Microbudgeting: Keep costs under control with a baby-steps budget

I’ve come up with a name for the week-to-week budgeting plan that I invented to keep discretionary costs (if you call food “discretionary”) under control: microbudgeting.

As readers who follow Funny know, I set aside $840 a month to cover recurring, nonoptional bills: utilities, once-a-month yard care, insurance. These represent the highest possible figures for the utility bills, which occur in three summer months here.

Then I set aside $1,200 a month to pay all other living expenses,including food, household goods, yard goods, gasoline, clothing, repair and maintenance on the house and car, vet bills, insurance copays, and on and on and on. This amount represents the microbudget: I divide the $1200 into four $300 “chunks” roughly corresponding to weeks, and coordinate those with the American Express budget cycle. All of these costs are charged on AMEX, and the bill is paid in full at the end of each cycle.

Some weeks, I’ll run in the red. But if I manage to stay in the black in one or two weeks, it usually evens out.

Here’s how this looked last month:

As you can see, even though even though I ran in the red three weeks out of four, over the course of the month I just broke even. Costs were high last month because of the new stockpiling scheme: I’d just bought a freezer and was stuffing it with one to three months’ worth of food. I’d planned to take money out of savings to do this, but as you can see, that wasn’t necessary.

Because I can spot, week-to-week, when I’m running in the red, I know when to cut back. Didn’t do the greatest job of that in February, but things are looking better in March. So far.

Microbudgeting turns out to be an effective tool for helping yourself to stay on budget. Except for extraordinary expenses that needed to be paid out of emergency savings anyway, the week-to-week strategy for staying on budget has worked to keep spending under control pretty well. It breaks a longer period, during which you might be tempted to overspend on this or that activity or impulse buy, into smaller pieces that give you an opportunity to climb out of the red without feeling like you have to pinch pennies the entire. grinding. month. It’s a lot easier to economize for one week than for two, three, or (if you’ve overspent early in the budget cycle) four weeks. Once you’ve got yourself back in the black, you feel a lot more confident that you’re coping.

Notice that I carry forward the red ink into the following week. This prevents “cheating” by pretending to start over with the full amount budgeted for that week, despite having spent more than desired the previous week. I ended up $11.13 to the good at the end of the month, because even though I overspent in three weeks out of four, I managed to stay enough in the black in week 2 to cover the excess spending.

Normally I try to stay in the black at least three weeks out of four (ideally, four weeks out of four!). February was stressed because of the food stockpiling, and because I chose to pay for it out of cash flow instead out out of savings. Had I taken some money out of savings to cover the hoarding scheme, I would have ended deeper in the black, and probably would have stayed in the black at least one extra week.

This scheme requires some OCD tendencies: it demands that you hang onto every receipt and enter it in a spreadsheet or hard-copy account book. But I don’t find this onerous. I stick the receipts in my wallet and then sit down and enter them about once a week. It takes maybe 10 minutes a week to accomplish.

To build habits that keep you in the black without leaving you feeling blue, it’s well worth the time!