Budgets Are Overrated
Author: Nick
Category: Money
Topics: budget
(My apologies to the 17 people who just had heart attacks after reading the title.)
I’m sorry, but it’s true. While any personal finance expert will tell you that you must have a budget or else you’re going to spend all of your money and end up homeless and destitute, that’s not always the case. For example, I know for a fact that there’s a guy in Kansas who doesn’t have a budget and he has $8,000 in the bank right now. Shocked? I was too!
All right, I’ll stop being a smart-ass for a minute. (Stopwatch start.) It’s very possible to survive and thrive financially without putting together a detailed budget and sticking to it. I know a few people who do just that, but they’re either too rich to spend all of the money they have no matter how hard they try, or they work too much to have a chance to spend it all.
And then there are people like Stephanie over at Poorer Than You—someone who doesn’t have a budget or a million dollars, and she’s doing just fine, thank-you-very-much. Oh, and before you ask, I do have a budget, but if you promise not to tell anyone, I’ll let you in on a little bold-texted secret:
I totally ignore my budget.
If I fire up Quicken, you’ll see that I have a very nice little monthly budget that looks something like this:
| Housing | 35% |
| Groceries | 5% |
| Dining | 5% |
| Entertainment | 5% |
| Utilities | 5% |
| Education | 5% |
| Charity | 5% |
| Ceramic Rooster Collection | 5% |
| Miscellaneous Expenses | 5% |
| Straight to Savings | 25% |
When I first put this budget together a couple of years ago, I religiously checked it against our actual expenses every month for several consecutive months only to find out that we never came close to overrunning our budget numbers. So I stopped checking. And you know what? Looking back now, sometimes we went over our budget numbers. For example, in December of 2007, we spent 7% of our income on charity. And yet, we still met our savings goal for the month. How? Well, in my mind, I knew that we were giving a bit more to charity that month (though I didn’t know exactly how much), so I cut back on funding my ceramic rooster collection a bit.
Some other months, we only contributed 25% or 20% or even 15% of our income to savings due to unexpected or higher-than-usual expenses. But then other months, we contributed 30% or more of our income to savings.
For all intents and purposes, we don’t have a budget since having a budget sort of implies actively following it and trying to meet it consistently. In any given year, we do meet our budget—and with plenty of room to spare—but it’s not through excessive penny-counting or obsessive record-keeping. It kind of just… happens.
Well, maybe it doesn’t just happen. We do have some degree of natural financial discipline, so we’re not in the habit of dropping $3,000 on a whim. Plenty of people don’t have that sort of discipline, so a budget might help them guide their spending and meet their financial goals. But saying that everyone needs a budget is just plain wrong. Sounds like someone should rename their software to something not so insisting.
Perhaps a better way of putting it is you either need a budget or the financial discipline to function without one. (Stopwatch finish.) I guess that means only reckless people need budgets?
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17 Responses »
1.
Mrs.ThePoint
April 22nd, 2008 at 1:33 pm
Budget is great but it never worked for me either.
We love food too much to actually have a food budget, so ends up we just save on clothing expense for food.
We look awful all the time but we eat well…haha.
2.
s. jennifer rose
April 22nd, 2008 at 2:32 pm
I work pretty much the same way. I know about how much I want to save versus spend each month, and if an unexpected expense comes up that’s one less Chia pet I get to buy. Or the next month I’ll have to forgo my head to toe body waxing. Trade-offs. It all balances out for me in the end.
3.
Fiscal Musings
April 22nd, 2008 at 4:10 pm
I don’t think I could ever stand to be on a budget. As long as savings and investments are taken straight off the top, I don’t care how the rest is divided up.
4.
Stephanie @ PoorerThanYou
April 22nd, 2008 at 4:17 pm
Woo woo! (Thanks for the link!)
Budgets are cool if they work for a person, but I find that a lot of people avoid money management all together, because they think they NEED a budget and budgets DON’T work for them. So woot! to spreading the word on this!
5.
Obbop
April 22nd, 2008 at 7:05 pm
Your oblate-spheroid-shaped crotchety old coot chiming in.
Tough times. Can you spare a buck or two. I shun drugs and alcohol so any donations will go to necessities.
Heck, I actually support the Wimmen’s Temperance Thingy advocating the elimination of alcohol in our society!!!! Booze causes so much misery and only numbs the brains of so many within the human herd whose brains appear to be naturally numb. For proof just peek at various politicians!!!
Oh. Budgets.
Gotta’ have money to have a budget.
Never had one. Never seemed to be suitable or applicable to my working-poor underclass life.
Hey!!! Wanna’ face a challenge? Try living out of your car. I learned the hard way to always own a pick-em-up truck with a camper shell over the bed to keep the wind and rain off the tender body.
Back in the late 1980s when full-time work paid only enough to chip in on a family’s rent, giving me cooking and cleaning privileges but with not enough room for me to sleep there….well, the 1975 Honda Civic (an itty bitty carlet) was my bedroom.
Budgets. Allocating scarce resources. Society does it by using money, generally. Some folks are great whiners and convince those with discretionary wealth to fork some over.
