One of my mom’s classic lines is “if the shoe fits, wear it.” If New Balance made a bad budgeter shoe it would fit me like a glove. So when my cousin asked me recently for some budgeting advice she must have thought that I would provide some soothsayer-like insight being that I write about money constantly and help produce a radio show about finances. However, being the bad budgeter that I am I could only give her tips that I know to be good but seldom use myself. That’s because I do not budget!
I think part of the reason that I’ve never been good at setting limits and sticking to them is that I’m cheap. I just don’t think about money in budget style terms. It doesn’t jive with my thrifty personality. My usual approach is to save as much as possible, get a good deal on the purchases I do make, and have a financial pad in my account for when the inevitable car or house malfunction occurs.
When I first got married my wife Em and I had a few hiccups because of the odd way I think about money. And I’ll admit, I wasn’t good at communicating my kookie cash intuitions to my new bride. So when she would want to go out for dinner or drinks my mind would rifle through all the things we had recently spent money on. If we had recently been austere with our funds I was more likely to approve of that meal out. If we had been a bit loose, I would get nervous and try to convince her that cooking at home would be a better idea (bet you wish you could have been a fly on the wall for that).
Communicating well about money is certainly important in marriage. I’ve learned that through some trial and error. 🙂 So in the beginning as we really began to learn each other’s money habits, developing a budget together helped us to not make decisions based on whims, but on facts. We used Mint.com to keep track of all our spending. We would go through each month and compare our expenditures to the budget sheet that we had created. Now that we’ve been married for almost 3 years though we don’t really stick to “the budget” and it works well for us. But how can we do that?
We keep a mental note of the progress or lack thereof based on the information Mint is showing us. It gives us a snapshot – a frame of reference – of how we are doing. Mint is our favorite online budgeting tool even if we don’t use it the way most people do. We have all of our bank accounts and credit cards hooked up to it for quick and easy snapshots of our financial life.
This is my great dane Moose. He’s super cute but can also be expensive!
We try to be as frugal as possible while still enjoying the things we love to do together. What’s the point of money if you continually deprive yourself now so that your 65 year old self can reap the benefits? Don’t call the retirement police, I promise, I’m still saving for the future. But if we deprive ourselves of everything now for the hope of a “comfortable retirement” I think it would be a big mistake.
We save more than we spend every month. Seems obvious but this is something that a large percentage of Americans don’t do! If you consistently find yourself spending more than your paycheck amount every month – or even close to it – you need to seriously consider becoming a good budgeter. You unfortunately don’t have the luxury of being budgetless.
We have built up a cushion that allows us flexibility. Over time we’ve saved so that when our giant great dane does have a vet bill that exceeds all rhyme and reason we are able to take care of it without freaking out.That takes time. If you haven’t started building up a cushion, start putting aside a little from each paycheck. You really need a rainy day account. Did you know that 30% of Americans have basically ZERO cushion? No savings at all! If you are one of them, start slow. You can do it!
So that is how I get by in life without budgeting. I know that to some this might be considered a cardinal financial sin. You guys think I’m crazy for going without a budget? What’s your budget stance?
[photo courtesy of Brent]
An interesting take on the topic of budgeting and more similar than dissimilar to my own. While I do allocate a specific amount of resources (dollars) to be spent in respective areas during a given period of time (generally monthly), I do not track everything down to the penny. My overarching approach is to fund my retirement accounts first, pay my bills second, and anything left over I consider to be discretionary funds to be spent as I please. Can I tell you how much I spent on coffee last month? Nope. However, I can tell you that all my savings/investment objectives were met and my bills were paid.
That’s exactly how I feel James. I just can’t allocate myself $30 for beer, $150 for gas, $14 for haircuts, etc. I buy what I need when I need it. And I try to do so as cheaply as possible. And, believe it or not, I buy things I don’t need like good beer too. But that’s ok as long as I live cheaply and keep a big cushion in my life. Strict budgeting and my brain just don’t jive very well.
We sort of budget. We have it so that we can see where our money is going and where we are overspending.
I think maybe from now on I’ll call it the “sort of budget” Michelle. I just hate being confined in certain aspects of my life. If I want a beer on the 31st of the month ain’t no budget gonna stop me. 🙂
Moose!
He’s the best!
If “spending less than you make” and “having a financial cushion” is in your DNA, like Joel (unlike me), then you are going to be successful with your money. Unfortunately, 75%+ of Americans are no where close to practicing/grasping this concept. Most people need a plan for their monthly (sometimes weekly) spending, otherwise, they’ll just keep wandering through their financial life without a clue, treading water, or going further into debt every day.
