Some people are budget nerds who love spreadsheets, checking in on their budget regularly, and get giddy when it’s time to update their budget. And some people just don’t care. They want to spend their money their way, and don’t want to be tied down creating a spending plan, let alone tracking it all…
And you know what? That’s okay. No budget is perfect for every single person. And, not everyone has the same personal finances goals. However, if you’re not great at budgeting and despise the idea of creating a spending plan, but still want to save more money and prepare for your future, there is a budget out there for people like you.
Creating a Spending Plan – For Those That Simply Despise It!
So what is this magical plan? What is it that could possibly make you enjoy budgeting after hating it for so long?
It’s called, the 80/20 budget, also known as the “non-budgeter’s budget”. It’s a great way to get your finances together without feeling like you’re giving up your lifestyle.
What is The 80/20 Budget?
So, what is the 80/20 budget?
Basically, it’s a budget where you save 20% of what you make and spend the other 80%. In other words, as soon as you get paid, 20% of your money goes directly into savings. Then, you can spend whatever is left.
It’s a more simplified version of the 50/30/20 budget (which is another great budget to look into if you’re not good at budgeting). The difference between the two is that it’s easy to confuse wants and needs with the 50/30/20 budget. But with the 80/20 budget, you know what you’re saving every single pay period, no matter what. There’s no complicating wants and needs, prioritizing spending, or anything of the sort.
For example, if you’re paid $1,000 every two weeks, you’d save $200 each paycheck. Then, the other $800 could be spent on bills, other expenses, and wants.
Why The 80/20 Budget Works
For some people, spending can get out of control. So, when starting out on their personal finance journey, they set goals to control spending. However, this typically has a negative outcome, because after a few days or weeks of limiting themselves and trying to stick to strict rules, they overindulge and overspend anyways.
For example, my husband is a spender at heart. While we’ve been able to pay off debt and save, it wasn’t always so easy for him. With his money, he’s found it easiest to just use the 80/20 budget method.
- He’s still saving, but
- He doesn’t feel guilty about spending his money the way he wants.
In essence, the 80/20 budget tricks your brain into thinking that you aren’t “on a budget”. But in fact, you are making healthier and more sustainable budget decisions. But instead of spending money you don’t have, you’re spending the money that you know you have to spend, after you’ve put some money away. You’re creating a spending plan without having to track 12-15 different buckets of spend!
It’s pretty simple to get started with the 80/20 budget.
- All you have to do is have your job hold 20% of your take-home pay and put it in a separate savings account.
- Or, if you know you have the self-control, you can just put 20% of each paycheck into savings as soon as you get paid.
If you’re a freelancer or have irregular paychecks, this won’t happen every week or two weeks for you. So, just remember to transfer 20% anytime you get paid. (And yes, that includes the small projects too!). A great app that I’ve found for my husband and I (since we are both self-employed) is called Catch, and it helps us save as if we were getting paid from full-time jobs.
Important Things To Remember
Of course, this budget does require a disclaimer or two.
For one, this budget may not work if…
- you’re highly in debt,
- you are in a relationship with a super saver, or
- if you find yourself with more month than money, this is not going to be the budget for you.
Instead, focus on paying off debt or getting yourself out of the paycheck-to-paycheck cycle. Then you can revisit the 80/20 budget once you have a little more money to play with.
If you are with a super saver, they may not be on board with spending 80% of their income.
- So, you’ll either need to have separate finances,
- or find a budget that can work for both of you.
For my husband and I, we keep most of our finances separate (except for living expenses). So he uses the 80/20 budget for his money. And I do a more detailed budget/cash budgeting method. It works for us now, but when we were paying off our debt he knew he had to be much more strict with our finances.
Last note: If you plan on saving 20% of your money, a simple savings account may not cut it.
Sure, it’s great to have an emergency fund. But, once you’ve reached a certain amount, you may want to look more into investing your 20%. Don’t have a bunch of money just sitting in a savings account not making money for you. Save your 3-6 month emergency fund and then start transferring 20% into other ventures.
Creating a Spending Plan When You Don’t Like Budgeting…
Overall, the 80/20 budget is a great budget option if you hate budgeting.
- No restrictions,
- no worrying about spending too much,
- and no worrying if you’re saving money.
Instead, you’re able to save for a rainy day and still enjoy living the life you love. So why not give it a try?
Are you ready to start creating a spending plan using the 80/20 budget?
AUTHOR Kimberly Studdard
Kim Studdard is a strategy consultant, product launch expert, and mastermind behind the www.theentrepremomer.com. When she isn't spending time with her daughter and husband, or crying over This Is Us, you'll find her teaching other mompreneurs how to scale their business without scaling their workload.