Budgeting Series Part 1 - Cash-Based Budgeting

Budget with what you have, not what you expect to make.

Budgeting Series Part 1 - Cash-Based Budgeting
Photo by Kelly Sikkema / Unsplash

Budget with what you have, not what you expect to make

When I was a kid, my parents divorced, and every other weekend, my Dad or StepMom would pick me up on Friday evening. Honestly, it was one of the best times I looked forward to, especially when I was young. I loved my Dad and wanted to spend much time with him, probably like any kid with a loving father. And I didn't get a lot of little moments with my Dad since my mom had self-custody. On the occasions my Dad would pick me up in his old beige Chevy pickup, we would turn on the radio, and often, the Ramsey show would be on.  

You see, my parents were amazing but not perfect (who is), and before I was consciously aware of things like money, my Dad had gotten into a significant hole with money. I'm not sure how much; I just knew he did. By the time I wrote this, they had cut up their credit card and had started taking action to get their financial lives on track. And I got the benefit of my Dad learning how to budget and manage his finances at a time in his life when it was formative for me. He even taught Financial Peace University, and I sat coloring while he taught the seven baby steps.

Fast forward to now. Even with that base, I still made plenty of mistakes. I continue to learn. I've probably used and tried every budget imaginable, even the ostrich budget (stick your head in the sand and hope for the best), because the anxiety of money stressed me out. I've also had the privilege of mentoring folks through their finances and realized while the tenets of achieving financial independence are pretty much the same, each person is different. Their circumstances, resources, personalities, habits, and more. This means each person should be treated uniquely.

This is why when some people use one budget, it works great! Meanwhile, the same budgeting style or method may not work for some. Many times, we blame it on a lack of willpower or discipline. But the book Atomic Habits by James Clear talks about how willpower is a muscle. And it would be best if you worked to have your natural state and the environment work for you versus against you.

Budgeting software tools

If you've read my blog for a while, you'll know I love YNAB's budgeting software and their method. But the main point of this series won't be the software. It will be the method. I like YNAB's zero cash-based budgeting method, and the software helps. At the same time, software tools can be helpful. It's more the why, then the method, and then the tool.

So, through my various coaching, learning, and experimentation, I've devised three types of budgets that would fit most people. And I didn't come up with them; they are the ones I've found to work the most.

Three Budgets

And you can mix and match those as you see fit. These three have a few things in common.

  • No forecasting income. You only budget what cash you have. Not what you expect. You can make a plan or targets for your goals, but all these work with the money you have. I call this type of budgeting cash-based budgeting. This is where I believe budgets fall short 99% of the time because you are trying to budget money you don't have yet.
  • All have spending, savings, and investing or debt paydown built in.
  • All require you to spend less than you make.
  • All require some level of tracking and analysis, even the automated ones.
  • With any budget, you must include your significant other and/or have an accountability partner to help you.

In Conclusion

There are many budgeting ways, but I find cash-based budgeting the best. In the upcoming articles, I'll go into depth about each one.


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Updated 1/4/24