section starts to look crowded, I total up to see how I’m doing. I do a final total at the next payday.