How to Budget Without Actually Sticking to a Budget

How to Budget Without Actually Budgeting

I’ve got a confession to make: I’ve never actually kept a budget. Not in the way a lot of people do.

We don’t stop spending in a certain category simply because we’ve reached a budgeted amount for the month.

We don’t spend much time worrying whether individual purchases fit into a monthly budget. Even the big ones. (Actually, especially the big ones).

We look back at our spending to track what we’ve been doing, but we don’t stress about every dollar leaving our account.

It’s a low-stress and low-maintenance approach that doesn’t require much mental energy on a regular basis. And yet month after month we’ve been able to put more into our savings and watch our net worth grow.

I want you to get to this place too, where you can make progress without stress. Here’s how to do it.

Step 1: Automate savings

One of the big mantras in personal finance is “spend less than you earn”.

Or in other words, save money.

And that’s one of the biggest reasons that people budget. By watching what you spend you can make sure that you have enough money left over at the end of the month to put some into savings.

Well a while back I learned a trick from Ramit Sethi that completely bypasses this need. Rather than waiting until the end of the month to “see how much you have left” for savings, you make your savings automatic.

It works like this.

Let’s say I get my paycheck direct deposited into my checking account on the 1st of every month. And let’s also say that I want to be contributing money to my IRA. What I would do is set up a scheduled transaction to move money from my checking account to my IRA on the same day every month, just a couple of days after that direct deposit (I usually do it on the 5th to give myself a little time buffer).

This setup does a few really powerful things for me:

  • I set up the transaction one time and then it happens on the same day every month without me thinking about it. This is an incredibly powerful way to build up your savings without having to spend much time or energy worrying about it.
  • My savings happen at the beginning of the month, before much spending has occurred. This removes the need to budget in order to allow for savings. I simply have what’s left in my checking account to spend.

You can do this for retirement, building an emergency fund, saving for a house or a car, or any other savings goal you might have. Which brings me to the next step…

Step 2: Regularly save for irregular expenses

What are the biggest budget killers in the world? Those big unexpected expenses that always creep up at the worst time.

Your car blows a tire. Your fridge dies and needs a new compressor. You drop your cell phone in a toilet.

These things suck, but they happen. Not regularly enough to fit neatly into a monthly budget, but regularly enough that if you don’t account for them they can really throw you for a loop.

The easy way to handle them? Make them regular. Treat them like a monthly expense.

Estimate the amount you might need to spend on car maintenance over the course of a year, divide that number by 12, and automatically send that amount to a savings account every month. When your car inevitably needs a repair, you simply draw the money from that savings account to cover it.

Repeat that process for home maintenance, health care, etc.

And this isn’t just for the bad stuff. We also do this for fun things like travel and gifts. So when we want to take a trip, we don’t have to worry about whether it fits into our budget. We simply look at the balance in our travel savings account and see if the money’s there.

Any irregular expense that doesn’t fit nicely into a monthly budget can be done this way.

How do you actually do it? Personally, we actually have multiple savings accounts with Ally Bank, each of which is named for its specific purpose (including a “miscellaneous expenses” account). I find it easy to manage and it works for us. I’m sure there are other banks where you can do something similar.

Some people will just have a single savings account for all of these kinds of expenses. That’s another perfect valid approach.

However you do it, the power in this strategy is the cushion you’re giving yourself to handle the curveballs life throws your way. That cushion makes it much less necessary to watch every single penny.

Step 3: Create rock-solid habits

Habits, not spreadsheets or fancy budgeting apps, are the real key to keeping our spending in line.

When you create a daily life filled with habits that just naturally keep you within your spending plan, it requires much less work to keep your spending in line.

Here are some habits we’ve developed that help keep spending low without much ongoing thought or effort:

  • We negotiate to get lower bills. We also cut some out altogether. These are savings that repeat every month without any additional effort.
  • We buy pretty much the same groceries every time we shop.
  • We make almost all of our own meals.
  • We have a number of go-to family activities that are either free, or low-cost.

Some of these habits have replaced other habits over time. Cable was replaced by Netflix. Friday nights out with friends were largely replaced by quiet nights at home with the family.

