Magazine

Explainer: The “One-Number” Approach to Budgeting

By Rachel Sanborn Lawrence

What’s the #1 thing you can do in order to get control over your money and work toward your financial goals? Good question. In my opinion, it’s following a budget.

An illustration of a weekly calendar with ONE NUMBER written across the top.

By “following a budget,” I’m not talking about going on a financial diet or tracking every penny you spend in a spreadsheet (unless you happen to really love spreadsheets, in which case totally go for it). I’m talking about having a handle on how much money you have coming in and then making a plan for how you’ll spend it. That’s the best way to make sure that you’re spending your money intentionally and making progress on the goals that are important to you.

One budgeting method we talk about a lot is the 50/30/20 “rule.” But while I love how that approach can help you get clear on how much of your money is going to needs, fun, and your future money goals, it’s not the only way. A lot of my clients find that an alternative budgeting method called the one-number approach works great for their real life.

The beauty of the one-number approach

The reason this approach works so well for so many people is because it’s super straightforward — the idea is to calculate how much money you can afford to spend on “flexible costs” (aka the things that you have to make decisions about) each week, and then you only have to remember that one number on a day-to-day basis.

This weekly amount can be easier to manage than a monthly budget — mostly because it makes it less likely that you’ll run out of spending money later in the month.

What goes into your one number

Fixed costs and variable costs

The first thing you’ll want to do is go through your current spending habits and identify all your monthly fixed costs and flexible costs.

Fixed costs are the ones that you have to pay every month and mostly stay the same. Some of them will be things you could categorize as a “need” — like rent, utilities, and the minimum payments on any debt you have. Other fixed costs are actually “wants,” like Netflix or a clothing subscription. These costs will exist outside of your one number — you’ll put them on autopilot and not think too much about them on a day-to-day basis.

On the other hand, flexible costs (sometimes called “variable costs”) ... those change. Again, some might be needs, like groceries or gas for your car, and some might be fun, like restaurants and entertainment. But either way, they take up more of your decision-making energy. Which is why these are the purchases that will come out of your one number.

If you’re trying to trim your budget and spend less, this is also the time to decide which of your fixed costs will stay, and which might be able to go. It’s also a good time to set some goals for which variable costs you might be able to scale back on.

Money for Future You

Next comes that whole “pay yourself first” thing. Decide how much of your monthly take-home pay you want to set aside for Future You — that includes saving, investing, and any debt payments beyond the minimums due. Eventually, we recommend aiming for somewhere around 20% of your take-home pay, but that might not be feasible right now. It’s OK to start with whatever you can — 1%, 5%, etc — and work your way up over time.

Money for non-monthly expenses

Finally, you want to make sure you’re putting aside money for expenses that don’t come up every single month. For example, you might have an auto insurance premium due every six months, or expect to spend a certain amount on holiday gifts or summer travel, or pay for Amazon Prime once a year. Things like that.

Make a list of all the non-monthly expenses you can think of, add them up, and divide by 12. That will tell you how much to set aside every month so that when it’s time to pay for those things, you’ll have the money ready. (Transfer that money into a safe, easy-to-access bank account so you have it when you need it.)

How to calculate your one number

Once you’ve set up all the pieces listed above, the actual math is pretty straightforward:

A visual representation of the math behind the one-number approach.
  1. Start with the total amount of take-home pay you expect to earn during the month.

  2. Subtract all your monthly fixed costs, the money you’ll set aside for Future You, and the money for your non-monthly expenses. This is your monthly flexible spending money.

  3. Divide your monthly flexible spending money by 4.3 (the average number of weeks in a month). This is your one number.

Then you can go out into the world and spend money on things (as one does), and all you have to do is check to make sure that you haven’t hit your one number yet that week.

Keeping yourself on track

I have a few logistical recommendations to help you keep yourself from overspending. First, put all your fixed costs on autopay out of the same account where you get your paychecks. Fewer things to think about, less decision fatigue. Done.

Then there’s the question for how to manage your flexible spending money. You could take out your one number in cash each week and limit yourself to only spending that. Cash can work, but it’s harder to keep track of, and you can’t use it to buy things online — which is pretty important nowadays. Instead, most people use a separate bank account or credit card for their flexible spending money.

If you decide to use a separate bank account, you could set up an auto-transfer of your one number into that account every week and use a debit card for your purchases. The balance of your account would be what you have left to spend from your one number at any given time.

If you want to use a credit card, consider designating a certain card — one that doesn’t have a balance on it already — for just your one-number spending. I also recommend paying off the card once a week, instead of waiting until the end of the month (set a calendar reminder to help you remember). All that will make it easier to track whether you’re within your one number.

And that’s the whole point of using the one number approach — fewer decisions to make about whether something can or should fit into your budget. And fewer decisions means more living your life.


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Rachel Sanborn Lawrence

Rachel Sanborn is the Director of Advisory Services at Ellevest and a CFP® Professional. She oversees Ellevest’s coaching teams and works with Ellevest members to help them be the boss of their money.