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Non-budget budgeting

by Arnold Machel, CFP®

“The plans of the diligent lead surely to abundance…” Prov.21:5 (ESV)

One of the most iconic clips in film history is of a tired Harrison Ford as the whip-wielding archeologist, Indiana Jones, facing off against an angry swordsman. Rather than more whip wizardry, which by then we’ve become accustomed to, he unexpectedly pulls out his gun and shoots the swordsman.

What most movie viewers don’t know is that that particular scene came about due to none other than budget constraints. Spielberg wanted desperately to shoot the Indiana Jones movie, but no one in Hollywood would back it. He ultimately landed in the office of Michael Eisner, who was the long time CEO of Disney at the time, and made the pitch. Like all the executives before, Eisner declined, citing the enormous cost of shooting a film in such exotic locations and the seeming impossibility of keeping a film like this on budget. I don’t know exactly what Spielberg said, but he promised to keep costs well in line and ultimately Eisner gave in.

During filming, it was well-known among the crew that the budget was tight and needed to be strictly adhered to. And in the original script, there was a long and elaborate scene in which Indy was scripted to ultimately use his whip to get the sword out of his attacker’s hands. Food poisoning for Ford and the crew was preventing them from getting the scene shot, however. Knowing the enormous cost that even a day’s delay would cause, a decision was made to simply shoot the attacker… and history was made.

In his book Working Together: Why Great Partnerships Succeed, Michael Eisner calls this the concept of “Creativity in a Box”. It’s the idea that creativity can exist (indeed thrive) when constraints (like cost controls) are in place. And if it can create one of the most iconic scenes in movie history, then just maybe it can help us with our own personal financial situation.

No one likes budgeting. In fact, I have met very few individuals who actually manage to maintain a budget for any real length of time, so I’ve developed a technique that I like to call the “Non-budget budget”. While the process remains somewhat painful, it only lasts for a few months rather than an entire lifetime, so it is something anyone can (and should) do.

It’s a four-step process that will take a couple of months, but it just might change your life, so pull out a pen and your smart phone and let’s get to work.

Stage 1 – Estimate Income and Expenses
Don’t worry about being too exact at this stage. We just want a rough idea in order to determine just how much is slipping through the cracks.

This is how much money you have coming in that you can’t account for. Maybe that number is too small for you to worry about and you feel that you are already spending wisely. Then skip the rest of this article. If, on the other hand you are worried about how big that number is, or you are concerned that you are spending unwisely, then move on to Stage 2.

Stage 2 – Track Expenses

Fortunately, software and apps have made this next step much simpler and less painful. Nonetheless it remains a bit of a hassle, but is a critical step. I recommend tracking for two months. You can do it for longer to get a more accurate read, or for only a month if you want to speed up the process. I’ve found that two months is typically long enough to give you a good enough read on your expenses to allow you to project the rest of the year. The best method I’ve found lately is to use an app called Mint, although I’m sure there are others out there that do the same thing. It requires giving the app your banking information though, so you’ll need to decide for yourself if you are comfortable with that.

Mint will do a very good job of tracking and labelling your expenses for you, but if you would rather do it yourself, any good spreadsheet will do. I suggest making a grid with columns labelled 1 to 31 and rows labelled similarly to the your expense categories. Each day enter how much you spend on each category. The computer can then tally up the results for you.

If you are really technologically challenged, then go old school and keep a paper record. Same idea as above, except you will need to create it by hand. I have a limited number of booklets available so that you don’t need to create it manually. Phone my office and I’ll have one sent out to you free of charge.

Regardless of the methodology, do this tracking for two months. Then tally up the amounts for each category. You now have a good snapshot of your existing expenses that will help you project them out on an annualized basis. You may want to make notes about anything anomalous, but be careful about that. For example, it can be easy to downplay the cost of maintaining a vehicle by saying that the repair expense that you experienced last month was anomalous, when in fact every two or three months something comes up. The point of the tracking is not to assume that each month is the same as those two, but rather it is to give you a starting point to project out for the year.

Stage 3 – Creating a Yearly Planner

Next we want to look at this all on an annual basis. Unfortunately, Mint won’t help you here. You will need to create your own spreadsheet for this. Take the same spreadsheet from above (or create one if you used Mint to do the tracking) and this time instead of columns labelled 1 to 31, label them Jan to Dec; Total and Average. Start by filling in the fixed monthly expenses that you know you have: mortgage, car insurance, other monthly bill payments, etc. Now, based on the two-month summary you have, fill in the rest. Be sure to take into account seasonality of certain expenses (i.e. heat) or your own personal factors (for example, maybe there is a very high proportion of your extended family that have birthdays in August).

If your income is not stable, but is somewhat predictable, you may want to add another row for Monthly Income. Now you can see how much you need each month in order to live and now you are finally in a position to put it all together.

Stage 4 – Getting Creative in the Box

From the information that you have gathered you may already have made some decisions to cut down on expenses that you feel you aren’t getting value from. If not, now is the time to take a critical look at where your money is going. It may surprise you how much you are spending on certain categories and the decisions might be easy. It is common for people to be shocked at how much they spend eating out and find it’s not too difficult to start bringing a lunch to work rather that going out every day. On the other hand, you may decide that your situation is such that you need to make more radical cuts and make tough decisions. At the end of the day it’s up to you.

And that’s the key. You have to decide. You have to buy in. You have to be the one to create the creative solutions within your personal financial box. Otherwise you just won’t be motivated enough to keep it up. If you are married, then it’s absolutely critical that both of you do the exercise together and that you make the decisions together. If it’s all driven by one spouse, it’s likely doomed to failure.

Look at the once-a-year expenses that you might have: property taxes, insurance, Christmas gifts, etc. Tally up those costs. Don’t know how much you will spend on Christmas gifts? Here’s your first real budgeting decision. Estimate a reasonable total. Remember you don’t have to necessarily hold yourself to this amount, but it will be what you have budgeted.

I recommend setting up three savings/investing accounts. The first account should be a high interest savings account in which you will set up an automatic monthly transfer so that you have enough money already set aside in the bank whenever these annual costs come up. If you don’t have the money, don’t spend it. This account can double as an emergency fund.

The second account could be a similar savings account to the above or it could be a conservative investment account depending on the time frame. In it you will arrange a monthly deposit for your medium term goals like purchasing a car or a home down payment.

Finally, you will set up an account for your long term goals such as retirement. This should most likely be an investment account and just like the others should be set up with an automated monthly contribution.

As part of the process you will need to carefully review your spending and determine what items you can or should stop spending on in order to have enough money for your medium and long term goal accounts.

Once you’ve set up the monthly amounts you have done the heavy lifting; you have fit the big rocks in the jar; you have automated the important items. Now you can simply spend what is left over and don’t need to worry about budgeting any more.

Arnold Machel, CFP® lives, works and worships in the White Rock/South Surrey area. He attends Gracepoint Community Church where he serves on the Leadership Team. He is a Certified Financial Planner with IPC Investment Corporation and Visionvest Financial Planning & Services. Questions and comments can be directed to him at or through his website at Please note that all comments are of a general nature and should not be relied upon as individual advice. While every attempt is made to ensure accuracy, facts and figures are not guaranteed.

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