Not all of these changes are easy to make and they don’t all happen overnight. But if you can dedicate yourself to creating one positive habit at a time, you start creating a daily life that just naturally fits into your spending plan.

Step 4: Track your spending and re-evaluate from time to time

I’ve said that we don’t budget, and that’s true. But we do track our spending.

At the end of each month I sit down and use to look back through our transactions. I pull out our total spending in each category and put it into a spreadsheet I made that lets us see our average spending over the past 3, 6 and 12 months. Then my wife and I take a little bit of time to look through it together.

What this lets us do is make sure that our long-term spending is in line with our goals. We don’t really stress it if we’re over in a given category for one month. But if we see that we’re consistently spending more than we want to, we have to take some time to re-think our habits and figure out what adjustments need to be made.

The main point here is that the focus is on long-term habits, not short-term spending. This isn’t a crash-course diet. It’s an ongoing effort to create a life where we have to worry about money as little as possible.

All of this takes time to get right

None of this will happen overnight. There are still plenty of aspects of this system that we haven’t perfected and we are regularly working on ways to improve it.

But our stress is dramatically decreased from what it used to be. At this point we know that all of the big things are largely in place, which gives us the leeway to not sweat the small stuff.

And that’s really one of our big goals. We want to make responsible financial choices, but we don’t want to have to worry about every single spending decision. For the most part we’d like to be able to just enjoy our lives without money constantly being in the foreground.

So what do you say? Can you envision living a financially responsible life without truly sticking to a budget? What’s your system for handling all of these things? I’d love to hear about it.

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57 Comments... Read them below or add one of your own
  • Dee February 3, 2014

    Great post, Matt! We don’t really keep a traditional budget, either. We do exactly what you do: We “pay ourselves first” by automatically transferring our savings allotment, extra payments toward student loans, etc, out of our account right after we get paid. Then we live on whatever is left. We tried the traditional budget thing for a while and it wasn’t working for us. This method is less stressful, and we are also saving more and paying down debt faster this way! Win-win!

    • Matt @ momanddadmoney February 3, 2014

      Awesome! Yeah this system works out really well for us too. So much less hassle AND so much more productive.

  • DC @ Young Adult Money February 3, 2014

    Sounds like we do the same thing when it comes to budgeting, Matt. I’ve never truly set a budget, but instead track my spending each month make adjustments as needed. It’s a bit crazy how consistent our spending is except for emergencies (i.e. broken garage door springs).

    • Matt @ momanddadmoney February 3, 2014

      Our spending is really consistent as well. Like you said, sometimes things come up, but for the most part it’s just naturally pretty much the same every month.

  • cashRebel February 3, 2014

    I suppose I am a little more stringent about budgeting than you. I at least have my monthly goals, and I keep an eye on whether or not I’m going to bust those goals. When I do, it’s not like I stop spending, it’s just useful to know.

    • Matt @ momanddadmoney February 3, 2014

      Sounds like you’re just a little bit further down the budgeting line than we are. But there are probably others who are even further away from traditional budgeting than us. As long as you find something that works for you without causing undue stress you’re good to go.

  • Holly Johnson February 3, 2014

    We use a zero sum budget and it really does help us stay on track. However, every person is different. My parents are super frugal and have never written down or kept track of a purchase in their lives. Some people just don’t need to!

    • Matt @ momanddadmoney February 3, 2014

      Whatever helps you reach your goals! A zero sum budget would drive me crazy, but that’s just me. There’s definitely no one-size-fits-all approach with any of this.

  • Michael Solari February 3, 2014

    Paying yourself first is the best way to accumulate savings. It forces you to save and creates those good habits.

    • Matt @ momanddadmoney February 3, 2014

      Agreed. And the automation has been so key for me. It’s fun to watch those accounts grow while barely ever thinking about it.

  • Debt and the Girl February 3, 2014

    I have to admit I am not a big budgeter even though I am a PF blogger. That being said, I am very frugal and always take the time to allocate savings to the ole checking account and that makes me feel good about myself.

