How To Not Need a Budget

I have a secret to tell you.  I don’t have a budget.  As someone who writes stuff online, sometimes about money, I have met a bunch of personal finance type writers over the last couple of years and in fact, quite a few of them do not follow a budget either.  How could this be that many of those seemingly most in the know don’t have budgets?  

The Experience and Process Trade Off

There is a project management truism that states that the amount of process you need around a project is inversely proportional to how experienced the team is and how much they have worked together on something similar before.  Likewise, those who are already pros with their own finances have a really good feel for what their spend is and what is appropriate to hit the rough spend planned for.  In other words, the better your money habits and the more aware you are of finances, the easier it becomes to hit a repeatable monthly spend without much oversight.  

At the same time, those that are already financially secure often have much more leeway in their budgets.  After all part of why you are careful with cash while getting to financial independence is so that you don’t have to pinch every penny later.  Paradoxically, the best reason to have a budget is so that after a bit of awareness and developing good habits, you’ll never need one again.

Have a Budget So That You Don’t Need One!

If your savings is piling up like uncle Scrooge’s money bin and you’ve been carrying around that same dusty $50 for the past month, then tracking a budget on a daily or weekly may not provide much benefit.  However if any of the following apply to you, a budget can give insight into your spend.  It can also help you develop some better spending habits that will have you stacking more chedder than a Wisconsin dairy farmer on his way to the state fair doncha know.

Get a Budget if You…

• don’t know what you spend
• want to save more but don’t see where you could cut spend
• spend too much
• have big variance in your monthly spend
• have big dreams of showing a friend your private plane some day (budget today = bud + jet in future).

Budgets Aren’t Fun So Let’s Be Brief

The essential elements of having a budget are as follows:

#1 Track your spend

Some use mint, personal capital, or just a spreadsheet like a caveman (I use a spreadsheet).  Seeing your baseline will help to identify opportunities. Even if you are afraid of what you may see, just do it! You are more awesome for taking charge and this is the only way to really begin your savvy money path.  

#2 Set Realistic Spend Goals

If you are living in San Francisco and want to cut half of your spend on housing that may not be realistic, however, if you are looking to trim your nanny and private schooling budget that is totally feasible. Can you realistically cut enough spend to meet your goals or do you need to increase income (or get a side hustle)?

#3 Periodically Review and Iterate (back to #1)

How are your spending habits tracking your budget goals?  What habits can you change?  Where are big areas of spend that may not be necessary?  It is amazing how compounding can work with lifestyle.  Cutting a bit and then acclimating each month and you are saving big dollars by the end of a year!  

Goal! Is Not a Four Letter Word (if you add an exclamation point)

Did you notice how I kept mentioning the word goal in the steps above?  What is yours specifically?  When I was just out of college, I started as a member of the 0-1 comma club depending on the month and whether my bank balance actually tipped up over $1,000.  My rough financial goal was to save cash ASAP.  However, I learned over time that having a more specific goal helped make my budget feel less like a burden and more like training for something awesome to come.  For example a goal of having $X in an investment account by age 30 would give me some F-You money.  A goal helps guide the 3 steps above and the 3 steps help evaluate if the goal is actually possible. 

Financial Independence, Retirement, Or Something Else?

Is financial independence your goal?   Are you older and looking to go from zero savings to being able to retire in 10 years?

Financial independence is a one financial goal. This is often defined as needing 25 times your annual living expenses saved and invested in order to live off of the passive returns from this pile forever without touching the principal (also known as the 4% rule). Perhaps you are older and just looking to retire based on a standard retirement age calculator.

Regardless of goal, setting one is a critical part of any budget.  It clarifies whether you can get there through controlled or reduced spend alone, or whether you need to raise income in some way as well as budget to get there.

My Budget Over Time

When I was in my 20’s, I was newer to running all of my own finances.  I looked at my budget often.  Today over a decade and a half later, I only look at my numbers every 6 months to a year.  I have a habitual control of my spend built over time.  I have also surpassed my goal.  However, I still look at the details periodically.  To give an idea of the level of detail that I look at in my spend, here is a pie chart of how my family of 4 spent our money in 2019:

If I was looking to trim spend, some obvious areas would be to spend far less on travel and entertainment for example.  However, after years of practicing the lessons I share on this site, I left my formal job in 2018 and actively planned to spend more money in 2019 precisely in these categories. Hence my budget is fine for us even if it likely doesn’t apply to you.  It certainly doesn’t apply to the 20’s or early 30 year old version of me either.

So What is an Average Budget?

The following is a pie chart of how the average American household spends their cash based on the latest US Bureau of Labor data from 2018.  This pie chart excludes pension and retirement savings and only looks at spend:

This is a benchmark to look at.  However, it is worth pointing out that the average household brings in around $78K before taxes and contains 2.5 people.  0.6 of those people are kids under 18 and 1.3 of those people have a job.  It is also worth pointing out that the average household has debt and likely retires in their 60’s.  My point here is that you are not the average household nor do you want to base your decisions off of the average if you are looking to get ahead and your goal is different.  You don’t have 0.6 kids (I hope) and your income is likely higher or lower than this average.

When You Can Scrap The Budget

Budgets are simple but certainly not easy to stick to.  Clarifying a goal and following the 3 steps above can get you there.  Averages can help to see generally how you compare, however, you need to adjust for your actual household situation.  Since we are all unique in our living situations, tracking yourself against your past and your goals is often even more meaningful.  If you hit your goal and/or you find yourself hitting your budget every month without much thought, then congratulations you can probably lengthen the time between checking your numbers.  Over time, you too will find that you are wealthier and won’t have to work as hard to hit the numbers.  Acclimation and habit building are real and is the reason that I no longer really have a budget beyond a 6 month or annual check in.

I hope this helps you on your path.  Feel free to ask any questions or share your budgeting tips in the comments below.

I’m passionate about financial independence, happiness, success, and adventure. Consider subscribing below to get a weekly email directly from me with a few thoughts and latest articles. It’s totally free and totally worth it, I promise.