Gas Tanks and Your Spending

Gas Tanks and Your Spending

I've tried many budgeting applications over the years, and even though I am pretty disciplined in how I spend, I found it very difficult to use them well. Usually, they have set you up categories, set the limit for those categories, and then when you buy something you assign the category to the item. When you check out your budget report you get to see how much you have spent and how much you have left to spend, for the month. This is reasonable, but I have many challenges with it.

1. I would tend to create too many categories, which really didn't help.
2. I would, often, struggle with what category to put an item in.
3. I would sometimes (ugh, many times) categorize something incorrectly and it would fall outside the budget (but the money was gone nonetheless).
4. I would find it difficult to square how much money I had left to spend for the month against the budget.

So, I decided there had to be a simpler and better way. I needed to be able to quickly see how much money I could spend for the month and then figure out where in the blazes the money went. I also needed a way to ensure that the amount that I had left matches the reality of what is in my account.

Gas tanks to the rescue! I like how gas tanks work because you fill them up and watch the gauge go down as you drive. You can immediately tell how much you have left and how far you can go before you are out of gas (the same works for EVs). After you have driven your car many times you gain a pretty solid intuition for when you need to fill the tank again. This same concept works for your monthly spending!

The simplest way to use gas tanks is to have 2 accounts, a savings account and a checking account. You put your paycheck in the savings account and at the beginning of each month you put what you can spend, in that month, in your checking account. At the end of the month you check what you have left and you move that to your savings account. You then move your next months spending amount from savings to your checking. Why do this in 2 steps? When you do it in 2 steps it makes it really easy to search through your checking, or savings account, and see how much you saved! It also makes it easy to see how much you added to your checking account each month.

If you really want to reward yourself, then you would create a third "emergency savings" account. You would then move any money that you did not spend for the month into your emergency savings.