My latest project: Un-budgeting.

What does that mean? Un-complicating our family finances a little.

I happen to be a very, um, detailed person about our family budget. So over the years, I have dived into it deeper and deeper, creating categories for everything under the sun: For “Cars,” we have Car: Insurance; Car: Repairs, Car: Maintenance. And so on.

I personally feel calmer when critical expenses have a category and a budget. I worry less that I’ll forget something important and we’ll end up caught short when we need money for it.  Also, I feel less guilty spending on “fun” items when I know the critical stuff (property taxes, utilities, groceries) has a category and money sitting inside it each month.

All that is well and good, but my budgeting mania was starting to get the best of me.  (Photo by Images_of_Money)

Too. Many. Categories. (We still use Quicken software to budget and record expenses.) In order to simplify, hubby and I sat down and condensed and eliminated a few categories in Quicken. Like, do we really need separate categories for groceries and “sundries” (who uses that word any more besides me, anyway?). If we buy laundry soap at the grocery store, let’s just call it part of groceries and increase that budget a little, okay?

For a month, we abandoned our gas and entertainment budgets. We figured we weren’t impulse-spending on those items, so we could consolidate them with another catch-all budget we call “Household Miscellaneous.” But as the month went along, I couldn’t tell if we still had enough $$ left for gas. Could we really splurge on a movie out with the kids (entertainment) or were we going to run short at the gas station? So we split those categories out again.

Keep It Simple. If creating all sorts of categories for things it just too tedious for you, consider the suggestion of Andrew Tobias, author of a great little book, The Only Investment Guide You’ll Ever Need. Tobias suggests cutting up your credit cards (so you don’t unknowingly spend more than you make) and depositing the first 20% of your paycheck into an investment account you don’t touch (the “don’t touch it budget”). He then suggests putting the remaining 80% of your paycheck in a checking account and making do every month with what’s in there, no matter what. When you run out of money, you stop spending until the next month. No categories, no problem.

The 60-Percent Solution. MSN blogger Richard Jenkins has another budgeting plan: His family keeps his critical expenses (mortgages, food, taxes, etc.) at no more than 60% of their pay. Jenkins then breaks up his remaining 40% into 4 buckets of 10% each:

  1. Retirement
  2. Long-term savings (unclear what that is for Jenkins, but apparently it’s a goal other than retirement that requires some discussion before it’s spent)
  3. Short-term savings for irregular expenses (vacations, repairs, gifts)
  4. Fun: Anything the family wants to do that month—eating out, movies, etc.

Big-Picture Planning. Sort of similar is “The Balanced Money Formula” from a great book I keep on my shelf, All Your Worth. Blogger J.D. Roth of Get Rich Slowly explains it nicely here. The idea is to have a “big picture” budget rather than a detail-y, category-laden budget like mine.

What works for your family? How do you make sure you’ve got enough for what’s important, but without becoming a budget nerd? I’d seriously love to hear your ideas!