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forget traditional budgeting. try this instead.

What you need to do differently if your budget just goes out the window.

👀 7minute read

mindful spending

📷: Pinterest

We don’t want to sound like dinosaurs, but it’s too easy to buy things in this day and age. 

Every time we open our phones, scroll through social media, we’re tempted to buy something. 

It’s SO easy, it’s literally one click away. Except every time you one click buy, you feel guilty. Maybe you return the thing, maybe you don’t. The guilt stays. More retail therapy is needed. Rinse, wash, repeat. 

Honestly, it’s freaking exhausting.

And that fool-proof budget you created on New Year’s Eve? Yeah, flew out the window on day 2. So much for new year’s resolutions. 

Traditional budgeting…

It’s a worthless exercise. 

Makes you feel like crap. 

Takes so much time. 

Worse: You set unrealistic goals that are so hard to stick to, it’s already doomed to fail. 

A one-click Google search on “why budgets fail” gave us results dating from 2012 and beyond. That’s nearly 10 years of proof that conventional Budgets. Don’t. Work. 

We think we’re ready for a change, don’t you?

Stop budgeting. Spend with purpose.

We think we’ve cracked the code on this – with what we call the **mini budget** method.

Yes, technically it’s still a budget. But this budget is more about mindful spending, and less about limiting numbers and rules that don’t make sense. 

This exercise is meant to help change your mindset from asking “what do I need to cut back on?” to that sweet spot of, “how can I make this work?”

The Mini Budget Method

The trick to the mini budget is to work backwards – and remember the **big** numbers – so you know where you need to save, and where you have room to play. 

Example numbers – Fill yours in as we go!

  • Income (after taxes - aka your paycheck, not your salary) ($3k month = $36k a year)
  • Subtract rent or mortgage ($1k a month = $12k a year) 
  • Subtract food ($500 a month = $6k a year) 
  • Subtract insurance/cell phone/anything else you *must* pay ($200 a month = $2.4k year) 
  • What’s left? ($1.3k a month = $16k a year)

That leftover $1.3k a month? Spend it all!

Just kidding. Sort of. 

First, set some money aside. Put at least $3k a year into a retirement acct, investments, and have some money in the bank saved just in case, and you’re good to go! 

Yep, now you can spend it all.

A total of $3K per year is all you really need to be saving in your 20s. You’re free to enjoy and spend the rest to your heart’s content. (betcha you’re feeling less guilty about that one-click retail therapy, aren’t ya?)

Confused? Let’s break it down.

Step 1: Figure out what’s your income after taxes

Not to be confused with your salary! It’s so misleading. Most people pay 20-40% in taxes, so you gotta use the after-tax number on your paycheck for this to work. 

How to read your pay stub

Step 2: Start with your big ticket *must-pay* living expenses

These are all your *must pay or die trying* things that you need to live your life. 

  • Housing (mortgage or rent) 
  • Insurance (health, renters, car)
  • Food (groceries, restaurants)*
  • Transportation (car, subway, bus, uber)
  • Miscellaneous (phone, utilities)

When you go through these numbers, think about what you consider non-negotiable. 

You gotta live, you gotta eat, you gotta get from point a to point b (literally). Doesn’t mean you can’t enjoy yourself in the process. Your budget should work for you, not the other way around. 

Here’s how to add up – or pair down – your big-ticket expenses. 

  • Housing (mortgage or rent) 

Whoever came up with “don’t spend more than 50% of your paycheck on housing” clearly never lived in New York City on a starting salary. Or San Francisco, Boston, DC, LA, Chicago, Dallas, *literally* any urban area. I mean, come on. Forget this already. 

If you’d rather pay more to live in the heart of NYC, do it. 

If you prefer to be thrifty on rent, and spend more on other big-ticket items, do it. 

If you want to live with that musician guy in Miami or spend that year in Madrid, go for it!

Life your live! We give you permission. You will remember that extra special year of bliss more than the $1,000 you might have saved staying put (and missing out). 

  • Insurance (health, renters, car)

Healthcare and car insurance are a gimmie. Yes, you should try to lower your premiums once in a while, and you don’t have to choose coverage for everything, but this line item is essential. 

  • Food (groceries, restaurants)*

Food budget can get contentious. Again, it’s about spending with intention.

These debates over healthy eating vs. budget – or meal prep vs. food on the go? 

*We don’t care.* 

If you love Sunday meal prep, good for you! 

If you can’t fit another thing on your to-do-list or risk burning the house down, Doordash it. 

Do what makes your life easier. Eat what makes you feel good.

Going out to dinner is where things can get expensive. Before you go wild, look at where your total mini budget is at.

A bit short? Consider saving the omakase for special occasions. 

Just right? Awesome. If you want to spend what’s leftover on every restaurant in Austin, go for it!

  • Transportation (car, subway, bus, uber)

Same with food, consider your priorities. 

Can you limit how often you call an uber? No? Then add it into your budget. 

Don’t mind taking transit everywhere? Great, you can use that money elsewhere. 

  • Miscellaneous (phone, utilities)

All the random things you need, but don’t think about on a daily basis. Phone bill, internet, utilities… The month-to-month stuff you gotta pay for living. 

Step 3: What’s left?

Now that you have all your “must have” items, and subtract everything from your income, you get to see how much money is left for you to save, invest, and play. 

If that number is zero or negative: 

No shame being in the red. Life happens. 

Think about your must-haves and prioritize based on where your mini budget total is at. Set guardrails on the things you know in your gut aren’t top priority for you, and get creative on new ways you can make more money.

Mindful spending, Fund your lifestyle

Use our money calculators to help you get back on track.

If you still have money to spend: 

Amazing! You’re doing it, girl!

We like to split this mini-budget item into three categories: save, invest, and spend.

  • Save it: 

For the unplanned emergencies, and for your mental wellbeing. Savings gives you freedom, and is your BFF when sh!t happens. 6 times your must-pay expenses is the guide. Remember, its hard to live on a starting salary, so if you can't get to that its OK, make a plan to get there.

Head spinning? Check out our money quiz, we calculate this all for ya.

  • Invest it: 

If you have to choose between saving and investing, we pick investing every damn day. Those few bucks you save here and there won’t help you grow wealth or retire with millions – investing will. We show you how to start with little money, and zero stress, here. 

P.S. When you’re in your 20s, you really only need to save&invest $3k per year to set yourself up for success when you’re 60.

  • Spend it:

This is your guilt-free, do-whatever-you-want money. Shopping, getaways, the extra night out – you name it! To be clear, we are not telling you to max out your credit card at Revolve or buy a new luxury car you can’t afford. Pick a number, stick to it, and give yourself full permission to enjoy that lux spa experience or get those new shoes. Treat yourself, girl.

Closing thoughts on this...

We all want to channel our inner Beyonce and live the high life. Remember, the purpose of your mini budget is to create a goal that feels good, and actually fits your lifestyle. It’s not about cutting back – it’s about spending your money in a way that works for you. 

Need more help with your mini-budget? 

Here are three real-life examples of women who put the mini budget method into action.

Read this post for ideas and inspiration of ways you can start funding your future

Want even more support? Get Penny, a digital advisor just for you.

Penny Finance may earn an affiliate commission if you purchase a partner product or service.

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