Drag a dirty whiney imp along with you and it’s relatively easy to get organized religion to hand you money and material items.
Even saw a large church give a decent car to a married couple with three waifs who came begging. Those were some really scummy scam artists that roamed from town-to-town begging and supporting their vile spawn and their drug habit.
Wonder if they budgeted?
Okay, herd. Here’s one method of budgeting based upon attitude vice writing down Arabic numerals (that are so much easier to use than the Roman type. Maybe you are one of those phreaks that can think hexadecimally but that talent likely allows you to earn the BIG bucks so forget about a budget and hire me to clean your firm at a livable wage, okay?).
Here’s what to do.
Live as cheap as you can. Pay the least amount of rent possible. Pay the least amount for everything. Some material possession are better bought with quality as or more important than price. Pay a little more with some goodies and the cost-per-use or cost over the goodies lifetime is a better bargain than buying cheap and having to replace the goody regularly.
After doing the above… attitude comes in. Before forking over your money ask yourself; do I really really absolutely gotta’ have this? Is it a necessity vice a want? Do I need the thingy or do I NEED it.
Let the answer be your guide.
Forego as many purchases as possible. Buy only what you have to survive. If you earn enough to live above abject poverty, to have a wee amount of comfort, go for it but….. look at your savings, that rainy day fund when your job disappears.
Weigh the amount of money mentally in your pocket ready to be spent and the amount in savings. Keep your savings amount in the back of your mind and weigh the two.
Be honest with yourself. Do you KNOW the few bucks in your pocket should go into savings? Well, put them there!!!
Okay… there’s the Obbop oblate-spheroid-style budget plan.
Designed by a life-long member of the class of folks who performs the labor that ignorami spewing “Jobs Americans won’t do” can utilize but could also probably function for those further up the socio-economic ladder/pyramid.
While I am here with babbling spewing upper-class on the mind I have a question. Hey, GW, where were YOU when I was steaming up the Saigon River with machine gun cradled wondering when the unfriendliness would arrive from the tree lines? When I returned the only job I could find for one with my skill-set was alongside the migrant workers in California’s central valley.
Where were you, Bush?
6.
Chris
April 23rd, 2008 at 9:13 am
Okay, I’m a nerd. I use budgets now. I’ll be richer than you now, without having to sell my body. Ha!
7.
Kyle
April 23rd, 2008 at 10:30 am
I just electronically transfer 1/3 of my gross income into various accounts every month for various purposes. The rest I spend however I feel like spending it, usually on booze and women. No budget, no problem.
8.
Chadwyck
April 23rd, 2008 at 12:56 pm
it’s good to take stock of where you are financially, but I’m a cheap bastard, so I usually don’t have a problem with overspending.
9.
Martin Welch
April 23rd, 2008 at 9:18 pm
Budget is very important especially if you are having a family. We need to prioritize the important needs that are needed.
10.
gt
April 24th, 2008 at 5:27 pm
amen to no budgets! like you, i m just financially disciplined. sometimes my credit card bill is 3500 sometimes it’s 1500. if i want something or need it real bad, i have savings that can go toward it. i just discipline myself b/c we do have a lot left over and it goes toward savings. when we go down to one income soon though, i am thinking we will need a budget
11.
Mr Credit Card
April 24th, 2008 at 10:36 pm
I actually agree with this. I’ve set up budgets before, but find that I do not really stick to them. But the way I make sure I stick to parameters I set out is as follows.
I set an amount that I want to save every month and have an automatic savings plan.
I put my bills on auto bill pay.
I charge all my expenses to my credit card and I make sure I spend roughly the same amount every month.
12.
Steward
April 25th, 2008 at 3:06 pm
Budgeting is important if you want to run a tight financial ship. If you don’t, then you can spend willie-nillie and as long as you aren’t
a complete failure as a human beingreally stupidliving well outside your means you can get by just fine. But if you want to maximize the amount of good you do with your money (good for others is what I mean) than I definitely recommend budgeting. That way you can do some more in depth analysis of your spending to see if not eating for weeks will really feed that many more starving children in Antarctica or the Vatican City.13.
Chris
April 27th, 2008 at 5:30 pm
Only 5% on ceramic roosters, whats wrong with you? That’s an investment brother, you cant skimp there.
14.
Presh
May 5th, 2008 at 1:48 am
The cartoon has me hooked
I’m looking forward to reading more articles.
I myself do not budget and wonder how budgets can help with spending. We can’t control the randomness in life. I like to set aside a fixed amount, like Kyle above suggested, and just spend the rest. Some have called that method a “budget” for savings rather than spending.
15.
Rob Bennett
May 13th, 2008 at 7:08 am
The power of a budget does not come from following the numbers. The power is in the insights developed while putting the budget together. Writing a budget forces you to assign relative priorities to diffferent spending categories and that causes you to think deeper about what it is you want to do with your money and with your life.
When you fail to stick to a budget, that tells you that you have done something wrong in writing it. If you go back and question what it is you did wrong, you will learn from the experience. Budget-writing needs to be viewed as an ongoing process.
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