  • E.M. February 3, 2014

    This is pretty much the same method we use. I have an ideal amount we will spend on things, but sometimes other categories are lower, so it balances out. I agree that having frugal habits is your best bet here. We aren’t impulse buyers, so we usually just stick to buying things we actually need.

    • Matt @ momanddadmoney February 3, 2014

      We really aren’t impulse buyers either. At least not with big things. Every now and then we decide to splurge on some sour patch kids or something, but luckily that doesn’t throw us too far off track!

  • Mrs PoP @ PlantingOurPennies February 3, 2014

    We have a loose budget, which is mostly jay keeping track of our spending and keeping us aware if we are varying a lot outside of our usual habits. Some our income is so variable, I prefer it this way – keep the expenses in line and just transfer Mr PoP’s paycheck of savings at the end of every month.

    • Matt @ momanddadmoney February 3, 2014

      Sounds like your approach is pretty similar to ours. The variable income would make it even harder to have a traditional budget. You guys seem to be rocking it pretty hard, so whatever you’re doing keep it up!

  • Shannon February 3, 2014

    I completely agree on the automation and planning for the irregular events. These two steps are actually how I get clients into “budgeting” without knowing it. When you do these first, it takes the stress of out what is coming out later.

    • Matt @ momanddadmoney February 3, 2014

      Glad to hear it’s actually worked in your practice! I think most people really loathe the idea of starting out with a budget so whatever you can do to help them get the benefits without the resistance is a good thing.

  • Done by Forty February 3, 2014

    I am someone who benefits from structure and planning, so going without a traditional budget, I believe, would be a small financial disaster. For me, the system itself alleviates stress: a free flowing, hands-off approach in which we simply spend as we see fit, would cause me stress. But for someone with a more organized or disciplined personality, I can definitely see how this system works better.

    • Matt @ momanddadmoney February 3, 2014

      It’s definitely important to know what works for you, so stick with what makes you comfortable, right? As long as those goals are being met it’s all good.

  • Grayson @ Debt Roundup February 3, 2014

    I am in the same boat as you Matt. I don’t budget in the traditional sense. I know my habits, save like a crazy person and then tweak as I go on. My savings is automatic, but I treat it like a monthly bill as well.

    • Matt @ momanddadmoney February 3, 2014

      Haha, hopefully you’re just saving like a responsible person! I’m not sure what a crazy person saves like, but I have to say the image I get in my head is a little scary.

      • Grayson @ Debt Roundup February 3, 2014

        Oh, it is scary. Trust me, you don’t want to know how a crazy person saves, but the end result is all good!

  • Shannon Ryan February 3, 2014

    Love this line – “Habits, not spreadsheets or fancy budgeting apps, are the real key to keeping our spending in line.” Very true! For most people, it’s their habits that they get them into trouble in the first place. So identifying which habits need to changed is key to successfully managing money. I also am a huge proponent of making savings automatic. Waiting until the end of the month to put any remaining money in saving is a mistake. For whatever reason, most people will spend what they have available. They rationalize or something unexpected pops up and at the end of the money, they have either very little or no money to save. Automatic makes it so much easier.

    • Matt @ momanddadmoney February 3, 2014

      Thanks Shannon! I think people get very focused on tools and tricks when it’s really just about instilling the daily habits that put you on the path towards your goals. It’s all the little things you do each and every day that really matter.

  • Fit is the New Poor February 3, 2014

    We are going to attempt our first budget in March. We’ll see how that goes. But, for the most part, we are not much of budget people. We’re not ones to follow rules and guidelines even though we set it up ourselves. We’ll end up breaking it anyways.

    • Matt @ momanddadmoney February 4, 2014

      Sounds like it’ll be an interesting experiment. But don’t feel bad if the budgeting process doesn’t really work for you. As long as you can find a way to meet those savings goals you’ll be golden.

  • Kim@Eyesonthedollar February 3, 2014

    I used to be a lot more strict when paying off debt, but now we kind of do what you are doing. The big change is that we really don’t spend on unnecessary stuff anymore, at least not before discussing it. You are right that your habits are much more important that numbers on paper.

    • Matt @ momanddadmoney February 4, 2014

      I could definitely see being stricter about things in a situation where money was tighter. But like you say, once you get into the habit of not spending on unnecessary things, a lot of the things that budgeting is meant to handle kind of just take care of themselves.

