I prefer tea

I virtually attended a national financial aid workshop and I loved every session because of the many learnings that are available. Kerry K. Taylor did a session: GET A Fresh Start WITH YOUR MONEY (Taylor, Kerry K., 2022). I really loved her BUDGET WITH BUCKETS tip. Ya, I know. Budgets. But stick with us because this is different whereby a little bit of behavioural science is used to switch up the budget game.

Rethink. When it comes to budgeting, we all have different needs, priorities, and preferences. Some of us prefer tea, everyone else is weird. But regardless of your caffeine status, you're more likely to have better financial wellbeing if you take the time to create a budget that reflects your lifestyle.

Know where your money goes

The first step to budgeting is knowing exactly where your money goes. Start by tracking your money for about three months, and make a note of everything you earn and spend. My bank app now has different pictures for my eating out, groceries, transfers, shopping, investing, payroll deposits, etc. Once you have a good idea of your regular income and costs, you can build a budget to suit your needs.

Start Piecing Your Income

‘Piecing’ involves splitting your income into accounts (or pieces), with a specific budget for each.  It’s a helpful way to manage your spending and saving.

Here is my big-picture pieces (with percentages) that reflect how we generally think about saving and spending. The Pie Plan Pieces is less about the small details and more about the big picture.  

A simple approach is the 50:15:15:10:10 method:

• Plan 50% of your income for essential living expenses (shelter, groceries, bills).
• Plan 15% of your income for lifestyle costs.
• Plan 10% of charity and or a tithe.
• Dedicate 15% of your income to save for the future or pay off the past. You may need to increase this category if you're aiming to reduce more debt or increase your savings.
• Expect the unexpected with 10% dedicated to missed or forgotten expenses. What's the unexpected? The Unexpected piece is a life preserver for day-to-day budgeting. It's common to be overly optimistic about reducing expenses or earning more money, and this over-optimism can easily blow up your plan.  It's also easy to forget a once-a-year expense, so use this category to keep your budget in balance.

How you slice your dollars into pieces is up to you – we're all different so plan your pie to meet YOUR needs. If it's not working today, go ahead and adjust it for tomorrow.

Setup your accounts

Once you know how much to slice into each piece, divide your income accordingly each time you are paid, and automate it to an account. This is a great way to keep you on track with your spending so you only spend what you’ve dedicated for each specific purpose.

The Pie Plan Pieces is most cost effective if your bank allows you to make several fee-free sub-accounts under your main bank account. Being able to transfer money back and forth without a fee is also key. Many online banks and credit unions offer sub-accounts for dividing your money into categories.

It's easier to stick to a plan and not overspend because you can see how much money you have in each sub-account. And ya, be flexible.

What we've done is create a system and an environment to help you budget WITHOUT needing to rethink every step, every time you spend or save money. Plus, automating your budget reduces the need to keep making decisions (which can be exhausting) AND puts good new habits into play. This Pie Plan Pieces uses the science behind mental accounting to link your budgeting categories to dedicated bank accounts.

Good job! You read it, now determine your Pie Plan Pieces. Enjoy your tea, bubble tea, or whatever.

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