Why Two Budgets Are Better Than One

The topic we’re most frequently asked about is our budget. Usually in the interest of time, people want to know that “one simple trick” to make budgeting easy. We love this question because a budget is integral to any successful financial plan.

Here’s our trick: Have two budgets. Why are two budgets better than one? Because they allow you to eliminate redundancies. Having two budgets allows you to think about what truly needs to be thought about — and to automate the rest.

Why Less Is More

Books and news articles often talk about how Steve Jobs used to wear the same look everyday: his black mock turtle-neck, jeans and sneakers. Usually the only variety Mark Zuckerberg incorporates in his wardrobe is the same blue hooded sweatshirt over his blue or gray T-shirt. Albert Einstein is rumored to have never worn socks.

Why do such brilliant people have such curious fashion habits? It’s because they eliminate unnecessary thinking. The thought is that if we eliminate unnecessary thinking, such as what to wear, what to eat, how to get to work, what time to wake up and all the other redundant questions we ask ourselves repeatedly, we save time and energy for important questions such as how to become a billionaire or what is relativity.

Breaking Down Our Budgets

There are many ways to implement this practice in our lives. One such way we’ve chosen is to eliminate unnecessary thinking about our recurring bills or those expenses for which the same amount must be paid by the same date each month. Such costs include your mortgage or rent, car payments, car insurance, trash removal, student loan payment, etc. These costs don’t often change. Therefore, we don’t often think about them.

We’ve created a budget for these expenses and put most of their payments on auto-pilot via online bill pay or auto-charges. They require minimal thinking and reduce budget clutter. We apply minimal maintenance to these bills.

For those expenses that fluctuate, such as gas and energy, water, groceries, etc., we use a different budget and review these expenses every other week, at a minimum. Even if some of these expenses are paid automatically, we still review them because they fluctuate and their fluctuations require updates to avoid budget creep. When such expenses are higher, we make sure there’s cash available to pay them. When such expenses are lower, we allocate the difference to savings and investments.

So, ironically, to simply your life, make two budgets. It’s what Einstein would do.