  • AvgJoeMoney February 3, 2014

    Absolutely. It’s all about getting money saved. if you’re meeting (or hopefully exceeding) your savings targets, how you enjoy the remainder of your income is completely up to you. Great stuff.

  • Tonya February 3, 2014

    As you know I agree about the habits. Practicing those little changes that are positive can set you up for good things. I do have to follow a budget though. For me it’s just what works, although it’s a somewhat flexible budget in that depending on what’s happening for the month I move numbers around. When I operated without one on the crazy variable income as a freelancer, all hell broke loose. But if not much changes income wise month to month, I can see your point.

    • Matt @ momanddadmoney February 4, 2014

      You’ve got to do what works for you! For me, operating with a different budget every month would drive me crazy. I just like to keep things in line over the long-term. But the monthly approach works for a lot of people, and I can especially see wanting to use that approach with variable income.

  • Emily @ evolvingPF February 3, 2014

    Great explanation of this approach! What we do is more similar to this than true budgeting since we rarely change our behavior on the fly. Getting those ‘big rocks’ in place is really what will get you to your goals.

    • Matt @ momanddadmoney February 4, 2014

      Thanks Emily! I definitely like focusing on the big things first and letting the little things kind of fall in line behind. It’s easier to focus on just the few things that have the biggest impact.

  • Lindsey@ Sense & Sensibility February 3, 2014

    I find this method works best for me. I put five digits away for retirement last year {first time ever for five digits) based on that pay yourself first thing. I found that when I was obsessing over every little dollar, I was just getting frustrated. By taking a step back and appreciating what I could be doing if I set money aside instead of not doing because I ran out of money in that budget line, things just got a lot easier. I do still need a framework of a formal budget in some ways but I find I can leave it behind more and more as I go along.

    • Matt @ momanddadmoney February 4, 2014

      Congrats on the retirement savings! That’s a pretty huge accomplishment. I’m glad you’ve been able to find something that’s both less stressful and more effective. Best of both worlds!

  • Alex Logsdon February 4, 2014

    Matt, this is a very good guide how to know your money without a strict budget. We have been doing something similar for over four years now and it work like a dream. One minor difference is that we have don’t separate so strictly our saving for irregular expenses. We have what I call an ‘everflow’ account where money goes from our current (checking) account. This is kept at a set level – all that is over goes to investments.

    • Matt @ momanddadmoney February 4, 2014

      That sounds like a great savings approach as well. I like separating them because I feel like I’m managing them more like separate “monthly expenses” that way, but the reality is that it’s all still one big savings account. As long as the money’s there when you need it you’re all good.

  • Laurie @thefrugalfarmer February 4, 2014

    I fixed it, Matt! Our filter was blocking Disqus. 🙂 Ok, so, great post!! Love especially what you said about it taking time to get right. As we grown in our PF knowledge, we are constantly revising what we do. Like you, we rely largely on spend-tracking. I do use the envelope system for entertainment cash, simply b/c it’s so easy for me to go over if I don’t see that cash in hand. 🙂

    • Matt @ momanddadmoney February 4, 2014

      Nice! I think the acknowledgement that it will take time is so important. There’s never an overnight fix where all of a sudden you’ve “got it”. We’re always re-evaluating and discovering better ways to do things. But the high-level framework has been the same for a while now and it’s been really helpful.

  • Jacob @ iHeartBudgets February 4, 2014


    • Jacob @ iHeartBudgets February 4, 2014

      Just kidding. We are similar, except the one step we add is having a budget meeting before the month begins to make sure were not missing anything, and just planning it all out before the month begins (aka, making a budget).

      You’ve got a financial plan in place, which is the purpose of a budget. I know the term “budget” is a swear word to most, but it really is as simple as making sure your money goes where you want it to go. The methodology is up to you 🙂

      • Matt @ momanddadmoney February 4, 2014

        Haha, I was hoping you’d chime in on this one! I like this line “it really is as simple as making sure your money goes where you want it to go.” Amen brother!

