Add more money to your piggy bank with the rounded budget method.

How to Increase Your Savings with the Rounded Budget Method

The Burden of the Perfectly Balanced Budget

Do you remember HOW or WHEN you were taught to make a budget for your personal finances? Perhaps this may seem like a trick question. Why? Well, if you were like me, you probably never actually received formal training for this particular life skill. The closest thing to a class or training that I remember receiving was way back in high school in the 90s (in a Home Economics class, I believe?) where I was taught how to properly balance a checkbook – TO THE PENNY.

Can you believe that? Balancing a checkbook???

Does anyone even do that anymore? Especially now that we can log on to our banks online and track all of our spending and balances almost instantaneously? Talk about an outdated and useless skill! And if anything, I think that the training I received may have actually HARMED me for many years – what follows is the story of why I believe that to be true:

I remember following the lessons I learned from my high school “balanced budget training” while I was in college – which meant that I worked very hard at tracking all of my bank account balances TO THE PENNY. Doing this manually (checkbook ledger style) worked for me for a while – but it was very time-consuming. Somewhere along the way, I figured out (since I had access to my new and fancy college computer) that I could automate some of the repetitive calculations by translating them into a fancy and newfangled spreadsheet for my personal budget. (And keep in mind, this was during the 90’s – way before people thought spreadsheets were cool, and WAY before modern-day budgeting tools like mint.com were commonly available.)

But even though I “upgraded” my budget to a new and more powerful tool, there was one fundamental methodology that I still kept the same: I was using the spreadsheet to help me track all my transactions and bills TO THE PENNY. And this approach meant that I would spend hours each month updating my spreadsheet and tracking my receipts to make sure that my balances were precise and exact.

I kept this budgeting “system” going for several years – even after college. During that time, here is what I can tell you about how this approach worked: Even though I knew exactly where all my pennies went – because I spent all of my time focusing on that, I never seemed to have any pennies left over to stash away for a rainy day!

The Counter-Intuitive Budgeting Idea

Fortunately, this all changed one day (circa 2010) when an older and wiser coworker of mine gave me a simple suggestion to simplify and empower my budgeting: He told me that I should just start rounding everything in my budget.

What??? After all of those years of trying to maintain a perfectly balanced (to-the-penny) budget? The thought was practically inconceivable! And even though I was interested in this very simple suggestion – if for no other reason than it sounded like it could potentially save me lots of time – because this idea ran so counter to everything I had ever learned about balancing my checkbook and maintaining the perfect budgeting spreadsheet, at first I admit that I didn’t even know where or how to start.

Of course, I understood how the basic concept of rounding works (I assume you, the reader do as well), but applying this idea to a budget almost felt like cheating. The math would no longer add up to the exact balance I always expected… and this just seemed plain WRONG!

So if you happen to still be in this “to-the-penny” balanced budget mindset like I was, please allow me to say to you right now: SNAP OUT OF IT!

After I finally managed to embrace this counter-intuitive idea, and have gained experience using it over the course of several years now, I believe I have understood and perfected the simple, yet counter-intuitive suggestion of “just start rounding everything.” So I have decided to formalize and share what I have learned about this approach so that all of you can start using this same method and benefit from it right away (without being scared off by how inconceivable it may sound).

There are probably many other people who have discovered a similar approach to what I describe below, and I certainly do not claim to be the first person who came up with this idea. In fact, I still give full credit for this idea to my coworker friend who suggested it to me years ago. But since I haven’t encountered any other articles describing the exact method that I’ve used, I am calling the method that I have personally used and developed below, THE ROUNDED BUDGET METHOD.

The Three Steps of The Rounded Budget Method

So how does “just start rounding everything” work best when applied to a personal budget? As I have experienced and learned over many years of using this method, there are three main steps that I believe you should follow on a monthly basis:

Step One: You should still keep and maintain a monthly balance spreadsheet (or checkbook if you are still old-school) to keep track of your monthly income, your bills, and your expenditures.

