This is going to be a shock I know, but I am not great at budgeting. Maybe my budgets are too unrealistic or maybe I just have no discipline, but to me, budgets are boring and yuck and just not my cup of tea.
Knowing and accepting this, I’ve searched far and wide for tips and tricks and techniques that force me to budget without really knowing or feeling I’m budgeting. Small steps here.
So this week, I gave one of these techniques a shot. The Round Up Principle.
How the round up principle of budgeting works
Essentially this is a saving by stealth method. There is no requirement to set a strict budget per se. When you spend an amount, if it is not a flat dollar amount, you round it up to the next dollar and save the rounded up amount. For spending under $10, you round up the amount to the nearest dollar. For spending over $10, you round up to the next $10 (or $5 depending on how big your goal is). The rounded up amount goes straight into your savings or onto a bill or credit card.
Clear as mud right? Let me demonstrate.
- I buy a coffee for $5.20. The purchase is under $10 so I round up that amount to the nearest dollar which is $6. That 80 cents gets transferred into your savings account, onto your credit card or into your coin jar.
- I buy groceries for $33.47. The purchase is over $10 so I round up that amount to the nearest $10 which is $40. The $6.53 gets transferred into your savings account or coin jar.
- I pay $5 for parking. It’s a flat dollar amount so no savings made. Sad face.
Get it? Good.
How did this budgeting technique work for me?
My expectation of this method was that it would probably amount to not much – a few bucks here and there and if I was lucky, the week would get me to about $30 or $40. Nothing to sneeze at for sure but nothing earth shattering. So to try and up it a bit, I decided to do the round up on my direct debits and bills too.
Here’s what it looked like:
[table id=8 /] I saved $54.59. In a week. Insert shocked emoji here. That money went straight into my
girls weekend fund savings account. If I’d made the round up amount $5, I would have only saved $19.59 so I’m glad I stepped up. Still, $20 is nothing to sneeze at!
It’s pretty incredible but also a little scary to see your spending laid out like that. I noticed for the first time how easy it was just to blow $20 here and there on stuff. Note to self: focus on spending less!
So what is the bottom line? This method of budgeting has a lot of benefits:
- I saved a good amount of money without too much pain.
- It made me look at everything I spent. Every transaction involved a thought process either at the time or afterwards, which was a nice change.
- Because I was mostly cashless, I could keep a track of the transactions and the savings transfers through online banking really easily.
- I considered price a lot more than usual.
- I didn’t really miss the odd few bucks.
- How I spent my money was not up for discussion – I just spent less of it and by transferring the round up amount on the same day, I had less to spend in the long run.
The downsides to this budgeting method it were mostly situational:
- I found I was far too disorganised to do this with cash so I had to be almost completely cashless and some places STILL don’t have EFTPOS.
- I got charged a few “use your card” surcharges but these were probably balanced by the lack of ATM fees I paid for the week.
Overall, it was a pretty good budgeting method. It’s almost like charging a tax on yourself for spending which makes you reconsider your purchases. If you were more disciplined than me, you could probably just transfer the round up amount at the end of the week but I actually enjoyed logging in and having a look at what was going on and I gave my account way more attention than I normally do.