        It’s nice to know you haven’t put me on your kill list. At least as far as I know…

        • Jacob @ iHeartBudgets February 5, 2014

          Don’t push me! 😉

  • Student Debt Survivor February 4, 2014

    We don’t have a formal budget per se, but we do have categories and limits on how much we want to spend each month. As long as I’m within my “acceptable” range, I don’t really care how the money is spent. Some months I spend a ton on food and others I spend carefully on food so I can buy birthday gifts, or clothes or whatnot. It doesn’t work for everyone, but it does work for us.

    • Matt @ momanddadmoney February 5, 2014

      Sounds like you’ve got a solid plan in place that works for you. That’s what it’s all about!

  • Andrew February 5, 2014

    I really like this post…probably because I’m not a big fan of the tradition spreadsheet budgeting methods. I think they are probably helpful for some, but if you’re pretty frugal, make good financial choices and have good habits…it can be unnecessary. It is good to keep track of your spending just so you can optimize and look out for leaks though. I think paying ourselves first is very important…too many people fail to make that the priority and only “pay themselves” if there are leftovers..

    • Matt @ momanddadmoney February 5, 2014

      I agree with the importance of tracking your spending. We use it to make sure our habits are staying solid and we’ve definitely caught ourselves drifting a little from time to time. We wouldn’t have seen that if we didn’t track our spending.

  • Candice @ My Freelance Adventu February 5, 2014

    I feel similarly. I was just reassessing the way I spend money and I realized I should save more. I’m definitely going to use the suggestion of taking my savings out right away. I do it for my taxes so it makes sense to save first as well. Thanks for the tip!

    • Matt @ momanddadmoney February 5, 2014

      Thanks for stopping by Candice! And I’m glad you found something helpful. Taking my savings out first, and having that be automatic, is probably the single thing that’s helped me save money over anything else. It’s a really great tactic.

  • Justin February 12, 2014

    I can see how this seemingly simpler hands off approach would be appealing. For me, I use YNAB or You Need A Budget. Many of the things it does you are already doing. Like, tracking spending in all accounts, automatic spending reports, and creation of categories to accumulate savings. You can simply choose to not budget anything upfront each month and YNAB will adjust automatically. I find this virtual moving of money to be much easier than creating a bunch of accounts and moving actual money around. And I can create delete categories with a quick click. YNAB automatically tells you what you have spent and what is saved in which categories and you can keep all your money in a single bank account. I use Ally bank too with an interest bearing checking account.

    I choose to budget my funds up front each month but you can simply skip that part and what you and I are doing is the same we just use a different method 🙂

    • Matt @ momanddadmoney February 13, 2014

      I’ve heard only great things about YNAB. I’ve never tried it out but I’ll have to give it a chance at some point. I’m glad you’ve been able to find a system that works well for you!

  • chutchison March 14, 2014

    Great post Matt! I am going to share this with a group of young men I enjoy mentoring at my church.

    I have an idea I use that works well. Have your Paycheck going directly into a savings or money market type account. Using to track your spending, come up with an average amount needed each month for everyday necessities. Make that average amount an automatic transfer each month to your working checking account to spend down each month. If you live off a low percentage of your income, you will see you savings explode!
    Keep up the good work!
    I blog at Come visit sometime.

    • Matt @ momanddadmoney March 17, 2014

      Thanks for sharing Chip! Sounds like your approach is just kind of the opposite of mine. You have money go into savings first and then transfer into checking. I have money go into checking and then transfer into savings. Should come out to the same result and in either case it’s a great way to automate savings.

  • Michael November 15, 2015

    I used to budget like that too. But i was always under false impression that i am saving money and doing a great job, while i don’t. When i found YNAB it literally changed the way i look to spending, savings and budget.. It is not just a software, it is a methodology thtat really works.. I don’t work for YNAB or get any benefit from saying that..

    • Matt Becker November 16, 2015

      Thanks for the input Michael! While I’ve never personally used YNAB, I’ve heard GREAT things about it from so many people and it’s of the tools I regularly encourage people to check out. The truth is that different systems will work better for different people, and really the right thing is to do exactly what you did here, which is try them out and see what works for you.

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