AUTOMATING YOUR LIFE // Which do you think an average person is more likely to successfully complete in one month: their budget or their diet plan? Trick question – the answer is neither. I can only speak for myself, but I genuinely intend to sit down and figure out a game plan to cut costs for our budget, or to cut calories for my diet but fail regularly. You may commit to the point of creating a spreadsheet or buying a new pair of running shoes. Way to go! Day 1 – you rocked it! You cut out that breakfast donut, saving on both the budget and the diet. Day 2 – staying focused with the end goal in mind. Schwew, a little harder than yesterday. Day 3 – you forgot you had already committed to a dinner with friends. There goes the budget and how can you say “No” to dessert?! YOLO, right? Probably best to start over Monday. Wait, it’s only Wednesday. Oh well, might as well enjoy Thursday through Sunday and start all over again next week.

Does that sound familiar or is that just me? I think that by nature we are lazy, preferring the path of least resistance. It’s not necessarily a flaw; it might even be a survival instinct. If you have to choose between walking a mile on a flat, paved path or walking through dense jungle that you’ll have to hack your way through, which route would you take? Give me the paved way every time!

Mark Twain has been credited with the quote, “Quitting smoking is easy, I’ve done it hundreds of time.” Whether he actually said this or not is disputed, but the humor of it remains. Is this how you could summarize budgeting? Or at least your intent to budget?

Failed budgeting started for me at an early age. When I was old enough to mow lawns I started a lawn care business called “Lawn Boy.” Not very original, considering that’s the name of the machine I was pushing to mow the grass! I also had a newspaper route, but I somehow ended up with extra papers in my bag at the end of each route. But that didn’t matter, what mattered was the $7 I made from each lawn and $13ish per week from the newspaper route. My mom was, and still is, a big believer in an envelope budget system. She has a cash envelope for everything. Everything! I took my first check and bought myself a fireproof lockbox to tuck in my dresser drawer. I got three envelopes and wrote “Tithe” on the first, “Savings” on the second, and “Vacation” on the final one. Every time I got paid I would put a percentage of cash in each envelope, rounding to the nearest quarter. I was always diligent to put the cash in, but the problem was it was never ever used for its intended purpose. My “Savings” envelope had so many well-intending IOU’s written on it that were never paid back.

LESSONS I’M STILL LEARNING TODAY // My wife and I used the Dave Ramsey-ish system for most of our marriage and are thankfully debt free, except our house. We borrowed from envelopes all the time and never fully stuck to it. Why? It’s boring! Nobody wants to track every single dollar that they have. Just like a diet, we are good at it for a month or two then get off track and just quit. So, what’s the solution? Automate your finances.

When you look at your spending, where are you most successful and consistent with your money? I bet it’s when you setup to automatically have money come out of your paycheck for your 401(k), when you have bills come out automatically, or when you have a dollar amount sent to a savings account. Where do you struggle? Paying back cash to your buddy from work that you’ve been intending to pay back for the past two months. What makes it worse is that you work in the same building as him! Just hurry up and pay the guy!

I’ve been listening to a really good audiobook called I Will Teach You to Be Rich by Ramit Sethi. He shares a simple way of automating your finances:

• Your take-home pay should fit into 4 different categories, I call them buckets:
  • Fixed Costs | 50-60% | rent, phone, utilities
  • Investments | 10% | company 401(k), Roth IRA, index funds
  • Savings | 5-10% | gifts, wedding, house down payment
  • Guilt Free Spending | 20-35% | restaurants, vacations, movies, whatever you want!
  • Note: The percentages above are of your take-home pay. For investments, calculate 10% take-home, then subtract out what you are already investing into your company 401(k).
• Here is a sample of how you could automate your paychecks:
  • Paycheck – Part of this should go to your 401(k) through your employer and direct deposit the rest into your checking account
  • Checking account – Schedule your automatic transfers from your checking account. This would include your Roth IRA, Savings account transfers (ex: house down payment account), Fixed cost payments (ex: utilities), and Guilt free spending transfer into a separate checking.
  • Remit has Fixed costs and Guilt free spending comes out of a credit card. That’s up to you!
  • In a perfect world, it would look something like this:
    • 1st of Month: Pay Day
    • 2nd of Month: 401(k) + Checking deposit (this might happen already on the first of the month, but sometimes it takes a day to deposit)
    • 5th of Month: Scheduled transfers to Savings accounts
    • 5th of Month: Scheduled transfers to Roth IRA – 10% of take-home pay, minus the amount put into your 401(k)
    • 7th of Month: Auto-pay bills (some businesses let you change the billing date with a phone call)
    • Auto-pay credit card in full (if that’s the system you want to use)
  • This system is really simple if you’re paid once a month, or if you can save up a month’s income and start with that. Otherwise, if you’re paid twice a month you can use the 1st paycheck for bills and the 2nd paycheck for savings and investing. Or you can budget 1/2 of each payment out of each paycheck.

The goal isn’t to be perfect, but to get funds where they need to be right away so they aren’t misspent. Basically, get the money moved to Savings before you spend it all going out to eat. The awesome part of this system is having money specifically for whatever you want: Guilt Free Spending! Some people might not want to budget because they feel it limits them from doing what they want to do. This system gives you 20-35% of your paycheck to do whatever you want with it! But it helps you live intentionally with the other 65-80%.

This is the budgeting system my wife and I are going to try after the last 10 years of spreadsheets and Dave Ramsey-ish budgeting.

Are you going to try this method? What budgeting strategy works for you? What hasn’t worked for you in the past? Comment below!

Getting Started // You will first need to look at 3-6 months of expenses to see how this system will work. Whatever you find for the fixed costs, add a cushion of 25% in case you forget something.

To My Boys // “I’m so proud of you. I’m thankful every day that I get to be your dad! You are the very best parts of me. You are dearly loved by your mom and me. Now go out there and do your best.” – Dad