I hate budgets. Yes, I do, and for a myriad of reasons *hides behind a wall to avoid cyber-stones thrown at her*. I have said so previously on many occasions
so when I read this article from Mr. CBB on Canadian Budget Binder about why budgets suck but not really, my first reaction was to tell him that like a model who says
“I am never on a diet and always eat what I want but keep my size 0 naturally”,
I am able to know instinctively when I overspent AND rectify during the next days or weeks. Because the model’s claim is BS. No one eats ice cream and burgers every day without putting on a pound. Even if you exercise, you need a balanced diet or you will still carry your beer belly around your otherwise toned body. The model has one scoop of ice cream once a month, and steamed veggies the rest of the time. Maybe her body craves the steamed veggies after an overdose of sugar and fat while most of us don’t unless we really go overboard and so we put on extra pounds. It is a fine balance, and if you are unable to balance yourself out you need to control your diet. Or your budget.
Continuing my reflection over Mr. CBB’s post, I thought maybe after all, I need a budget. I am not a size 0 financially and it could help me cut all the non necessary fat (read, the things that won’t drastically reduce my happiness, comfort, inner peace, etc. $3,000 trips to Europe are here to stay) and build wealth even faster. I joined the grocery game challenge, again over at Mr. CBB’s with no idea how much I was spending on groceries. I set an arbitrary amount of $200 for two people, which is about minimum wage here and already sounded quite high, and found out that we were spending a bit over that. That’s fine, we are not tightening the financial belt elsewhere to pay for our wine and cheese, but small amounts add up and having a budget may after all help get you in real good shape, leaving you more breathing room for what you really want to spend on?
At the moment, my approach to budgeting is a no budget approach. To make it work, like my model who has 12 Tupperware of veggies in her fridge instead of stacks of Pringles, I make the money disappear when it hits my account. Money comes in, bills are paid automatically a few days later, and some money is also wired to a savings account to meet my savings goals. What is left I can spend how I please. I like the no budget approach because you don’t have to think every month about what you’ll need, and reallocate money from the toothpaste fund to the vet fund when your dog gets the flu for the second time this year.
That is what seems tedious to me. Having 20 categories with $5 in each or *gasp!* decimals, and moving imaginarily your money around because after all it is all in your account anyway, what a waste of time!
So I thought about compromising. How about a three categories budget?
1. Fixed expenses. That would be your mortgage, your cable, electric, internet or water bill, your insurance premiums, anything that will have to be paid month after month.
2. Savings. Looking back, it is pretty easy to know what you need every year in travel, car maintenance and other big expenses. Looking forward, you know your roof will need replacing in 5 years and cost $10,000. And you want to save $200 for retirement and $300 for a house for example. So there you have your budget for saving, say at $1,000 a month. It will balance over the long term, the $300 for the house may go to car repairs this month and then you’ll have $600 for the house next month.
3. What’s left. The slight difference with the no budget approach here is since you know how much you make, you know how much is left after fixed expenses and savings, while I always get a different number, so I have leaner months than others. If you make $4,000 and have spent $2,000 on fixed expenses and saved $1,000 you are left with $1,000. Scared of not making it last until your next paycheck? Split it. Give yourself $250 a week, or $30 a day, and when it is gone, it is gone. Having it in cash may make it more visual and help you realize that you really have to make it go further. Try to cover with it expenses that would go in the second category, like the car repairs, so you keep your savings intact and can splurge later on a nice holiday or a fancy dinner.
Having all your spending money for the week with you means you need to pay for important things first, like food. Once you are out of the grocery store, if you still have $50 and want to go out then you know you can go out and spend $50. If you prefer a $50 pair of jeans or would rather keep it to have $100 next week and get the spa day you’ve been dreaming about, then the money isn’t virtually locked to one purpose only. Yet it is there and your mortgage is paid, your savings accounts are full, so it is all yours.
What do you think? What is your smallest budget category? Can you eat as much as you want and not get fat? Really?