I’ve been a personal finance junkie for going on 8 years. How do I know the time frame so well? It all started as soon as I graduated college. I’ve been looking for a life changing budgeting tip or hack since then.
I feel like I know quite a bit about budgeting when it comes to your personal finances. I’ve already shared some different types of budgets I’ve tried, some tips on avoiding overspending, to some of the best budgeting tools out there. With all of that I still have so much to learn.
Turns out a life changing budgeting tip or hacks probably doesn’t exist. I’ve tried a ton of short cuts, work arounds, etc and realized they probably weren’t for me.
In my time as a budgeter I’ve actually developed two things that I would consider a budgeting tip or hack. One of those is the spending ceiling.
Budgeting seemed so easy
From all the personal finance bloggers and opinion leaders budgeting seemed so easy. From the outside looking in it just seemed as if everything went great.
Here are a few of the things that would run through my head (and still do to some extent):
- Is that all you spend each month?
- How do you spend so little on food?
- Are you sure that savings rate isn’t a typo?
The personal finance space may be filled with some budgeting/frugal savants but I knew my family and I weren’t in that class.
My Budget Frustrations
We’ve already established that I’ve been budgeting for 8 years. What I didn’t share before is that, compared to what I do now, I feel like I started out as a caveman.
You been there? Are you currently there? Don’t sweat it.
There has been so so much trial and error in my budgeting journey its not even funny. I hope that I can look back on my budgeting and personal finance practices in 2019 and realize how different things are.
With all that progress budgeting can be unbelievably frustrating. I put all this time into planning and systems and it can all go out the window with a single bad day of purchases or something unexpected coming up.
Like Kevin O’Leary would say, STOP THE MADNESS!
Its such a constant battle.
My budgeting tip
With all the madness going on around me I went looking for a solution. Again I had tried all the budgeting tips and hacks to no avail.
I needed something that would be so simple and would get the buy-in from my wife. I was frankly giving up hope.
There are so many budgeting tips, hacks, schemes, and types of budgets I was just about ready to stop looking.
Then I realized I simply needed to put a cap on my spending. Seems so simple right?
Well it was 7 years in the making (this is my first year trying it).
Setting your spending ceiling
I decided to call the cap on my spending a spending ceiling. Mentally trying to get across that the room, and hopefully my spending, would simply stop at the ceiling.
The key is setting your spending ceiling and not over complicating it. My mindset is to keep it the same every month.
When I plan my budget each month it always seems to fall within a few hundred dollars of the previous month. I mean with just a few of my budget categories ever differing too much it does make sense.
Because my budget doesn’t differ a ton I set the same spending ceiling each month. The spending ceiling tends to be ~7-10% of where my budget falls.
I consider this 7-10% my saving grace. It allows me to not get frustrated when things pop up. I don’t get frustrated when we overspend on a category because we just got lazy.
The reason I don’t get frustrated is because I know that even if we hit the budget ceiling every month I can still hit my savings goals.
3 Reasons Why I love the spending ceiling
The spending ceiling has a lot of advantages. As I think about it the only disadvantage my personal finance situation is that I may rely on it too much. Only time will tell on this front. Here are the three reasons I love it so much.
The first is that its just plain simple. It isn’t complicated. It doesn’t take some math formula to implement. It doesn’t take any big personal finance terms to explain.
Its a ceiling. You don’t get any higher than a ceiling. That means its time to stop.
The second reason is that it protects my downside. Its a known limit each month that is a round number. Its not rocket science to realize when we are approaching it.
The third is that I won’t need to pull out the “STOP THE SPENDING” card each month. If you have to pull out the spending ceiling card every month, maybe you need to raise your ceiling
Spending ceiling success so far
At this point in time we are four months into the year and I’ve had (and technically broke) the spending ceiling twice. I feel like fifty percent isn’t horrible.
I really hope I can get in the groove throughout the rest of the year and the use of it drops to no more than one third of the time. I’m not sure why but that just feels right.
What do you think about the concept of a spending ceiling? Its pretty much worked for me. Do you think it could work for you?
This is a great concept, thank you!
When I was focused on getting out of debt over a decade ago, the nuts and bolts spreadsheet approach I took really worked well.
As that phase of FI – becoming debt free (except the house) was complete, I found and continue to find myself lacking… I don’t know if it is discipline or strategy or what…but the same was true for my wife. The budget didn’t work anymore…and through your writing, I think I know why.
So, instead of going ballistic because we had another club fee or something for one of our kids, I think I implemented what you described so well as a spending cap. My budget doesn’t fluctuate much either and so I have a set number. I’ve given myself permission not to get mad at myself if we don’t hit that number and by relieving that pressure, it has really helped me out emotionally. And, it allows me to focus on accumulation for a more ‘Fat FI” at retirement.
Thank you for sharing.
SJ