For many years I tried, and failed, to make a budget. Planning ahead, I discovered, didn’t work for me. I’d sit down with a piece of paper and scribble some expenses, starting with the easy, predictable ones like rent. But, soon I’d get to the more nebulous areas of my budget, like food. ‘Just how much do I spend on food?’ I’d wonder, without any idea.

Rather than recognize my ignorance as a warning sign that I really needed a budget, I took it as an excuse to stop. ‘Well’, I’d think, ‘If I don’t know how much I spend on food, I can’t really start, can I?’

To be fair, planning out a month’s worth of expenses for the first time is a daunting and anxiety-producing task. I suggest an easier method that worked for me: grow your budget, don’t plan it. Here are the steps to grow a budget.

  1. Start your budget with known expenses. Take out a sheet of paper and list all the easy-to-measure expenses. These will be your fixed, predictable costs such as monthly rent. If there are any bills that are reasonably consistent or that you are somewhat confident about their amounts, add them.
  2. Leave the rest of your money undefined. Add all the expenses you wrote down in step one and subtract that amount from your take-home pay. If your expenses are $1,000 a month and your take-home pay is $2,500, the difference is $1,500. Take the left over money and put it in a debit card account. Your first month of budgeting is now done. Yes, the majority of your money is unaccounted for, but that’s no problem. The budget will improve each month.
  3. Pay all your expenses with the debit card. By paying your random bills, going out money, and miscellaneous expenses from the debit card, the bank tracks your expenses for you.
  4. In the second month, add your undefined expenses to the budget At the end of the first month of this process, the bank will send you a statement. From this, you can now estimate last months’ expenses. If, after looking through your previous month’s debit card records, you discover that you spend $200 on eating out, that goes on next month’s budget. Adjust up or down as you see fit.
  5. Repeat from step two. Each month that passes will give you a slightly better idea of how much your average expenses are and help you plan for next month’s budget and have less money unaccounted for.
  6. As unexpected expenses come up, add them in. Surprise! Valentine’s day is in February. If you need to plan to spend a certain amount of money on Valentine’s day for a trip with your partner, then take the total amount you spend (say $500) and divide by 12 ($42). That’s how much you need to put away for Valentine’s day each month. (I recommend using ING direct to store the money)

There are some disadvantages to growing your budget rather than planning it out. Chief among them is the time it takes — about a year to work out all the kinks. As an example, it didn’t cross my mind that I needed to budget for the rather expensive London-Raleigh Christmas flights to see my parents until about December 20th. After scraping that unwelcome surprise together, I now shuffle £45 a month into a ‘flights’ ING direct account to prepare. To help mitigate the stress of unexpected costs, I recommend you have at least a partially-stocked emergency fund before trying to grow a budget.

The chief advantage of growing a budget is, however, that you actually start budgeting. Growing a budget allows you to let go of the need for perfection. Beginning with a poor budget, and slowly improving it is miles better than doing nothing at all.

Go plant that seed and start your imperfect, but self-improving budget today.

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Header photograph by sakura