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How I PASSIVELY Track My Spending | Three-Step Budgeting System

I have learned through many failures that it does not matter how smart, how comprehensive, or how every painstaking detail is carefully calculated in your budgeting strategy. None of it matters if you CANNOT stick to it.

In this article, I have put together a budgeting game plan that absolutely minimizes the amount of work you need to do day in and day out. Learn the system, make it a habit, and you cannot fail. Let’s get into it!

On the go? Watch the video here:

The number one goal of this budgeting system is to be as passive as possible. I want you to think of the day-one setup as an investment that will pay dividends in the future. We will put in the effort one time to create a system that minimizes work for the rest of the time.

Your success hinges on establishing this system correctly.

If you are here reading this article, I know you have the momentum to get started. If you can just set this system up, keeping the ball rolling will be easier than any other budget.

You know what, on second thought budgeting is more of a hybrid between working out and investing.

With working out, the effort doesn’t really go down. It does get easier if you find enjoyment in it, but the effort is still there. But with budgeting, you have the ability to set up a system upfront that can reduce how much effort is required going forward.

First, we will talk about the tools you will need to be successful, second I will walk you through creating a budget, and finally, the tracking system that keeps you on course.

Step One — Tools

Step one is figuring out where your money is going today and how you want to change it. This will be the most work-intensive part of the process but once it’s done, you reap the rewards.

The first tool that you will need is a spreadsheet program like Microsoft Excel. If you do not have one on your computer, you can use an online spreadsheet program like Google Sheets.

Before you run away, if spreadsheets are intimidating to you or you just hate them, I am sharing my Budgeting Spreadsheet for you to use and follow along, completely free and no strings attached.

Step Two — Budget

Apart from your income category, you only need two broad spending categories for this budget: constant spending and variable spending. First, let’s talk about income.

1. Income

The income category is easy, just put in your take-home pay on your paycheck in the appropriate cell.

If you are paid weekly, enter the full amount in the weekly column. If you are paid every other week, enter the full amount divided by two.

You also have the monthly column if you are a part of the unfortunate few who get paid monthly and yearly column for expected bonuses.

Make sure to be very conservative with your bonus estimation though since a bonus is typically not guaranteed.

2. Constant Spending

Your constant spending category will consist of expenses like mortgage or rent, utilities, car payments, loan payments, subscriptions, child care, and groceries. These are things that, once you get dialed in, do not change very much, and/or you do not have the ability to exercise control over the amount spent.

In the spreadsheet I have constructed, I have already filled out a category for every expense known to man. Just simply delete the rows of expenses that do not apply to you or change them to something that is more relevant. Every spending item can be calculated on a weekly basis, monthly basis, or yearly basis.

This section is pretty straightforward and once you have it built, it only serves to help you determine how much cash you have to work within your budget for variable spending, which is the only category you will need to track going forward.

Again, we are trying to distill down all of your spending to the most important categories and only focus on tracking those.

As you can see, as I complete the entries in the constant spending category, the remaining budget automatically fills in at the bottom. This remaining sum of money is your starting point for determining the next category.

Now before moving on, this is a good opportunity to audit your constant expenses like subscriptions.

Maybe when you really think about it, you haven’t used your Disney+ in months so you can go ahead and cancel it. If you can find a constant spending item to drop it feels pretty satisfying to see that number increase at the bottom of the spreadsheet.

The goal is to keep this bottom number as high as possible after filling out all of your constant and variable expenses so that you can have money left over for saving and investing. Let’s move on.

3. Variable Spending

The variable spending category is where all the action is. Don’t get me wrong, though, the other categories are important because they must be accurate for this to work.

Variable spending includes expenses like food and drinks at home, eating out, bars, hobbies, toys, vacations, gifts, and donations. Expenses in this category are the only ones that require you to make a decision every day, every week, month, or year on a regular basis.

Once again, I have already filled out the sample spreadsheet with all of the variable spending categories known to man. Just delete the rows that don’t apply and change the ones for a category that I missed.


