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Easiest Budgeting Method Ever

Today, I am going to tell you how to create the simplest budget ever! Set it and forget it.

You can literally review this budget once a year and just quickly look at your account balances monthly. The best thing about it though is if you decide once you start getting your finances in order that you want to look at it more closely or more often, you can. So let’s jump right in!

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I am going to tell you how to create the easiest set it and forget it budget ever. If you read until the end, I am going to share with you a way to make it super automated so you don’t even have to think about it.

The great thing about the strategy that I’m about to share with you is that it can be as hands-on or hands-off as you want. This works so well because you will see that it mimics the way people are looking at their money now but in a much more positive light.

Open 4 Bank Accounts

So the first thing to do is to open 4 separate bank accounts. At least 3 should be checking accounts and the final one should be a high-interest savings account. The next thing you want to do is collect the past 3 months of all of your bank statements and/or credit card statements, basically any place that you are spending or receiving money each month. The reason I recommend 3 months is because it eliminates the chance of overlooking things or the possibility of irregular spending. Then you are going to go through each month worth of statements and assign categories to each transaction. This could be money coming in like your paycheck, side hustle money, etc, and each transaction going out like rent or mortgage, bills, dining out, etc. Trust me, this part takes the most amount of work. Once you have this done the rest will be easy. This is also great to do because I don’t know how many times I’ve helped people, and they are shocked at the amount of money they are spending in certain categories and it really helps put things into perspective, especially on items or areas they don’t really care about. One last thing to add…. don’t skip this process because you are afraid to look at your finances. They are what they are regardless if you look at them, and it is best if you take control of them regardless of what they look like or how you feel about them. I promise it will 100% pay off to start doing this. Each step forward no matter how small is a step toward your big goal.

Monthly Expenses

Once you have them categorized, then you are going to want to total up each category. Things like rent or mortgage, dining out, gas for your car, etc. Total those up so you have the amount that you spent in each category for each month. Once that is complete we are going to go to the next step which is looking at what belongs in each of the 4 bank accounts, but let’s go through each account so you know where things go. The first checking account is going to be the one that has all of your bills that are approximately the same each month. This would include things like your mortgage/rent, any stable bills like your cell phone bill that rarely change or only changes slightly. For example, this could include your utility bills, or different types of insurance that you pay monthly, credit cards, car payments, student loans, regular giving or tithing amounts, etc. You get the idea, basically all of the bills and regular monthly expenses that are more or less the same amount and that you pay monthly. In this account, I would try and have a 10 to 20% buffer. That way the money is in the account for the bills that change slightly won’t get accidently overdrawn. So if your bills in this account total $1000 for an easy number, then you would need to have between a $100 and $200 buffer in the account. If your standard monthly bills fluctuate drastically you might want to have a little more of a buffer. Each month, I would take a few minutes to review the account and make sure that your bills all seem within range and that the buffer is still good. Additionally, if you know a bill is increasing then you will want to prepare for that and increase the amount you are putting in this account monthly.

Non-Monthly Expenses

The second account will contain all of your bills that are not paid monthly or things that need to be budgeted for, but you may not always need on a regular basis. An example could be, car insurance that you pay twice a year vs. each month. This could also include things like car repairs, oil changes, medical visits, etc. So either things you pay irregularly or things you will most likely need, but are not consistent. For these items, you will look at how much you have spent in the last 3 months or even look back over the last year to get an idea of how much you have spent on car repairs or doctor visits etc. In this account, you will need to have a monthly amount to account for these item. You just need to glance at this account and make sure it is not getting too low. However, you only want to use this money for the items you have budgeted for. Sometimes people will check in on this account and see money accumulating and think they can use some of it. Don’t do that!! We will talk about that a little bit later. Money should not be used from this account, except to pay for the bills that are assigned to it no matter how much money is growing in it. Before we get to the third account I am going to recommend getting all of your bills on autopay if they are not already, so you don’t even have to think about it. If you absolutely hate doing auto-pay, then I recommend paying your bills on the 1st and 15th. So any bills due between the 1st and 15th would be paid on the 1st. Bills due on the 16th to the 31st would be paid on the 15th. That way you only have to touch it twice. However, I highly recommend auto-pay to get the full automation.

