4S Budget Update
In a previous post, we shared an idea for a new approach to healthy spending. The 4S Budget is broken into 4 parts: Save, Spend, Splurge, and Share. Our team tried it retroactively based on the month of January, to help understand our own patterns so we can improve upon them in the future.
Pros
Bringing focus: At the start, the purpose of looking at our expenses retroactively was to get us thinking about our habits without forcing ourselves to count pennies. We have a lot of bills on autopay, as well as expenses coming directly out of our paychecks. It’s easy to gloss over all these transactions as just… things that happen. This effort prompted us to look more closely, almost like balancing a checkbook, old school style. Maybe that’s not such a bad thing!
Visibility into savings: We liked being able to see the money we “Save” more clearly, especially since it’s the first and most important “S.” We learned that we are passive savers, setting aside money mostly into retirement funds. When this comes right out of paychecks, it’s easy to forget. We were worried that maybe it wasn’t enough, but going through this allowed us to see that we’re actually doing ok here. Still, there may be opportunities to be more intentional.
Handling unpredictability: One of the challenges with traditional budgeting is that it often assumes predictable income. But life isn’t predictable. Whether you work for yourself, lose a job, or are working multiple gigs, your income can change month to month. We had some large unexpected expenses come up too. We struggled to categorize these, but looking at the previous month rather than the future month helped a bit. We were still able to see what we were doing well and where we needed to trim the fat.
Cons
Still a pain: Even though we tried to make this easy, it’s still tedious. We went online and opened our pay stubs, credit cards, checking accounts, savings, everything. We also had a spreadsheet. Then we still got stuck using pencil and paper in some cases. The statements from our financial institutions didn’t align perfectly to the month of January either. For example, when billing happened from the 19th to the 19th, that meant looking for transactions in two different statements, just for one bank. That made the mechanics even more annoying.
Categorizing: And then, which payments go where? Which “S” does a mortgage payment fall under, for example? That’s a living expense but also a debt repayment. And where do debts go? Are more expensive organic groceries a “Spend” or a “Splurge?” For some expenses, it was all too easy to spend a significant amount of time trying to figure out which category to choose. In general, we tried to benchmark ourselves against the 50/30/20 rule, but we still had some questions. Don’t even get us started on trying to categorize every Amazon purchase or Venmo reimbursement…
What’s next
Some of us learned that we spend a bit too much, especially going out. (Like everybody!) We also learned that we “Share” more than we realized, and that made us feel pretty good. Overall, we think it’s a solid tool if not a perfect one. We want to keep up the experiment.
Stay tuned! We’ll be sharing more of our experience and what works for us. If this is a budget that you want to know more about or even try yourself, send us a note at support@brightfin.io.
-----
Personally, I LOATHE budgeting. Like many of my peers, actually. The last time I found myself actively budgeting was in college, due to a relatively small income. I realize it’s now even more important to have some kind of plan though, even one that’s a little more passive like this. You can quickly lose track of how much you’re spending if you don’t pay too much attention.