Unlike with constant spending, you actually have to put some effort into deciding how much money you will be allotted for each category. I have come up with two good options to accomplish this.

Some people love diving into a good spreadsheet, researching, and calculating what the optimal amounts for each category should be. I fall into this camp. I prefer not to close the spreadsheet until every item is meticulously calculated. But I understand not everyone shares my love for spreadsheets so I have come up with a great alternative.

With this option, you only need to take a stab at the annual expense category for things like yearly gifts or vacations. And it doesn’t have to be perfect. With the remaining weekly and monthly expenses… just… don’t do it. Just go about your normal business and check your spending in these categories after one month. This is now your benchmark to beat the next month. You are competing with your past self to just make an incremental improvement.

After repeating this process a few times, you will have a great idea of what targets you want to hit in the next cycle. Or you can just keep repeating this process until you arrive at numbers that you are happy with. That being said, I am willing to bet that after the first month, it will be pretty obvious where your spending weakness is.

Speaking of tracking, let’s get into the final step.

Step 3 — Track

This is the step where all the budgeting systems out there crash and burn. This is the step that needs to be as easy and passive as possible. We will accomplish this by investing in the setup.

1. Shallow Layer

The main tool you need for tracking is a dedicated spending vehicle for the weekly and monthly expenses.

My preferred option is a dedicated credit card that you only use for variable spending. I like the credit card option because you naturally check it every month when you pay it completely and you benefit from points and bonuses.

Picking the best credit card can be overwhelming. If you would like me to make a video about the best credit cards let me know in the comments.

Another option is the David Ramsay method where you withdraw cash at the beginning of the month that exactly matches your variable spending budget. This method is good for people who have a hard time staying responsible with credit cards. You are only allowed to spend money on variable spending category options with your withdrawn cash. Once you run out of cash, you’ve hit your budget.

I only recommend this if you absolutely cannot make a credit card work. The cash strategy is more effort and cash cannot synergize with the next tool I am going to talk about.

This credit card or cash withdrawal is the first filter that helps you track your variable spending with nearly zero effort. It is an automatic check that can be evaluated at a glance. You only need to take a deeper dive if you busted your budget.

2. Deeper Layer

The next tool is going allow you to dive a little deeper with as little effort as possible.

We are eliminating the need for you to go through several different credit cards or bank accounts or try to file your receipts so you can remember how much cash you spent where.

This is where the phone app Mint comes in. Like I said at the beginning, this system is specifically set up to be as passive as possible after your initial setup.

And keep in mind, there is nothing magical about Mint, it’s just the app I am familiar with and I know it works. If you have another one that has the same capabilities then use it.

You only need to link your one variable spending credit card to Mint and it will automatically split up your purchases into different categories. You just need to create the categories and input the amounts that you determined when you made your spreadsheet.

You can see it even gives you a nice progress bar so at a glance you can tell where you went wrong. Or you can be a little more proactive and check it mid-month to see if any categories are in danger of busting.

If you have tried and failed to budget in the past, I am willing to bet you got burnt out tracking expenses.

But this system is different. You have done all of the effort up front to create your budget, set up your credit card, and set up your app. The only thing you need to do now is refine the numbers a bit, but this takes very little work.

During the first few months, dial in your numbers on the spreadsheet and transfer those to the categories you already made on Mint.

If there are a few variable spending categories that you discover are never a problem for you, feel free to break them out of the category and move them up to constant spending. That just means fewer categories for you to think about. It allows you to eliminate as much pointless effort as possible so you can just track the few categories that give you trouble.

After you create your budget, designate a credit card, and set up Mint, the system does all of the filtering and tracking for you. Just pay off your credit card, check Mint for the details, and adjust from there.

That’s it for today. I hope you found this article helpful. Let me know in the comments if you have any budgeting hacks that you swear by.

Here is my Budgeting Spreadsheet again for you to use and follow along, completely free and no strings attached.

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