Spending Account

The third checking account is going to be your spending account. Not only will this have your fun spending money or family money, this account will also have things like groceries, and gas for your car. These are the items that fluctuate and can be borrowed from one another since you will not be borrowing from any other account. Again, when you are looking at spending money, including groceries, and gas, this is the only account you look at. I can’t stress this enough. Don’t get low on this account and peek into the irregular bill account and think “Wow, there is extra money in there!” That money has already been allocated. The reason this type of “set it and forget it budget” works is because oftentimes people who don’t budget just look in their account and get a feeling for how much money is left to be spent. This ensures that all of your bills are paid and that there is enough money to cover everything including your irregular budget items. If you prefer to use credit cards then I would try and have one “spending credit card” that is paid out of this account and maybe a “bills credit card” that is paid from the other account. This will just make it much easier to track the spending portion to make sure you are not going over the amount in the spending account and make the review much easier.

Open a High-Interest Savings Account

The fourth account is going to be a high-interest savings account. I would recommend opening up this account at another bank that is not connected with the 3 other accounts because then it makes it harder to take money from yourself. This account will have a progressive purpose. As you progress you can open a couple of other high-interest savings account, or you can just track it all in this account. The first thing you will need to use this account for is to build up your emergency fund. If you have debt, then I recommend $500 for the 1st person in the household and an extra $100 for each person in the household. For example, a family of 4 would be $800. So goal number one is to fill up this emergency fund. Once it is full you can move that to a separate account or when you are moving on to the next step just know that for example, $800, would not be included in the next step. The next step is going to be snowballing your debt. So you will pay the minimum on all of your debts and take the smallest one and put all of the extra money you have diverted into this account, not including the $800 for an emergency fund, to paying off the smallest debt. Continue that process until all of your debt is paid off.

Grow Your Emergency Fund

The next step will be growing your emergency fund from 3 to 6 months of expenses. Once that is complete, start investing as much of this money as you can. An easy way to do that is investing in index funds through mutual funds or ETFs. If you want to have it completely automated then mutual funds are the easiest because you can have them set up to have an automatic withdrawal to be invested each month. The last way you can use this account is for milestones savings. This would be like saving for a new car, a wedding, a new TV, vacation etc. Basically, this final account is your emergency fund, saving, and investing account. I am about to share with you my bonus tip on how to really automate your budget but, before I do I would just like to quickly explain how the maintenance of the budget works. The only maintenance would be each month glancing at the balances to make sure that they are sufficient. Reviewing the items to make sure there are not any errors or overcharges. Then basically go through this exercise once a year to reset the amounts, and just check in with where you are. This is the time where if you have any extra money above your cushion in your first 2 accounts, you can take that money out and invest it or spend it. I would not take any money out of those accounts except at the end of the year. You can consider it a bonus for doing the work yearly and coming in under budget.

Now, if you go down this path and you find that personal finance is not overwhelming or unpleasant then you can, spend more time on it. Perhaps review it monthly, looking at the money you saved. Work on ways to be able to save and invest more and spend less. Honestly, as people start crushing their debt, building up savings, investing, and watching their passive income grow, suddenly personal finances don’t feel like a chore anymore. They can actually be very exciting! Watching your passive income grow is like getting regular pay raises without having to do more work or take on more duties. The important part is taking the first step to mastering your finances, and that is just knowing where your money is going, even if that is with a super simple “set it and forget it” budget like this one. It does not get simpler than this.

Free Cheat Sheet

Don’t forget to grab the cheat sheet below! It lays everything out for you. Plus it gives you categories, and a workbook to set it all up. The best way to fully automate your budget is “out of sight and out of mind”.

Bonus Tip

Now for the bonus the tip. In order to further automate your “set it and forget it “ budget there are a couple of ways to do this and it depends on your employment.

1) if you are employed with a company, decide how much of your income will go into each account. Have your employer direct deposit that amount into each account. Historically, your check would only be deposited into 1 account, however, it is becoming more and more common that your paycheck can be divided amongst multiple accounts. The benefit of this is that you never see it or have to touch it, the money just goes in and it is less tempting to touch it. You set it up once and then it just works on its own. I like to think of it as “out of sight out of mind”. The only time you would need to tweak this is if a bill or your income dramatically changes. You would then need to adjust the allocation for that account.

2) If you are self-employed or your company says they don’t allow multiple accounts, then I recommend setting up automatic monthly bank transfers within the accounts so you don’t have to manually move the money. Again that is more automated and less tempting.

Thank you so much for reading until the end!