Ah the B word. Let’s be real for a second – almost nobody actually loves to budget. If they do, they’re some sort of freak. Budgeting can be time-consuming (though it only takes an hour or so a month) and it can be mentally exhausting.
If you’re not already on a good track, budgeting can be life-changing. Telling your dollars where to go is extremely important.
After you’ve got the hang of things, though, budgeting becomes somewhat less important.
That’s why Kristin and I don’t really, truly budget.
Don’t Sweat the Small Stuff
Instead of actually sitting down each month and breaking out all of our expenses – something I’d expect to do in a traditional budgeting exercise – we just estimate the big things.
Then, every week or so I pore over what we’ve spent money on to make sure it’s in-line with what we’re expecting.
It’s not a budget in the strictest sense, but it serves the purpose of still keeping us on track. Things will come up unexpectedly. But we’re living below our means to the point that if we spend $300 in a month on groceries and we’d only planned on spending $250, I’m not sweating the fact that we “blew our budget”.
One way we accomplish this is by limiting the money we have to spend. It is a behavioral change that has taken some time to get used to, but it’s served us well for a while now.
Everything else we spend relatively freely on. In the mood for a coffee on the weekend? No big deal, regardless of if we got coffee last week, too.
Paula Pant refers to this as the anti-budget: take what you want to save off the top, and spend the rest however you want. When you’re out of money, you’re out of money.
Getting down to the nitty-gritty of line-item expenses works for some folks, but it’s not ideal for us.
Conduct a Spending Review Instead of Creating a Budget
While we may not budget every month, we do watch what we spend. Periodically I conduct spending reviews.
Sometimes these will point out some potential issues and areas we can cut costs. For example, looking at some of our recurring expenses pointed out two areas we could probably trim:
- Cable TV. Based on how much we actually consumed, could we get this for cheaper? (It turns out yes, we could)
- Cell phones. Are there alternatives to the Verizon plan we’re on, based on our data usage and phone preferences? What’s the cost to switch, and what would it save each month?
In the case of cable, we’ve switched to SlingTV which is less expensive. We still get all the channels we’re used to watching, so this one was pretty painless.
For our cell phones, we’ll wait until I’m no longer paying for mine each month. After that time, since I don’t use much cell data, I’m going to switch to Google Fi. Kristin uses an insane amount of data and the cheapest option for her will likely be to stay at Verizon on an unlimited plan.
Spending reviews can point out other behaviors, too. Going out to eat a lot? It may not hurt, but it might mean foregoing other uses for that money.
If that’s not how you want to spend your money – if it doesn’t align to your values – a spending review will help you identify those.
Budgets Have Their Purpose
On the front-end, budgets serve a good purpose. They help you identify where you WANT your money to go.
Once you get into a routine, however, personal finance is actually pretty boring day-to-day and month-to-month. We find that assessing how money is actually being spent, on a more frequent basis, is more effective at controlling our expenses.
There’s a reason JD Roth created a web site called Get Rich Slowly. Finance is a slow game.
Setting up good systems – like a budget – can help you plan, but typically things don’t change significantly in our life month-to-month.
Of course, 2017 has been a bit of an exception to this with our wedding and a house. 2018, however, is shaping up to be pretty stable and predictable.
We’ll start off 2018 with a budget – with a decision on how we WANT our money to be allocated – and review it quarterly or twice a year. This will make sure it aligns with our goals.
Then we’ll conduct a spending review every other week to ensure we’re on track. Reviewing it more frequently lets us pull back in some areas if needed.
Do What Works For You
I know a few other people in my life who also don’t actually budget. At some point your income easily supports your lifestyle.
As long as lifestyle inflation doesn’t creep in, conducting period spending reviews is a great way to manage your money. Reviewing your budget and reassessing your goals on a periodic basis is very helpful.
But if we’re doing well financially, we’d rather not stress over creating a new budget each month.
For us, a spending review does the job just fine. At the end of the day you should do what works well for you.
Do you conduct spending reviews AND budget, or just do one or the other? Or neither??