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Budgeting Without a Budget

How did you do financially in the last year? Did you save as much as you wanted? Did you pay off the debt you intended? Did you give as much as you wanted to charity?

  1. How much money did you make last year?

  2. How much did you pay in taxes last year?

  3. How much did you make towards debt payments last year (not including home mortgage)?

  4. How much did you save last year?

  5. How much did you give to charity last year?

If you can answer these 5 questions, then you can get a good picture of how you did last year. Here’s how it works. Take the amount of money you made last year and subtract from it all of the items in 2, 3, 4, and 5 above. This number will then tell you how much you spent on your lifestyle. You can then take your lifestyle number and your numbers from 2, 3, 4, and 5 and put them into a chart like the one below. This chart will give you a rough approximation of how much of your income you have allocated to lifestyle (Live), giving (Give), taxes (Owe), debt (Owe), and savings (Grow).

Example Live, Give, Owe, Grow Analysis:

Income: $75,000
Taxes: $7,500
Debt: $12,000
Giving: $7,500
Savings: $3,000

Subtract $75,000 – ($7,500+$5,000+$7,500+$3,000) = $45,000

Lifestyle = $45,000

Budgeting Chart
You can then look at these percentages and determine if you like what you see. If you do, well done, keep it up. If you do not, you may want to spend some time breaking down your Live piece of the pie to determine where you have been spending and where you can cut back.

The great thing about this tool is that it gives you a very quick analysis of how you are spending your money. Once you know where your money went, you can determine if you like where it went and change it if you do not.

Get started in the next 12 months knowing what you want your pie to look like. Revisit these questions throughout the year and make changes as you need to. If you take the few minutes to do this exercise, you will be well on your way to knowing where your money is going and you will have the tools to make changes if you do not like the results.

This post was written by guest-poster, Michael Blue. It originally appeared on the blog of the Ron Blue Institute. The author graciously reposted it here, changing some pronouns and dates from the original.

Michael Blue

Michael Blue

I'm the Executive Director and General Counsel for the Ron Blue Institute for Financial Planning. Prior to my role with the Ron Blue Institute, I practiced for ten years as an attorney and worked as a financial planner for Ronald Blue & Co. I studied theology at Southwestern Baptist Theological Seminary and finance at the University of Texas.