Dear Penny: I’m Coming Up Short on Money Every Month. How Do I Budget?

Dear Strapped,

People think of a “budget” in two distinct ways: 1) a way to set restrictions on spending and plan ahead how you’re allowed to use money, or 2) what I call a “money map,” which is a way to gain visibility into what’s coming in and going out. I don’t endorse restrictive budgeting, but it sounds like a money map could help you find clarity.

To make a money map, list your monthly income from all sources, then list your monthly financial commitments — mortgage, utility bills, lease payments, minimum debt payments, etc. This will help you see how well the two actually balance out.

If your income isn’t enough to cover your commitments, try listing additional resources you could use to expand that pie, like community or government assistance, or available credit. You could also look at your commitments to see if there’s anything you could adjust, like canceling a cable subscription or refinancing debt.

When your income and resources on paper seem to be plenty to cover your commitments, with some to spare, list your financial goals, like building savings or paying off outstanding debts early.

Now, this is the part that makes mapping your money more fun than adhering to a budget: Use your money map to set your money on autopilot. As money comes in, deposit part of it into a bucket to pay for your commitments, part into another bucket for your goals and the rest into a bucket you can spend without counting pennies.

This strategy is called “reverse budgeting” or “paying yourself first.”

This way, you don’t wait until the end of each month to see what’s left for your goals and commitments. You take care of those automatically and use money throughout the month however you want!

Dana Miranda is a Certified Educator in Personal Finance® and author of YOU DON’T NEED A BUDGET. She writes Healthy Rich, a newsletter about how capitalism impacts the ways we think, teach and talk about money.