Last Monday I wrote about starting your budget with something you’re truly excited to either spend your money on or save for. It was a call to budget with a passion. It drew some interesting comments from readers claiming they didn’t have a budget, and that got me thinking.
What is a budget?
When we hear the word “budget”, I think most people have a pretty similar idea of what it means. There’s a list of categories (sources of income, savings goals, bills, etc.) and all of your money fits neatly into one of them. By the end, you know exactly where all of your money is going and can track your “performance” against that budget.
That’s certainly one way to do it, but as I’ve learned over the years there is never only one way to do something. So let’s look at some of the different ways people “budget”, even if they say they don’t.
The hassle-free approach to budgeting
One of my favorite comments came from my friend Pauline, who said:
I just take out all the bills and savings goals from any income at the beginning of the month and what is left is fun money. It takes the hassle out of budgeting.
I love this approach because of its incredible simplicity. I’ve actually considered using this exact approach before, but have never adopted it just because I have a different system that works and haven’t felt the need to change. But it’s still tempting and I certainly might switch at some point in the future.
So is this budgeting? I think it is, but honestly the answer really isn’t important. What I do think matters is that she’s adopted the main point behind budgeting with a passion in that she’s taken the things she cares about, in this case her savings goals, and handled them before giving herself her “fun money”. And the best part of all is that she’s removed most of the barriers that make classic budgeting difficult. Because the important stuff is already handled, there are no difficult decisions about spending or saving the money that’s left over. Whatever’s in the account is free to spend without guilt. This is truly a no-hassle approach to budgeting, and it’s actually one I would probably recommend to anyone just starting out.
A true no-budget approach
Another interesting concept came from my friend A. Blinkin:
Maybe I’m a complete n00b for never creating a budget. I think I’ve always considered budgets to be restrictive (as you stated) and that doesn’t have to be the case. I have also thought that my wife and I don’t need a budget because we have high incomes and low expenses, BUT the way you (or Jacob) position it makes it sound more necessary than I’ve always thought. Everyone can afford to reduce some waste.
In this case, he’s explicitly stated that he doesn’t have a budget. But he also states that he and his wife have a high income and low expenses, so how necessary is a budget really? If you’re living well below your means and are comfortable that you’re successfully working towards your goals, then I personally don’t see any need to have a traditional budget. While it’s certainly possible that you might identify some “waste” if you list everything out, I think there’s a certain point at which the time and energy to do that just might not be worth it. After all, life is about enjoying the things you truly care about, not about tracking your spending. If you can do the former without the latter, good for you!
I will say that I doubt that most of us are at a point where we can do this successfully. I know we certainly aren’t. But for those of you whose income is simply far greater than your expenses, this could be a reasonable approach. No need to make things harder than they have to be.
Budgeting vs. tracking spending
My friend Ree wrote a great article last week on struggling with the polarity of money, and one of her points was that she thought tracking spending was more important than having a budget. I actually 100% agree with this sentiment. The most important thing you can do is be conscious about your spending and saving, and it’s very difficult to do this well if you haven’t spent at least some time tracking where your money is going. What you do with that information is up to you. You may end up making a traditional budget and holding yourself to strict spending limits, or you may do something a little more fluid, such as Pauline’s approach from above. But simply tracking your spending gives you the information needed to make these decisions and to monitor how they pan out.
Thomas from Your Daily Finance summed it up well in another comment:
I think you have to do what works for you and your family at the end of the day. Whether you want to call it a budget or something else find something that works stick to it but make adjustments along the way. I like structure and still think you should be able to enjoy life. Though I find that too many people waste money on things they claim make them happy. Follow your own path you dont have to do what the next man or woman does. Find your own happy place and enjoy life.
There’s no one-size-fits-all approach. In the end, you simply have to find an approach that allows you to use your money to reach your goals. The specifics of that approach are unimportant, as is whether you call it a “budget” or something else. It’s the results that matter, and we all have different ways of getting them.
Photo courtesy of jack dorsey