Budgeting for the automated millennial
Traditional budgeting, for the individual, is flawed.
Today we face incredibly dynamic daily routines, which also continuously change. Budgeting works when the majority of the conditions which go into the planning are known beforehand. How much food do we need to buy? How many drinks do we do per month? These are all questions which budgeting requires you to answer. These questions are all too difficult for the typical millennial.
Party/event/friendship FOMO, screen time, WhatsApp groups (whyyy are there so many?), Instagram influencers.. all things which take our energy and focus to keep up with.
Restraining ourselves to not spend is hard enough. Having to keep track of a multitude of categories AND do the manual work of recording the guilty transactions is just a recipe for backlashes, feelings of guilt and hasty abandonment of long-term "good scout" habits.
So a lot of people choose to not do it instead, focusing on (and rightly so) living their lives instead of moving bank transactions from their bank to their bookkeeping.
In our opinion, the best approach is to use an automated approach. Which is why Nordveld works on the premise that we automate as much as possible, leaving you with just the valuable activities of looking at the vision and strategy of your life.
To combat "bookkeeping fatigue", we ourselves use a method called the "Hands-off cashflow" method. It works on the premise of automating your money flows.
It is very basic.
- A bank account "No shame, no blame" (with a card connected) specifically for daily expenses
- A bank account "Automatic" specifically for bills, direct debits, online payments and invoices
- Somewhere to put your savings (savings account, investment account or some similar form)
Set it up in this way:
- Your salary goes into the "Automatic" account
- Once per week you send X cash to "No shame, no blame" where X is a good balance between saving and allowing for your desired lifestyle
- Set up a recurring transfer which triggers the day after your salary and sends Y amount to your savings/investment account where Y is your target savings rate
Why every week? Because running out of that cash might leave you without money for one or two days typically, while budgeting for a month and running out of your “drinks” money two weeks in will typically leave you to curse silently to yourself and then go ahead and go out anyway for the remainder of the month.
It’s easier to ask of yourself to hold back a bit for a few days than several weeks, basically.
When trying it out at first, just guess how much money you need until a week from now for your daily expenses. Take that amount, say 100€, and set up a recurring weekly payment of 100€ from your “Automatic” account to your “No shame, no blame” account.
The target is to reach a mode of long-term consistency. The above can lead to huge shifts in the way you approach budgeting and money in general. It is the essence of automating the growth of your personal finances.