I’ve found that a budget needs to be a written plan for every dollar of your money before you spend it. And a budget isn’t always restrictive, though many automatically make that association. When my wife and I started budgeting hardcore (when we got married 4 years ago), even on one income at the time, we found that we had MORE money than we thought because we could actually SEE where it was going to go. Many people, who know they need to get a grasp on their finances, just assume they don’t have enough money.
I think “budgeting via Mint” or by bank statement is dangerous for most because the damage (usually impulse buying) has already been done; I call it a ‘financial autopsy’. We use Mint religiously as well, but just to track against our budget plan.
Great stuff, Joel, I really enjoy all of your blog posts!
Thanks for the comment Josh. I think personality and experience goes a long way to determining how we view money. My experiences and personality have made me a bigtime saver. My personality also doesn’t like to be tied down to specific numbers. I basically hate math. 🙂 But you are totally right, I don’t think that just because I don’t use a budget that most people shouldn’t. Know your own strengths and weaknesses in order to make the right decision. In fact, a great majority of folks probably DO need to use a budget. Just wanted to share my experience.
It seems to me you are still mentally budgeting. It’s just not written down and formal. You are mentally tracking things via Mint and “keep a mental note of the progress”, as you put it. So it may just be a matter of semantics as to whether you are budgeting.
The other thing I would note is that you used to formally budget. This helped you make sure your decisions were based on actual numbers and helped make sure you were on the same page financially as your spouse. It probably also helped you make sure you were spending money on the things that were most important and not just the overall spending number.
But once you went through that exercise and learned those lessons, I agree it’s probably not necessary for most people to continue to have that level of formality indefinitely. When things truly become a habit, we don’t need to fill out spreadsheets each month to track things that are already habitual.
That’s pretty true SB. I didn’t let it all just go to pot! But, most people have an excel spreadsheet type approach to budgeting. I was just trying to communicate that if you spend your money wisely and save even more you can do away with tracking every single penny. You don’t have to be a “slave to the budget.” Thanks for your comment.
I love this post!
I think I’m a mix a both. I started keeping an Excel spreadsheet in the middle of 2006 when I was working a full-time and part-time job and was making no progress. I had a a car loan for about $6000, about $1000 on credit cards and $38,000 in student loans. I found when I started budgeting that I was consistently spending $100-$200 than I was making. Had no savings and looking back I don’t have the slightest how I was making it! As long as I had $30 in my checking account the day before payday, I figured I was okay.
Fast forward 7 years and I paid off the car and credit card years ago, finished paying on my student loan last year, am about to pay off the loan on the 2011 Escape we bought in May and have a nice cushion savings account and retirement.
I don’t think I could of made it out of that hole without having my spreadsheet. But when it comes to the money spent in a month, I’m not a stickler at all for how much I have “budgeted” for each category. Bills are always covered, everything else just fits in by being thrifty and splurging just on occasion.
I do believe budgeting saved my financial tushy! But once you’re out of the debt and you have a good footing – coasting is totally cool! Keep up the great posts, Joel!
Thanks Emily! I’m so bad at Excel spreadsheets. They make my head hurt. I’m so glad it works well for you and has helped usher you into a more financially secure place. And I totally agree that for some people, at many points in life, a budget is essential. We’re just fortunate that due to our extreme thriftiness we don’t need one.
For the last year, I have taken a break from budgeting. My family made it work, but I was unable to kick the high levels of anxiety I had throughout for not having a handle on how we were doing.
I’m going back to more formal budgeting of late to get a clearer picture and some peace of mind
That’s a good idea Ragnar. If your personality doesn’t jive with the whole no budget thing then it isn’t even worth attempting. Thanks for stopping by!
if people who are in a hard place with money they should be budgeting. i mean you should live within your means and not spend money like it grows on trees cause one day your going to need some money and it wont be there.
Thanks for stopping by Thomas! I was trying to share how I do things. It works for my situation and personality. It certainly doesn’t work for everyone. In fact, I would imagine that there are a lot of folks that absolutely NEED a budget. I certainly don’t knock the budget overall. It just isn’t the best overall strategy for me.
Thank you for this post! This is the closest I’ve seen anyone come to my approach. I’ve tried making a “normal” budget, but with the wildly fluctuating income and varying expenses I have right now, it just doesn’t work. I buy stuff when I need it, and pay close attention to where my money is going, making sure to have a good cushion. That works for me!
Glad it resonated with you Daniel. Thanks for stopping by!