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?
This post was featured on the Carnival of Money Pros, Evolving Pf, Financial Carnival for Young Adults, Mom and Daddy,Pearltrees, Financial Planning, Aspiring Blogger, thank you!
Nice tips… I admit following a budget can be a drag… I like this approach, will share!
I don’t gain weight! Just kidding, I do. I’m not 16 anymore. I’m a budget lite person. I’ve been throwing $1500 towards debt the past two months….any $ I have left over to spend, I don’t really feel guilty about because the debt payment is almost all my take home income from my day job (not including side hustle income). I make sure I have enough money to cover rent, buy groceries, pay bills, then I throw a bunch towards debt and still have some fun.
Nice simile to the model! Budgets are so essential for understand what and where you spend money. Its impossible to reduce expenses without knowing where your expenses are incurred.
I think this is a great budget compromise for some. Something is surely better than nothing.
I am an advocate for a more detailed budget. Largely if you are not disciplined with your money. It can be tempting to get carried away with “ice cream” while working with limited budget categories. Instead of a single scoop in a cup, you end up with with a waffle cone, hot fudge and sprinkles.
My budget style cycles depending where I am in my money life. If I have something I’m specifically working on (saving for a vacation, etc) I have more categories. If I’m in maintenance mode, the less I have.
Hey mate,
The budget is a no-brainer for us any more. It takes hardly any time at all. At first it took time getting organized and sorting out who does what but not any more. We can’t imagine not using it, to be honest.
I can confidently say that we are where we are so early in our life because of the budget. Our spending previous to the budget wasn’t hog wild but we weren’t utilizing our savings and investment opportunity as we are today. Our investing is still lagging but we’ll get there little by little. Like anything, education is most important. Not everyone easily grasps the concept of , earning, spending, savings, budgets, and retirement for that matter.
The funny thing is when I wrote that post I was thinking about you and how you hate to budget and your approach. This was about you because we’ve previously had a conversation about budgets behind the scenes….quoting myself lol…
“Some people have a handle on their finances and simply have no need for a budget. If you pay your bills on time, know where your money is going and are happy with that then a budget might not work for you.”
It’s always nice to know people in the PF world and how their approach to finances work in comparison to your own or others. There is no one size fits all budget or way to manage money, there’s only smart budgeting.
That means whether you use a computer, piece of paper or your head you need to make sure you spend less than you earn. It’s that easy. It’s the approach that people need to find which works best for them in terms of managing that cash.
The one thing that is important is that the person who is managing the money has to be good at it. If you are rubbish at what you do financially it will show.
The savings part is another tough part since people dip into that savings for things they don’t really need. When I came up with the projected expenses account for the roof, or the city taxes, vehicle sticker once a year etc that account NEVER gets used for anything.
It’s not a savings per say that is used for emergencies it’s money already spent but just waiting to get paid. If people don’t have that money ready to rock and roll come the bill time they money will come from emergency savings when it’s not an emergency or it ends up on credit.
Managing money without a budget is possible but you must be confident you have all your bases covered and money in the bank just in case something were to slip your mind or to pop up. You are that person Pauline.
Your grocery game posts and the way you manage your kitchen with homemade recipes and testing out foods is great. I applaud you for that. Many fans who post their shops are in awe how much they actually spend on groceries especially when they thought they had it under control.
Mrs. CBB and I were those people. We’ve since worked our way down but it’s still very tough when it comes to food and self-control at the grocery store.
The GGC is what saves us from spending more money on crap then we need for our bodies. One fan emailed me the other day to say she needs to stop buying so much junk food. She realized that because of her GGC posts and just how much she was spending which she wouldn’t have if she just bought it without a care in the world which many people do.
You are a brave girl the way you manage your money, I’d be a big fail at your game of finances because I’m just not as relaxed or maybe as confident I should say about the money as you are because I’m a numbers guy and need to see continuous data (I could learn something from you and your approach) but I agree balance is important.
Thanks for sharing some of my insight on budgets and The Grocery Game Challenge with your fans. Maybe I’ll catch some of you around posting your shops!! \
Have a great day Pauline.
CBB
Wow Mr. CBB that was almost a blog post haha. I get that your GGC is a big reality check for most. You always think you are doing ok but when you write everything down you have to face your harsh reality. As I told you when I stopped posting my shops I am traveling at the moment so most of the time we eat out, and pay way more than we should for food but it is part of the travel and experience, it is about sitting in a nice place and having a relaxing dinner rather than a sandwich every single day for two months. Europe is crazy expensive! Makes me realize how lucky I am in Guatemala to have cheap and delicious food all the time.
I agree with you that a little bit of a budget is still better than no budget at all. At least you’re monitoring your spending habits!
I guess you could argue that I don’t “technically” have a budget, but I do track my spending and adjust accordingly. Most of my spending is on fixed expenses and the variable expenses are really such a small part of our spending that it wouldn’t make sense to slash any further (plus we do things like coupon and whatnot to keep the prices low).
I’m with DC in the camp of tracking spending vs. budgeting. We definitely don’t hold ourselves to a strict budget every month or do the kind of micromanaging that you talk about. We automate our savings and beyond that we’ve created habits and a lifestyle that fit our budgeting needs. But we do track our spending across various categories to make sure that our habits haven’t gone off the rail. I think that as long as you have an approach that lets you work productively towards your long-term goals, then that’s plenty good enough.
My parents and the most frugal people I know and they NEVER had a budget, still don’t. They just have a ton of self-control and only spend money when they absolutely have to.
