海角大神

When Sarah and I first started our financial recovery, we tried out several different budgeting tactics.

We made up a very detailed budget in a spreadsheet. We split up our expenses into several different specific categories and then, whenever there was an expense, we noted which category it came from.

We tried an 鈥渆nvelope鈥� system. We put aside money for different spending purposes into different physical locations, operating almost entirely from cash.

We tried a 鈥渘otebook鈥� system, where we kept a running tally of each of our expense categories, subtracting the amounts we spent from our budgeted total for the month.

No matter what system we tried, though, we always found ourselves running into the same problem. We would end up running over our budgeted amount on some particular category and that would end up eventually unraveling the whole thing.

For example, we might budget, say, $200 for our monthly energy bill, which would work for most of the year. Then we鈥檇 face a bitterly cold January and find ourselves with a much larger bill one month. (This eventually led us to trying out a cost-averaging plan, actually.)

We鈥檇 have a clear food bill, but then we鈥檇 have several out-of-town guests over a month and overshoot it significantly.

We鈥檇 have a child expenses bill, but then the cost of dance lessons or taekwondo lessons would come due.

Every time we鈥檇 think we had everything accounted for in our budget, we鈥檇 find out that we didn鈥檛 and our plan would just fall down. We鈥檇 have to hurriedly stop an automatic payment or quickly transfer money back from an automatic savings plan.

It was frustrating, to say the least. It felt like every good effort we made ended in failure.

There was one simple ingredient we were missing, though. Flexibility. That one little thing makes all the difference.

Implementing some flexibility into a budget is really, really simple. All you have to do is have another item in your budget 鈥� flex money. Assign an amount to that line item 鈥� a significant amount. I鈥檇 suggest that it be somewhere around 10% of your total budget.

If it makes it so that you鈥檙e not automatically saving money each month, that鈥檚 fine for now.

Then, keep track of your monthly budget as you normally would. Try to stay within the barriers you鈥檝e set up for each section of your spending. Make yourself stay within your budget for non-essentials, such as entertainment.

However, sometimes life intervenes in an area that you don鈥檛 have control over. When that happens, transfer some money from your 鈥渇lex鈥� portion of your budget to the area that needs help. If you鈥檙e buying $40 of extra groceries because of guests, take that extra $40 out of the flex. If you鈥檙e paying for an extra taekwondo lesson for your child, move that $25 out of the flex.

At the end of the month, save any and all money that鈥檚 left in the 鈥渇lex鈥� portion of your budget. Use it for emergency fund building (speaking of e-funds, I like to think of 鈥渇lex鈥� money as a 鈥渟oft鈥� emergency fund) or for actual saving for a goal. Just put it to positive financial use.

Also, look at the expenses that came out of 鈥渇lex鈥� and ask yourself if that implies you need to make changes to your budget for the coming month. Is the expense that came out of 鈥渇lex鈥� trying to tell you something?

You鈥檒l find that with 鈥渇lex鈥� in your budget, it鈥檚 much easier to develop and maintain an actual functional budget that works for you. It certainly works for us.