SIDE NOTE: If you don’t currently keep a monthly spreadsheet, MAKE ONE! And if you need help with this step, please reach out to me directly since, as I described above, I have been perfecting my budgeting spreadsheet for over 20 years, and I’ve got lots of tricks and formulas I can share.

This requirement for keeping a monthly budget may sound like a chore (especially if you are not currently using a budget), but here is the good news: If you use the Rounded Budget Method, now you get to allow yourself the mental luxury of following this one simple rule: Forget about trying to balance what is in your bank account to the penny! Instead, you simplify and round ALL your banking transactions to the nearest dollar.

Here are some further details: For your income transactions (your paychecks, your tips, your commissions), you round these transactions DOWN to the nearest dollar. For your spending transactions, you round UP to the nearest dollar – and if your budget allows it, you can sometimes round up by even more. For example, let’s say you buy something for $8.19. Normally you would just round up to $9, but you if you want, you can also round that up to an even easier rounded number of $10 amount. The main point here is this: If you are rounding your spending up to a whole dollar value, you’re doing it right.

Of course keep in mind it is still essential to keep a balanced monthly budget, in the sense that you should always make sure that you keep the total (rounded) amount of what you spend every month below the value of your monthly income. But the good news is, tracking this is now a much easier task since you get to simplify your monthly calculations drastically by using nice, rounded numbers.

Step Two: At the end of the month, you look at what your bank balance is, and compare that to your simplified budget where you have been rounding. If you’ve done the rounding correctly (from step one), you should always have MORE money in your bank account than what your budget shows.

That’s like finding free money every month – just by simplifying the math you are using!

Step Three: You take that extra money that you just found from all the rounding you did during the month, and you put it in your saving account! Voila! You just made saving money painless, and you didn’t even have to budget for an amount to save each month! And of course, after you move the extra money over to your savings account, you start the next month over by starting at step one again.

Who Can Benefit From Using the Rounded Budget Method?

As I can attest firsthand, this rounding method works incredibly well for people who have a really tight budget like I did when I was just out of college. So if you are, just out of college, or if you are currently having a hard time setting aside a portion of your budget each month for savings for any reason (can anyone say inflation?), I recommend giving this method a try, and you will start seeing your savings account grow painlessly, and faster than ever.

On the other hand, if you are fortunate enough and already have room in your monthly budget to set aside money for savings each month, don’t stop doing that! But even in this case, I suggest adding this rounding method on top of what you are already doing, and you should find that the extra “free money” you find each month on top of your other savings will just help your savings grow even faster.

So in other words, no matter what your monthly budget currently looks like, I believe that everyone can benefit by following the steps for the Rounded Budget Method I outlined above.

Your Next Steps Toward A Rounded Budget

So what are you waiting for? This all sounds so simple and easy, right? And how can you go wrong with finding FREE MONEY in your budget every month? So go start rounding your budget transactions and start saving extra money today!


Before you go running back to your budgeting spreadsheets, I want to let you know now that this rounding budget method was only the beginning for me – and if you are interested, we can go EVEN FURTHER than this idea to help you EARN even more money with the money in your savings! (And why wouldn’t you be interested in that?)

PLUS, I’ll tell you the secret that I found to make the Rounded Budget Method even easier by making it fully automatic (no more forgetting to rebalance every month)!

So stay tuned, because in my next article, I’m going to tell you all about how I took all of the same lessons I learned (and that you just learned!) about the Rounded Budget Method and made them even better!

Credit for the image in this article: https://www.pexels.com/photo/person-putting-coin-in-a-piggy-bank-3848193/


One of my readers pointed out to me that I should add a note to this article to make it more clear that the Rounded Budget Method is meant for personal spending accounts only. If you are managing a business account, or if your personal banking accounts are tied to a business account in any way, the Rounding Method (as described above) should not be used. If you happen to be in this situation and if you still would like to use the rounded method, I recommend building the following two spreadsheets and managing them separately: One where you track your business expenses and cash flow (to the penny!), and another where you track your non-business/personal spending.

So long as you have a very distinct separation between your personal/business accounts in this way, you can now use the rounding method (with your personal spending) to your heart’s content!







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