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A Monthly Financial Review for people who hate budgets

a person doing a monthly financial review with a calculator

Finances are one of the hardest areas of your life to keep things on track. Having rigid budgets for different areas of spending doesn’t always work – is the money you spent on beer at the supermarket part of your entertainment budget, or does it come under ‘groceries’? Doing a monthly financial review is a way of keeping this on track, as it allows you to see where you’re spending money, without worrying about it all month.

There ain’t no financial advice here.

I’ll confess: I’ve never been able to do a budget and stick to it. There are too many transactions throughout the month for me to keep an idea in my head of whether I’m sticking to my budget or not. And I’m fucked if I’m going to start logging every fucking transaction as I go.1

But what I am all about is planning and reviewing. Even if you don’t like budgets, it can be useful to have an idea of where you want to spend your money, and review what you actually did, so you can make better decisions in future…without become a budget bore.

What is a Monthly Financial Review

A Monthly Financial Review for those who don’t budget is an after-the-fact check of whether you’re roughly spending money how you want to. It’s not about beating yourself up because you blew £100 on a night out, or because you didn’t save as much as you’d like.

How far you want to actively manage your money during the month is up to you. But doing a review at the end of it will at least give you a sense of how you’ve been spending.

Why even bother?

Like it or not, money’s a big part of how we run our lives. And because it’s flexible, you can use it to support your goals in lots of different areas. That’s before you even get to considering spending money on other people.

So unless you’re Montgomery Brewster, it makes sense to at least do a little thinking about how you spend your money, even if you don’t want to set a budget that you try to stick to.

Although it’d be nicer to not think about money at all, it’s also better to check your bank balance now and again – if only to make sure it hasn’t disappeared.

How to do the monthly review

First of all, it’s worth making clear that this is done after the spending – rather than a budget, which is an amount you set beforehand to try to stick to. I try to do my review soon after the end of the month, or it gets hard to remember what the spending was for.

If you’ve read any of my other reviews, you’ll know I like to split my life down into areas. The same goes for money. At the end of each month, I go through my online banking, and categorise every transaction.2

The key here is to keep it simple. The more you break it down, the more it becomes a burden, and the less likely you are to do it.

Unlike my Yearly Review, I don’t split my spending down 11 ways, or it becomes too much hassle. But if I have any big purchases, or high regular outgoings, I can mentally connect them to my life areas and evaluate whether they’re contributing enough for the money.

For example, I’m currently trying to save £800 for a new iPhone. It’s a lot of money, but I think it will contribute a little to my daily ‘happiness’ (I’ll have fewer times when my phone just doesn’t work, and I get frustrated), and to my ‘fun and adventure’, because the camera will actually work. Plus, if I keep it as long as my current one, it’s only £200 per year. It might be justified or not, but at least it’s got some purpose.

What financial categories I use

Here’s how I think of different categories of spending. You don’t have to do it the same way – the important thing is that it’s clear to you what goes where.

Savings

This is two things: money you’re saving towards an emergency fund, and savings for anything you know you’ll buy in the future, such as a house deposit, birthday/holiday gifts, vacations, a new phone, or an expensive subscription you pay for once a year.

Investments

Money you’re expecting a return on, whether that’s buying shares, investing in a second property, or spending on a side business. If you have a mortgage, that probably goes under ‘bills’, but you might want to say 20% of that spending is actually ‘investment’, or something like that.

Bills

Accommodation and utilities, plus things like phone and internet that you can’t really do without. Does include gym, and Spotify3; doesn’t include Netflix.

If you pay for transport for work, or have a vehicle, include that. For me, this also includes charity, though people may think of that in a different category.

Sustenance

Stuff you buy where the main purpose isn’t fun. Don’t include alcohol, eating out, or takeaways – that’s fun. Does include household necessities, and basic toiletries. In the UK, it’s mostly stuff you buy from a supermarket, but it’s different in other countries.

There’s no need to get pedantic about how much you enjoy certain types of food, and whether they’re classed as sustenance or fun; just have a simple rule that you can apply.

I like to call it ‘sustenance’, so I’ve got less of an excuse to put things that are actually ‘fun’ in there.

Fun

Things you enjoy doing or buying, but don’t necessarily need. Includes podcast subscriptions, Netflix, coffee out, takeaways, alcohol, entertainment and products you could live without, but which can help make life more enjoyable.

Automating your monthly financial review

As well as reviewing and planning, I like to automate where possible. The first three of the above categories are fairly stable, so I have automated transfers to other accounts.4 OK, so that bit is a form of budgeting, but at least you don’t have to count all the transactions as you go along.

For the remaining two categories, the money just comes out of my current account as I go5. At the end of the month, I categorise everything as either sustenance or fun, so I’ve got a rough idea of how I’m spending my money. You can make a pie chart or something, if you’re into that kind of thing.

Some bank accounts already give you some stats like this, or you can use tools like the popular YouNeedABudget, but my process is quick enough as it is.

Every so often, I’ll spend more than what was in my ‘current account’.6 This means I have to move it out of my savings account, or take it out of next month’s spending. I don’t beat myself up about it, but I’m at least aware of what’s going on, and what the long-term results are likely to be.

What to do next

Once I’ve categorised all my transactions, I write answers to each of the following questions:

  • How would I change the allocation of spending among the categories if I could?
  • Is this supporting my plans?
  • What spending was the best value? What was the worst?
  • What will I change for next month, and how? (easier if you do the automating above)

This approach is fairly light touch, and isn’t going to help you completely overhaul your finances if you’ve got a big problem. But it does provide some accountability, and at least prompt you to think about your finances on a regular basis. For a lot of people, that’s enough.

Key Takeaways

  • Even if you don’t like budgeting, it’s worth reviewing your finances on a regular basis 👍
  • This helps ensure you’re on top of things, and makes you more conscious of how you’re spending 🙇‍♀️
  • How much action you take to change things is then up to you 👊

Further Resources

This strategy goes along with my wider planning. I complete my Monthly Financial Review before every general Monthly Review I do.

If you’re into the automation thing, and want to take it to the next level, you can read more here.

Footnotes

  1. I actually tried that for about a week. You forget a few times and the whole point of it – and life – seems to go out the window.
  2. Any cash I spent I categorise as ‘fun’, for reasons that will become clear.
  3. Maybe controversial to hardcore savers, but there’s no way I’m living without easy-access music
  4. Some bank accounts let you make sub-accounts, which make this really easy, but there are plenty of ways of making it work if you don’t have that.
  5. Or on a cashback credit card, which I pay from my current account.
  6. I don’t actually let it get below zero, but have a set buffer in there, so I can see when I’ve overspent