Beautiful Budgeting In 3 Basic Bullet Points

First of all, I think we should clarify what I understand by budgeting. In financial resilience, budgeting is not only allocating resources (most of the time, financial resources) for various expenses. It’s an umbrella activity, including active tracking of every movement (in and out), and forming spending, accumulating or investing habits.

I started to do what I now call budgeting probably more than 2 decades ago, for my first company (the one that I successfully sold after 9 years). It was a very lo fi budgeting, with only two columns, on paper: money in and money out. This very simple model served me well for years. In time, it obviously became more complicated, and a simple sheet of paper wasn’t enough.

During these two decades, I tried many applications and approaches, but, in the end, I settled for the simplest one: an excel sheet. I use this for my personal budgeting, as part of my financial resilience strategy, for more than 5 years now. It’s unchanged.

Because the beauty of it is not in how it looks, but in how much it helps you. But I’m getting ahead of myself.

Today I’m not going to share an actual sheet (you’ll see down the road why this may not be that useful to you), but 3 main principles that I use. Without further ado, let’s start.

1. Do It Daily

The first, and the most important bullet point is that it should be done daily. I’m not kidding. It should be an activity at least as automatic as brushing your teeth. You brush your teeth at least twice a day, right? I hope you do, anyway. Well, you can track and write down what you make and what you spend at least twice a day. Ideally, you should block small time slots during the day in which you will quickly adjust your sheet with your expenses.

Hint: most of the time you will put in your expenses, not your revenues. The only notable exception is when you’re dealing with money daily, as a trader, or as a crypto enthusiast trying to compound your earnings with DeFi.

2. Chart It

An excel sheet is very good at calculating stuff for you. You can set up quickly a few formulas to take care of the totals, or to calculate the value of an asset in other currencies, for instance, or to do some basic projections and scenarios. But the real power is in the charts. I function so much better what I have in front of me a chart with all the potential expenses. I use most of the time a pie chart, but your mileage may vary. As long as you always see how much is left, and the size of each expense relative to the total and to the other expenses, you should be fine.

Hint (this is about the basic monthly budgeting): as you get closer to the end of the month, the number of remaining expenses should decrease. So you will start the month with a very complex and diverse chart, with many expenses, but you will end it with less and less items in your chart (slices, in my pie chart). There’s a certain clarity and satisfaction that you get from this and it works at so many levels.

3. Keep It Consistent

And by consistent I don’t mean the habit, this was covered in the first bullet point. I mean the format. If you have a specific app that you use, great, stick to it. But if you change the tool that you’re using every 6 months, chasing the eternally elusive bells and whistles of the newest and shiniest app, you’ll lose the point. And the point is that the tool should be so thin, almost invisible. It shouldn’t stay in your way. You’re interested in managing your money, not in using a flashy app.

Hint: as you collect more and more monthly budgets (let’s say you’re using excel sheets for that) you will get to a point when you will have a few years worth of data. Running some calculations by integrating all those sheets together and seeing some bigger trends, stretching over a few years, will be enlightening. Doing it month by month is ok, but when you do it a few years in a row and look back at how much you grew, well, that’s a life changer.

That’s all there is to it, at least at the fundamental, conceptual level. Of course, we can dive in as much as we can, but every person is different. My income and expenses structure is probably very different from your income and expenses structure, so what matters is the approach, not the actual sheet. Use whatever works for you, but do it every day, chart it and keep it consistent.

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