Everyone budgets differently, and I’m no different. Here’s how I do it, month-in, month-out.

It consists of 3 parts.

1. Planning the month
2. Recording and categorizing daily transactions
3. Creating birds-eye views of finances

Planning the month

Every month, I divvy up my expected income into spending and savings categories. I give myself a spending buffer for flexibility. The category breakdown looks something like this:

paycheck
  savings
    investment account - retirement
    investment account - non retirement
    savings account
  expenses
    home
      rent
      insurance
      bills
      transportation
    food
      groceries
      restaurants
      office food
    subscriptions
      music
      gym
    discretionary
      books
      electronics
      clothing
      bars
      shopping
      gifts
    travel
      transportation
      accommodation
      food
      entertainment
      shopping

Recording and categorizing daily transactions

Throughout the month, I use a mobile app to manually record and categorize transactions. I prefer this over using automated tools that pull in transactions from your bank account, because the data usually needs to be manually cleaned anyway. It’s not too tedious, as long as the app you use is designed to make manual input easy. For now, that app is EveryDollar.

Creating birds-eye views of finances

At the end of the month, I tally up my totals, and move them to a spreadsheet with monthly data. It looks something like this:

This allows me to see a birds-eye view of my monthly activity, in a way that I haven’t found in any free app. I can easily see what happened in any given month, and compare against any other month. It’s really neat when you start to accumulate years of this stuff. It starts to become a sort of outline of your life, where you can identify special events, and the start and end of eras.

I also have another spreadsheet that aggregates my annual activity. It’s probably more impactful because it underscores how little things add up, whether its expenses or savings. $100/month becomes $1200/year, and with a few more $100/month expenses easily becomes thousands a year. The money decisions that really matter are very clear when you look at the yearly totals. It’s a useful way to validate your decision making.

And that’s really it. I find that keeping track of where the money goes is enough to goad me into making more responsible financial decisions, especially when I can quickly see the big picture impact of those decisions. I get a real sense of what changes I actually want to make by gauging the amount of pain I incur by looking at certain numbers.