I agree with this model (not the person, the budget lite)! I’ve been trying to budget for a little while, and I think I get stuck with all the multiple categories part. I think I use this sort of model without even realizing it! I will definitely be sharing this- thanks!
Thank you Dani. If you are overwhelmed with the categories, the most important part is to set your savings goals and then you can spend the rest!
We do budget, but were not on the budgeting extreme that you described. We’re a mix of budgeting plus your more simpler approach and don’t obsess over numbers as I believe you really just rob yourself of enjoying life if you’re looking at miniscule numbers. We see what we spend and we adjust accordingly year to year to make sure our expenses are in check.
We’re not strict budgeter and our “budgeted numbers” are basically averages of past spending in those categories. Mostly it’s a gut check that let’s us see pretty clearly where things are going sideways (if they are), so we can decide together if spending is a priority. Mostly it’s about keeping us on the same page.
I do have to report my spending to my BF now that we bought a house together or else I can’t claim half of it back, but we don’t check the overall amount, if the spending was necessary we just spend it.
For folks with financial discipline, who don’t have trouble meeting their savings goals, I can absolutely see how the “no budget” system works. For others, who struggle, I think percentages or set amounts can be helpful.
It is all the categories I find boring. I would maybe follow your % idea with a set amount for daily expenses for example, that would include groceries, eating out, hygiene etc. so if you eat pasta at home you have a bit more to eat out, without saying you blew the eating out category.
We have a budget, but we don’t follow it. It’s just more of a guide so that we can see where our money is going.
Personally, I love budgets. I have a love affair with charts and graphs and I truly see the value in budgeting. It helps build discipline and plan for the future as well as to see where our money is spent. And it is satisfying to know when we’re under budget in a particular area.
That said, I agree that some budgets are way too detailed. Categories for house repairs, house supplies, clothing, toothpaste?! We can be victims of our own budgets and waste time micromanaging.
I believe your budget methods. Extra Expenses = Income-Fixed Expenses-Savings.
I take a light budgeting approach as well. For the most part, it consists of fixed expenses, and then variable expenses. I am pretty good at controlling my spending, so I like to track that rather than restrict myself. I am with you on instinctively knowing when I’ve overspent on something. I have a sense of how much I like each shopping trip to cost (ideally less than $50) and when it costs more, we just go longer without shopping the next week.
I do the delayed shopping too although sometimes it doesn’t work, if you buy too much snacks and booze but are out of bread and cereals then you go back shopping and end up buying more snacks as well…
We use what probably represents your budget nightmare, with itemized lines for a bunch of categories, that change from month to month. We find that if we aim at nothing, like Zig Ziglar says, we hit it every time. So we set small goals for each category, and viola, we somehow hit our savings goals. That said, I know our system would be a grind for a lot of other people. My take is that if you have a system (or lack of a system) that allows you to hit your annual financial goals, then stick with what you’re doing. There are many roads that lead to Rome.
and with a link love to budget porn, oh boy, that is a nightmare :). But you are right that with no goal comes no improvement I guess I am just content with where I am and not in a rush to go anywhere.
I am somewhere between you and Mr. CBB, although I did download his budget spreadsheet yesterday, and it is so pretty and colorful! I think the important thing is to know how much you need to save and how much your fixed expenses are and pay those first. If you wait until the end of the month, most of your saving and investing money winds up gone. If you can live on what ‘s left, that works, and you probably don’t need to keep track of every latte.
I like to see his pie charts and graphs too but waaaay too lazy to do them. I guess I am fine making most of the money disappear earlier in the month as I still have a good bit to live on, but on a tight budget it works too, it is harder to take the money from savings back into your account than spend it while it is there.
I can understand where you’re coming from, but for me I don’t mind some sub categories. I think my netflix one has to be the lowest. It helps me feel more structured, and for years without any financial structure, I feel less stressed knowing the finer details of where my money is going. But everyone operates differently!
Living in LA, I had a good chuckle at your model who stays a size 0 but can eat whatever she wants. 🙂 While I have professed my love for budgets previously, I do believe what is most important is that people figure out what works for them. Often times I hear people complain about budgeting because it’s too complicated but I suspect for some that is an excuse. Budgeting can be as simple or complicated as you like but some people don’t want to be confronted with how their spending their money. Whether at a more detailed level like I do or a budget lite like you do – we both end up in the same place – where we can consciously choose how we want to use our discretionary income and to me that represents freedom, not constriction.
Aren’t those models annoying? 🙂 The reality check can be brutal whichever way you budget. That may be why I avoid running the exact numbers. But my budgeting pants still fit so that’s ok.
I tried to make a budget that included every single things I could I purchase. It took me hours to create in excel. I was happy when it was don, but never followed it. It was too complicated. I have since used a modified budget like yours where I only track a few categories. It’s quick, simple and gets the job done.
I did the same once, thanks to a program similar to mint. I liked that it did most of it for me but was way too lazy to do the rest.
Pauline! Very reflective, reflective indeed! Surely, we need to know what we make and spend. But a spending philosophy will trump a budget every time. Eating is the same. I simply don’t eat crap, no fried crap, no processed crap, no salty, sugary, fatty crap. Likewise, I don’t spend like an idiot and don’t buy crap. Staying within our means is effortless, not because we make a lot or are cheap, but because we know what we like and know what to spend on that will actually improve our lives rather than detract from it. It’s our philosophy and priorities that matter and not so much our budget.
No crap, just a few pints here and there, that’s the way to go!