How Ploutos Budget is Different
Jason | August 04, 2022
Most budgeting apps and methodologies will have you just enter in a guesstimation of how much money you think you will make this month and then start allocating non-existent dollars towards various expenses. We don’t find that all that helpful as incomes can vary for most people especially those working hourly or off commission. Starting your budget off that month from a guess is not a great place to start and can lead to issues late in the month especially for those living paycheck to paycheck where each dollar counts. Budgeting based on a guess can leave you stranded with too much month at the end of your money. This leaves many individuals and households feeling frustrated and ultimately giving up on budgeting as they feel it causes more stress instead of helping eliminate it.
Budget Real Dollars
Budgeting with Ploutos Budget is different. We don’t budget money we don’t have, because… well because we don’t have it yet so what good does allocating money towards something if we don’t actually have that money yet to spend. A budget is supposed to help you keep track of your money and what it is allocated for. Budgeting dollars you don’t have makes a budget useless as it does not accurately reflect how much money we have and what it is allocated for.
Budgets Don’t Start Over Each Month
We see budgeting as a continuous process not a task we do once a month and then scrap it and start over the next month. We see our categories as spending buckets that we are continuously adding to based on goals and spending from as needed. Just because a new month started doesn't mean we are going to completely wipe our categories’ balances and start fresh at zero for all our categories. Besides just being tedious we see a huge benefit to carrying over certain balances which helps us to get a month ahead on our spending and break the paycheck to paycheck cycle. While some categories we don’t need to carry over a balance each month some categories we will. We call these categories sinking funds.
Sinking funds are a secret to budgeting that many people don’t talk about enough. In fact they are a key component to the strategy that we recommend to help individuals budget. Not all months are created equal, and people make more in some months than others and spend more in some months than others. Sinking funds are a great way to help us level out all those months in the year. Sinking funds can help us save for a big ticket item that might take more than a month to save up for. Sinking funds help us plan for expenses we know are coming, but we may not know when. Lastly, utilizing sinking funds can help us to get a month ahead. If you are looking for more details on sinking funds we wrote an entire article just focusing on them here.
Source of Truth
A budget only works if you are checking and sticking to it. Now I know reading that some of you are instantly turned off to budgeting as you don’t like the feeling of restricting your spending or feeling like you can’t buy something you want. You work hard for your money, and you want to enjoy your money. To that I say, we agree. Many people have the incorrect impression that budgeting is all about limiting your spending or restricting yourself from buying the things you want. That is not how it works though, at least not how we teach people to budget. Budgeting is simply writing down your goals. You tell the budget what is important to you, and then it is there to remind you of what YOU said was important. Keeping the budget up to date and accurate is vital. It keeps it as your financial source of truth. Whenever you are going to spend money you will know if you have the money to spend. Whether it is a necessary or frivolous expense is irrelevant. What is important is you have the money earmarked for it, and if you don’t then you have 2 options. Don’t buy it or make the conscious decision to move money from another category because you have decided it is important to you to buy it. Knowing what all of your money is earmarked for is very freeing and allows you to spend your money with confidence.
Goals. It is why we budget. We want to make sure we are making financial progress towards the things we want and need. Notice I said and there, because it is also important to set aside money for fun not just our needs. Obviously when money is tight or limited our needs take a higher priority, but budgeting should help us free up the margin in our life to have the money to spend on fun and hobbies. In Ploutos Budget you can think of goals as the plan for the month. When you first start budgeting you may not have all of the money currently to cover all of your spending for the month. This is where goals come in. Goals are there to remind us and inform us about what we want or need in a certain category for the month. Remember with Ploutos Budget we are only budgeting the actual money we currently have not future expected income. When we don’t have enough money to budget all of our categories, goals are there to show us what categories will still need money this month while still showing us how much money we actually have in that category to spend. This is a huge distinction many budgeting tools don’t show. For example, we may need $500 for groceries this month but only have $300 of real money currently allocated to groceries. It is important that we know we have $300 to spend while also knowing we need $200 more.
When it comes to budgeting you are in control. The budget is there to remind you of your goals and what is important to you. We get it, things change and something you thought was important a month or two ago isn’t anymore. You can change your mind at any moment. The important part here though is that you make the conscious decision to change your plan.