Forget Budgeting: Here Is A Smarter, Easier Way To Control Your Spending – Money Perception

Let’s face it: budgeting is a real pain. That’s why Andrew Sivertsen, a partner and senior financial planner in the Quad Cities office of The Planning Center, advocates another way to control your money. A much easier way. His prescription:  

Just saying the word “budget” is enough to cause your gut to wrench and make you feel guilty.  Many academics and journalists have told us that a budget is the cornerstone of financial success.  Yet according to a recent Gallup poll, two thirds of Americans don’t have a budget, and I would guess that the one third that do aren’t all that excited about the process.

On top of being boring and time intensive, budgets remind us that our money is finite. They punish us for making purchases that seemed exciting at the time, but later turned out to conflict with our financial goals. What’s worse is that many affluent individuals earn so much income that they think budgeting is only for college students or newlyweds. The fact is that the benefits of budgeting are actually greater for individuals at their income level.

As a result, it is no surprise to me that money is cited as one of the top reasons for divorce in America. What if there was a way to eliminate the pain of monthly tracking? What if you had the peace of mind of knowing that you had an effective plan for fulfilling your values and goals, would you follow it?

My wife, Amy, and I were taught the First Step Cash Management System shortly after we married. We discovered it offers the most valuable financial advice anyone has ever given us.

First Step was created by  Marty Kurtz, who carefully watched his clients’ spending habits and identified key themes among those who had the best handle on their cash flow. He learned that they seemed to “bucket” their money into three main categories: past commitments, present choices, and future needs and wants. Knowing what goes into each bucket and how to make related financial decisions can be life changing.

The static bucket. A good place to start is to make sure that no more than half of your total annual take-home pay is spent on static expenses. This has given Amy and me the framework for deciding how big of a house to buy, what trim level to choose on vehicles, and which services are the most important to us.  Because ultimately this affects how much money we have left over for the next two buckets.