Budgeting gets a bad rap. A lot of people think a budget is restrictive, time consuming, and means you must be poor. While none of those are true, you may feel like you don’t want to be bothered with a budget or even that you don’t need a budget.
I was talking with my dad about budgeting recently when he and my mom were in town visiting. As recent retirees, they are traveling across the country in their RV to see new places and visit family.
My dad has never been a budgeter. He uses the classic excuse that a budget is too restrictive. He hasn’t seen the budgeting light yet.
In the year or two before retiring, he talked about how after retiring he would need to start budgeting because he’d be on a fixed income. My mom was excited at the possibility of introducing a budget into their marriage after nearly 40 nears without one.
Knowing that budgeting and personal finance are favorite topics around here, he was eager to get my opinion (or, I daresay, my approval) on his non-budgeting plan.
Instead of keeping track of and categorizing his expenses, he just checks his account balance monthly. He leaves a certain amount, maybe a couple thousand dollars in his checking account as a buffer. He spends whatever he wants during the month, then just makes sure that they haven’t dipped into the buffer. If he sees that they are dipping into the buffer a couple of months in a row, he will back off on spending so much, evaluate their overspending and make any necessary changes.
“See? I don’t need a budget,” he told me. “Isn’t that good enough?”
I agreed that his system was working fine for him.
His situation, however is exceptional. He has a pension that pays him something like 70% of the average of his salary over his five highest-earning years. Staying within that income isn’t much of a challenge right now.
At the same time, he doesn’t really have any financial goals. Besides living within his monthly pension check and keeping a buffer in his account, he isn’t working toward anything in particular.
Times when you might not need a budget
While I think that most everyone can benefit from a budget, I suppose there are some circumstances where you would be fine without a budget.
1- You have no financial goals.
If you’re at a place financially where you aren’t trying to achieve anything in particular, then you might be fine without a budget.
Budgeting is not an arbitrary set of restrictions on your money. Budgeting is the vehicle to reaching your financial goals. The more precise your goals, the more precise your budgeting.
If you have a financial goal that stretches you, is measurable, and is time-bound, you’re going to be more dedicated to tracking, managing, and making the most of every dollar.
2- You have a consistent track record of living within your means
Maybe you’ve been frugal your whole life and have an easy time living within your means without trying very hard. Maybe you’re just not a spender. You might have really good system of checking your spending total and have a cushion of money in place.
Keeping track of your spending and telling your money what you need it to do might seem like overkill since you’ve been doing fine on your own.
Either of these situations on its own isn’t necessarily a free pass out of budgeting though.
For example, just because you don’t have goals doesn’t mean you can wisely manage your money and stay afloat. Additionally, people who consistently live within their means may still live by a budget as they work to reach their goals.
However, if you have no financial goals and you easily live within your means, then you might not need a budget.
I haven’t always been a budgeter
Until I was married, I never budgeted or tracked my spending. I was naturally frugal during college and kept mental track of the money I had available. I didn’t have any financial goals aside from feeding myself, housing myself, and paying for school. I felt like my finances were simple enough that I didn’t need a real budget.
I managed to pay for school without debt and without a written budget. But that wouldn’t work for us any more, and I don’t think it works well for most people.
Most people need a budget. Most people need goals. Living within your means is hard for most people.
It’s been nearly 11 years that my husband and I have been budgeting. It has taken different forms over the years and slowly evolved into something that I love.
Do you need a budget? It’s up to you!
I’m going to guess that the answer is YES for most of you, but I’m going to let YOU be the one to make that call.
Budgeting is absolutely essential for us to reach our goals right now, but it might not be for everyone. What about you?
What do you think?
- Do you feel like you’re an exception to needing a budget?
- In what circumstances does someone not need a budget?
I don’t agree that everyone (or even most people) need a budget. I think it’s ridiculous to say that you can only be a good steward of your money if you have a budget. My husband and I have never budgeted. We have financial goals, and we’re able to meet them quite easily without a budget. We don’t have any debt; we aren’t big spenders; our income is below average but so are our expenses. We’re comfortable with our level of giving and we’re comfortable with our level of savings. Realistically if we stopped working today we could maintain our current lifestyle for about 7 or 8 years, by which time we likely would have inherited enough money to maintain it indefinitely; but work is good for you. Copious studies show people who work are healthier and happier. Plus, one of our big financial goals is to build intergenerational wealth. We’ve benefited and stand to benefit from those who have gone before us and we want to pass those same benefits on to our children.
Budgets are necessary if you have a lot of debt (particularly if the debt is larger than the value of the asset – for instance, $40,000 of credit card debt, bad; $40,000 of debt on a house that is worth $300,000, manageable); if you struggle to control your spending; and, sometimes (though certainly not always) if you have a specific financial goal in mind or if you’re trying to save for a large purchase like a down-payment on a home. But many people do quite well without a budget.
I agree with you that a budget is just a tool for reaching your goals! It wasn’t until I got a goal (becoming debt free) that I figured out the whole budgeting thing. Now, as another person mentioned, I can’t really imagine living without one. My original goal was met (whoo hoo!), and now I have so many other things I want to do that will require me to be good with my money.
I think everybody does need a budget, even if it’s just a tracking budget where you keep track of what goes in and what goes out every month. Even that can be eye opening, and it’s always a must (at least for me) to at least know that basic information.
We never had a budget and neither of us really took responsibility for our spending. 15 years and 2 failed businesses later it will probably come as no surprise to learn we have financial problems. When my husband secured his dream job we moved 200 miles and with the first regular income in 15 years we thought we were on our way to stabilising and starting to get on top of things with regular payments. I started budgeting with YNAB 3 months ago and felt so positive about the future but sadly after only 1 year in the job it now looks like he’s going to be made redundant as the charity has run out funding. Feeling a bit deflated to say the least.
I think it’s a lot easier to control your spending when life is simplified, your expenses are relatively predictable, and you have most things paid off and a high income, so maybe in that situation you would not need a budget. We have none of these :), With 4 kids, owning a home, having a limited income and a high amount of student loans, I can’t imagine not having a budget. It is so so easy to spend money on certain things and not feel like you’re spending that much.
I still think it’s important to have a budget, though, because retirement accounts can change, health expenses can go up, and even if you have everything paid off, I think it is wise as a principle to be a good steward with your money and do the most with it that you can, whether that means investing, sharing/giving, or other things.
My friend and I were talking recently. I’m about to have my student loan paid off and she asked me what I was going to do next. Then she said, “Well, you’ve always been frugal”. I’ve never considered myself frugal (until I started this financial journey of doing everything I can to get out of debt). I’m definitely frugal now, but before, I think I just understood the value of a dollar. I work hard for my money. She has no problem spending $60 for a tshirt. That’s way too much for me. And why pay for parking when I can walk a little farther and get it for free? Before I had a budget, I lived within my means. I never carried credit card debt and I never overdrafted my account. Now that I’m almost debt free, I honestly can’t imagine not having a budget again. But at the same time, I have a ton of financial goals and my budget helps me keep track of everything.