No, Not Everyone Needs a Budget (guest blogger – Dan)

This week, MikedUp Blog is attempting to answer the question, “What are personal finance bloggers collectively wrong about?” My contribution posted Tuesday, while Dan from Pennies and Dollars has provided his take below. Here’s a link to the intro post (from Monday) if you’re looking for more details. And as always, thanks for reading!

 

-Mike

 


The personal finance community is obsessed with budgets. And for good reason.

 

Budgets are the roadmap for our finances, and most people tend to go astray without a budget in place.

 

However, there’s a tendency in the personal finance community to deliver budget ultimatums. To be clear, not everyone is guilty. Some personal finance writers take a balanced and measured tone to budgeting. But I’m certainly guilty of budgeting ultimatums! I’ve stated in no uncertain terms that everyone needs a budget. And I know I’m not alone. The kind host of this blog has delivered a similar ultimatum. And according to my very unscientific twitter poll, this sentiment is very common.

 

A majority of the 28 people who chose to participate in my poll said that There’s even an entire budgeting program named ‘You Need a Budget!’ Yes, perhaps some of this is intentional hyperbole intended to underscore the importance of budgeting for the majority that does need to budget. But when repeated enough, hyperbole morphs into doctrine. The thing is, such ultimatums don’t recognize people who actually can be financially successful without a budget.

 

The bloggers at Urban 20-Something, Money Manifesto, and Make Smarter Decisions are all examples of people that don’t budget. On a side note, since these are personal finance bloggers, there are clearly outliers in the personal finance community who don’t deliver budgeting ultimatums. Back to my point, each of these individuals has decided to forgo the budget.

 

The reasons for not needing a budget vary. Perhaps the individual doesn’t feel the urge to go on shopping sprees. Perhaps they recognize the limits of their spending power and always make sure they have enough to cover their expenses. And they likely have developed strong self-control (Money Manifesto) and good habits (Make Smarter Decisions). Almost certainly these people place a high priority on saving, likely saving right off the top of their paycheck.

 

Either way, as they say, the proof is in the pudding. Each one of these individuals has success stories to back themselves up, such as paying off an $80,000 debt mountain in 3 years or retiring several years early. So if someone with no budget is covering their expenses and meeting their goals, telling them that they need a budget is like telling a software developer that he needs a user manual to do basic computer functions.

 

But Wouldn’t Budgeting Just Supercharge Their Finances?

 

You might be tempted to think that it’s all fine and good that these people are living without a budget, but they might do even better with a budget! Perhaps. Maybe a budget would help them eke a few more dollars into savings or investments. But to what end? If they’re already meeting their goals, trying to squeeze more money into savings starts bordering on wealth hoarding. Saving is good if it is done in the context of planning for the future, but not if it is done for the sake of dying with the most money. Life is not a game of monopoly.

 

Budgeting also costs time. True, not a lot of time, but time nonetheless. For many people (myself included), spending this time to budget is well worth it to ensure that we save enough to cover emergencies, retirement and any other goals that we might have, while still covering all our expenses. However, for someone who is already on top of this, budgeting is simply wasted time.

 

Err on The Side of Caution

 

I don’t want anyone carelessly abandoning their budget because of this post. When in doubt, budget. However, if you are convinced that you don’t need a budget anymore, that you have formed good spending and saving habits, and you are convinced that budgeting has become more of a burden than a tool, go ahead and cautiously try living without a budget. But keep an eye on your goals. The moment you notice that you’re falling behind on savings or your emergency fund, or if money starts getting tight at the end of the month, get that budget out again! When someone else mentions that they don’t have a budget, however, don’t jump to conclusions. Don’t automatically assume that they too must be falling short on savings goals or running out of money at the end of the month. Remember that personal finance is personal. Everybody has their own sets of strengths and weaknesses.

 

 


 

Thanks for reading!

 

Thank you so much for being here! I have a few humble requests:

 

– Please share this post on your social media platform of choice by clicking one of the social icons below.
– If you like what you see, please subscribe to the blog or follow MikedUp Blog on Twitter.
– Our Index page has a complete listing of all published articles – check it out.

 

I’m glad you’re here. Thanks again and talk soon!

 

– Mike

 

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8 Comments

  1. Thanks for including me here! I have never budgeted but I have asked myself the “supercharge” question in the past. Good habits (I am not a spender or shopper at all…) and making really reasonable choices on big ticket items (house, car) have made the big difference in our lives. We tend to spend the most on experiences and travel – our priorities.
    Here’s an interesting thought though – as I enter early retirement in June, I think we will try budgeting – or at least keeping much closer tabs on our spending. Not getting a paycheck will definitely throw my comfort zone off. We are planning on downsizing and have both kids off to college, so I think the start of 2018 will be a good time to give it a try. The numbers would vary too much until we do that.
    I am going to push my kids to use budgets though. Time will tell…one is a saver, the other a spender – but on value items. Nice post!

  2. Confession: Heather and I haven’t sat down to do a budget in at least 6 months or maybe even a year…and as you point out, it hasn’t decreased our progress at all, likely just saved us time.

    That being said, I do wish we would budget because it would help me better estimate how much progress we will make a month ahead, instead of always looking back and evaluating afterwards what slowed us down or sped up our progress.

    I would also argue that while those of us who make progress without budgeting may not sit down and write out a budget (on paper or otherwise), we still budget in our minds and have set limits on what we normally spend and intentionally make decisions to keep within the ranges we should be spending on various traditional budget categories. We just make the adjustments in our minds as the month goes by instead of on paper.

    (Correct me if I’m wrong, any others who don’t budget and still make every bit of the progress you should be able to given your goals and circumstances)

    1. Interesting points, Jon- thanks for sharing them. I’m guessing you’re right about sticking to a budget mentally. The only other way I can think of making a ‘no-budget’ work is by intentionally living extremely frugally and not really spending money on non-essentials.

  3. I could see how a single person could not have a budget and still “succeed” financially but I would think it would be very difficult for a married couple unless they both have the exact same mindset about money. In my family, I am the saver and my wife is the spender. We have to have a budget/set boundaries or else she would just keep spending. Also, are these PF bloggers that don’t have a budget still tracking what they spend after the fact? I would think you would at least have to do that in order to know where your money is going!

    1. Ryan, I think you’ve touched on an important point in regards to marriage. A lot of couples are definitely split between saver/spender, although I do know several couples who are both savers!

      Also regarding tracking vs budgeting- it’s interesting because some PF bloggers are adamant that tracking is more important than budgeting, while others are reversed. I can’t say for sure if there are any PF bloggers that do neither.

  4. I started out initially budgeting (actual budgeting) but eventually it became more overwhelming and started to become an obsession. It was a perfect start to change my mindset and perspective on my finances, but since then I’ve eased my way into basically budgeting on autopilot. I stick to mentally budgeting the important stuff like bills, then just try to curb unnecessary spending.

    Great read nonetheless because I think some people better off not being so analytical with their budgeting goals

  5. Dan,
    Thank you for agreeing to take part in this experiment and thank you for coming through with a solid post!

    I’ll say that my wife and I started budgeting early in the relationship (almost a decade ago) and now our habits have become so consistent, budgeting started to seem like a waste of time. We knew how much would be spent on most items before they came up. So, we wouldn’t be where we are without a budget, but we don’t necessarily use one anymore either… (I love a good hybrid strategy).

    A big thank you to all of the other commenters as well. Dan and I appreciate you taking the time to read and share your thoughts! Here’s to more thought inspiring posts in the future! Cheers
    -Mike

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