I’ve always been torn on the word “budget.” Mainly because I think the connotation of the word has overtaken the denotation (common use) of the word, which is:

an estimate of income and expenditure for a set period of time.

That’s not bad, right?

Unfortunately, many think of budgeting in terms of another word whose connotation has given it a bad rap; “diet,” which has two common usages (we’re talking about the second when we talk in terms of a negative reputation):

  1. the kinds of food that a person, animal, or community habitually eats
  2. a special course of food to which one restricts oneself, either to lose weight or for medical reasons

Budget means restricting the spending, not estimating income and expenses in a given period. I don’t do restriction well. Hell, I barely do delayed gratification well.

Now, budget as a verb means to allow a certain amount of money to be allocated toward something in a budget (noun).

Just like you have a diet (the food you habitually eat), you have a budget. The question here is how intentional is that budget (diet)? How mindful are you of that budget (diet)?

The following describes my current method.

Traditional bank accounts

Section titled Traditional bank accounts

I consolidated down from my previous method (that ran from around 2005 to 2021). I’m still rocking the same credit union I’ve had since around 1992. I’m essentially doing fund accounting and the method described in Profit First.

There are six sub-accounts:

Money deposited to the Income account is moved to the other accounts on the date the money is received to ensure the average daily balance of the other accounts (specifically the various savings accounts) is as high as possible for as long as possible; interest is based on the average daily balance.

The Operating Expenses and Investing Pass-through accounts don’t earn dividends, therefore, the balance will typically be held relatively close to a zero balance.


Section titled Categories

I’ve seen folks use accounting software and have a category for every little thing. Further, some accounting software comes with a set of starter categories. I prefer additive systems over subtractive systems.

With an additive system you start with bare bones constraints and setup; then add on what you need to do what you need and want to do. With a subtractive system you are given everything and the kitchen sink up front, just in case you need it.

In my coaching practice I’ve realized that the kitchen sink approach can often lead to an invisible hand that drives people to find ways to use capabilities of the system even if they don’t need them:

Why are we doing X? Because we can.


I want to have a minimal set of categories. This makes it easier for me to remember which categories exist and tends to give me enough information to visualize income and expenses quickly. Because systems come with some more accounting standard categories I don’t want to delete the initial set either. Enter the workaround; prefix the categories you use with a special character—I use the hyphen (-).

So, if I see a category of Fuel, I know I don’t use that category, because it doesn’t start with a hyphen. If I see a category of - Food on the other hand, I know I use that one.

Prefixing with a special character is also something of a computer hack. When software is used to sort a list of items symbols tend to come before number, which come before letters.

So, when the dropdown is expanded in my accounting app, the categories that start with the hyphen are at the top of the list:

- Food

This means I can quickly scan down through the list of categories I actually use before scanning of the categories that have never been used or are no longer being used (more on this in a moment).

When I first set up the accounting app, I created a Miscellaneous expenses category and a Miscellaneous revenue category (I won’t use the hyphenated versions for the purposes of these inline examples). Then I went through and reconciled a single month. With each transaction I asked myself if this was something I want to track specifically; that’s where the Food category came from. As I continued reconciling though, I decided I want to track dining out separately, which is where the Food - dining came from.

As of this writing I still smoke tobacco and walk to convenience stores every couple of days to get cigarettes and snacks. I could categorize this as Food because of the snacks, but both are actually luxuries that could be cut from my life, if needed. So, I created a Habits - tobacco category and another for Food - snacks. The Habits - tobacco category lets me track spending specific to that habit.

For things I don’t buy very often, like clothes, I can just use the Miscellaneous expenses category. For things I spend regularly on, I can create a different category. For example, I pay rent regularly, it gets flagged as Housing. This is also where other bills related to the apartment go; like electricity, water, internet, and so on. If I want to track something specifically, I can create a different category. When I no longer feel like tracking that specific element, I can stop using the category.

For example, in early 2021 thanks to the Food - dining category I learned I spent thousands of dollars dining out; this was way more than my tobacco habit, in fact. For someone who’s not into food this is excessive. So, in 2022, I decided to adjust both Food - dining and Food - snacks. If both of those categories become small enough, I’ll stop using them.