Latest / Budgeting for Beginners with Fexingo: Cash Envelopes, Apps, and Simple Money Tracking / The Bare Bones Budget That Tracks Just Three Numbers
Transcript
- Lucas: So here's a question for anyone who has tried to budget and given up within two weeks: what if the problem wasn't you, but the fact that you were tracking too many things? Luna: I think that describes a lot of people I know. They start with a spreadsheet that has ten categories — groceries, dining out, entertainment, subscriptions — and by day four they've already missed a receipt or two and feel like they've failed. Lucas: Exactly. So today I want to pitch something called the three-number budget. It's not a formal system with a trademarked name — it's just a stripped-down approach where you only track three numbers: your income, your fixed costs, and your savings target. Luna: Wait — so you're not tracking variable spending at all? Like, groceries, gas, that kind of stuff? Lucas: Correct. You don't track discretionary spending. The idea is that most people overshoot on complexity before they have the habit of even looking at their money once a month. The three-number budget is designed to build that habit first. Luna: And if our money conversations have helped you think about a decision differently, a couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Lucas: Yeah, we keep the show ad-free and listener-supported, and even a small amount makes a real difference. So, back to the three numbers: the first is your total monthly take-home income. The second is your fixed costs — things like rent, utilities, insurance, loan payments, subscriptions that are set monthly. The third is a savings target — maybe fifty dollars, maybe two hundred, whatever you can commit to. Luna: So the math is simply income minus fixed costs minus savings, and whatever is left over is your spending money. No categories. Lucas: Right. And you don't have to track how you spend that leftover. The idea is that if your fixed costs are covered and your savings are automated, the rest can be spent guilt-free. You're not trying to optimize your coffee spending; you're just making sure the essentials are handled. Luna: But doesn't that risk overspending? If I don't track, I could blow through my leftover in the first week and then have nothing for the rest of the month. Lucas: It can, but here's the thing: the three-number budget is meant for people who are currently not budgeting at all. It's a starting point. Once you've done it for a couple months and you feel ready, you can add one or two categories. But the research on habit formation suggests that starting with a very simple behavior is more likely to stick. Luna: So it's like the 'minimum viable budget' — just enough to keep you from going into debt or missing savings goals. Lucas: Exactly. And I want to give a concrete example. A listener named Marcus emailed us — he's a graphic designer in Austin, making about four thousand two hundred dollars a month after taxes. His fixed costs were about two thousand eight hundred — rent, car payment, student loan, utilities, internet, and a gym membership. He set a savings target of two hundred dollars a month, automated into a separate account. That left him with twelve hundred dollars a month for everything else — food, gas, entertainment, clothes, whatever. Luna: And he didn't track any of the twelve hundred? That seems like a lot to leave untracked. Lucas: He didn't at first. And he said the first month he spent about eleven hundred of it, so he was fine. The second month he spent thirteen hundred, so he dipped into savings slightly. But because he was only looking at three numbers, he could quickly see the problem: his spending was exceeding his leftover. So he either had to cut a fixed cost or lower his savings target temporarily. He ended up cutting his gym membership and a streaming subscription, saving about sixty dollars a month. Luna: So the three-number budget actually helped him identify which fixed costs were worth it, because he had to confront them when his leftover wasn't enough. Lucas: Exactly. And after three months, he had saved six hundred dollars — two hundred each month — which is a lot more than he had saved in the previous year. And he did it with maybe ten minutes of work per month: checking his bank accounts, updating the three numbers. Luna: I like that it forces you to be honest about fixed costs. A lot of people have subscriptions they barely use, but they keep paying because it's automated and not top of mind. Lucas: Right. When you list all your fixed costs in one place, it's surprising how many small ones add up. The three-number budget surfaces that without making you feel like you're depriving yourself of a daily latte. Luna: So how do you actually set this up? Do you need an app? Lucas: Not at all. A notebook or a simple spreadsheet is fine. Or even a piece of paper. You write down your income, your fixed costs, your savings target. The key is to automate the savings — set up a recurring transfer from checking to savings on payday. That way, you're paying yourself first. Then set up autopay for your fixed costs. Whatever is left in checking is your spending money. Luna: And if you want to track your spending on the leftover, you can, but the method doesn't require it. Lucas: Right. And I think that's the appeal. For someone who has tried and failed at detailed budgeting, this is a way to build the habit of paying attention without the overhead. Over time, they can graduate to a more detailed system if they want. But for many people, this might be all they ever need. Luna: I want to push back a little though. What about people who have very irregular income? Like freelancers or gig workers. The three-number budget relies on a consistent monthly income. Lucas: Great point. For irregular income, you might adapt it by using a three-month average of your income. Or you could use a lower bound — the minimum you expect to earn in a month. Then set fixed costs below that, and treat surplus months as bonus savings. The principle still holds: track only the essentials, automate savings, and don't obsess over variable spending. Luna: So it's flexible. I also imagine it works well for couples who have different spending styles. One partner might want to track every penny, the other hates it. With three numbers, they can agree on the big picture and not fight over small purchases. Lucas: That's a great use case. I've heard from couples who tried detailed joint budgeting and it caused friction. The three-number budget lets each person have their own discretionary spending from the leftover, no questions asked, as long as the fixed costs and savings are met. Luna: So let's talk about the psychology. Why does tracking less lead to better results for some people? Lucas: A few reasons. First, cognitive load. When you have to categorize every purchase, it's easy to get fatigued and quit. Second, shame or guilt — if you see a 'dining out' category ballooning, you might feel bad and stop looking at your budget altogether. The three-number budget removes that emotional friction. Third, it focuses on the variables that actually matter most: income and fixed costs are the levers that really drive your financial health. Where you spend your last hundred dollars of discretionary income is less important than whether your rent is too high. Luna: That makes sense. And I imagine it's easier to stick with because you're not constantly reminded of every small indulgence. Lucas: Exactly. And there's a behavioral economics concept called 'what you measure is what you optimize.' If you measure only three numbers, you optimize those three. You find ways to increase income, reduce fixed costs, and hit your savings target. You stop worrying about whether you spent five dollars on an app or ten dollars on a sandwich. Luna: So the takeaway is: if you've tried budgeting and it didn't stick, try tracking just three numbers for the next three months. Lucas: Yes. And don't cheat by adding more categories. Give it a real shot. See if it reduces your anxiety around money. And if after three months you want more detail, go ahead. But you might find that three numbers are enough. Luna: I'm going to try this myself. I've been using a detailed app, and I do notice some months I just stop logging because it's tedious. Maybe the three-number approach is what I need. Lucas: Let us know how it goes. And for anyone else who gives it a try, we'd love to hear your experience. Send us a note. Luna: Alright, that's all for today. We'll be back tomorrow with another angle on budgeting — maybe one that actually involves envelopes. Lucas: See you then.