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Why I do not use a Budget

The other day I posted about the key to my current financial position.  One of the comments on this post caught my eye. Route to Retire had an interesting comment on how he saved without using a budget. I started to respond to this comment. As I thought about my response, I realized it would need to be a more in depth then a comment would afford. Here we are, with me explaining why I do not use a budget.

The Benefits of Budgeting

So, let me first say that budgeting provides a lot of benefits:

  • It can facilitate you tracking your spending if you are not already doing so.
  • It allows you to pinpoint specific areas of spending where you can focus. Reducing these items can lead to a more efficient household.
  • A budget can also be used as a yardstick to measure your progress against your larger goals. For example, we set a goal of saving 50% of expenses this year. The process of compiling a budget can tell us in any given month where we are against our savings goals.

Our Approach to Cost Controls, No Budget

For many people a budget is the right way for them to manage their expenses, it just is not necessarily for us. We do more of an implied budget approach. Everything our household purchases is paid for by either a single credit card or 2-3 fixed payments a month.  We have a very good grasp on our overall spend a month.  Knowing this spend amount we have a goal to not exceed a target amount a month. To help with this goal we do things like automate our savings to further drive us to meet these goals. From this target amount we determine how much is fixed (can only be changed with significant life changes) and variable.  We then push ourselves monthly to live below the variable portion of that number.

My Targets Control Cost Growth, not Reducing Costs

By now some of you are thinking, this approach probably does not help with reducing your costs from month to month. Well you are right, but in my case I do not use a budget to reduce costs. Instead I am focusing in this step on controlling cost growth. One of the keys of my approach is month to month and even year to year I compare to what came before. This limits lifestyle inflation and naturally increased my savings rate. My income would increase from year to year but my costs stay roughly constant to my average from the previous year.

What about Reducing already Inflated Costs using a Budget?

You might be saying, what about the scenario where I already have inflated my lifestyle? Or in my case what about the higher likelihood where I changed my situation so significantly what came before is no longer relevant? In these cases, I admit my approach is a little more complicated than a monthly budget.
As part of my process I take a step back once or twice a year. This timing often corresponds to the occurrence of a major life change, but I still do so once a year regardless. As I take a step back I look at my spending in various categories and specific items over the course of a year or more of time. This is also when I look at the fixed costs I largely ignore the rest of the year. I then brainstorm how to cut costs related to these areas. In some respects, I am implicitly applying budget methodologies in this analysis, but I’m doing it over a much longer period. I am also only doing it a few times a year rather than monthly.  During this time, I also benchmark what I see others spending in this area. Perhaps I check what the average cost for power is in my area? I check for lower cost insurance or phone service options. Mortgage refinancing is also considered. I even read other personal finance blogs and see if my spending on certain areas is way out of whack or in line. The important part here is I am benchmarking against those on a similar path to my own. I’m also only comparing to items that fit my value. It would be no good if I checked myself against the Jones after all. However, seeing where someone else is maximizing their life can help me to maximize my own. This should sound familiar, we talked about similar concepts around analyzing data. I essentially use the same approach to my finances over time.

So What are the Benefits of no Budget?

The benefit to me over normal budgeting is:

  • I do not have to spend hours a month categorizing all my spending.
  • I also do not find myself obsessing over if I spent 20 dollars extra on toilet paper in January.
  • Often budgets are hard to manage over a month as some costs do not fit into a monthly cadence. This is especially true if you are trying to get a good deal. You do not want your costs of paper towels to increase because you are buying it monthly instead of in bulk.
  • It works for me.

The last point is the most important. Everyone has a different approach to cost controls that works for them. The key is to determine that method and put it into action as soon as possible. Perhaps you will like my approach and put it into action. Perhaps you will use a more implicit approach like Budgets are Sexy. It’s down to whatever works for you.
How do you control spending?


  1. Leo T. Ly @
    Leo T. Ly @ March 20, 2017

    I also don’t have a budget and I don’t go shopping a lot. One way that I save money is to buy things ahead of time when I don’t need it yet. For example, if I walk by a men’s clothing store and see a huge sale for dress shirts, I will buy a couple as I rarely go shopping for clothes. At other times, when I see household items that are on sale, I also buy them ahead of time to avoid paying full price when I run out of the item.

    • March 20, 2017

      That’s a very good point Leo. Once or twice early in out marriage we tried a more explicit budget. It raised our costs sometimes because we tried to Time certain purchases to the budget, instead of to the best price.

  2. I’m naturally a saver and not a spender, so I know what my baseline spending habits will be month over month.

    That being said, I still track every dollar and track my net worth over time. I like to see this evolution and I will see if there are any areas I could improve.

    Right now, I’m focused on paying down my mortgage to get rid of PMI and to control my eating expenses.

    • March 20, 2017

      Both myself and my wife are more naturally savers, which does make it easier. How are you doing the tracking?

  3. Dan
    Dan March 20, 2017

    I don’t budget mainly in defiance because my father was obsessive about it.

    I get a paycheck once per month. I l compare my checking balance on payday vs. payday last month. I set up autotransfers out of the checking account to some taxable investment accounts so I have “savings” built into the process. I immediately transfer out any one-time credits to the checking account like an annual bonus or tax refund.

    Using this month-on-month comparison, I see a generally growing account balance which tells me I am spending less than I make. Once the balance exceeds a certain amount, I move some of the money to a taxable investment account.

    I try to charge as many expenses as I can to my credit cards (which I pay in full at the end of the cycle). My credit card categorizes the charges so I get an after-the-fact spending report each month which I use as a budget for the future (mainly retirement planning). It also shows me where I am spending the most money (and where I can potentially save the most).

    • March 20, 2017

      Not to far off what we do. Have you found any particular categories that tend to be problem areas over time?

      • Dan
        Dan March 20, 2017

        Restaurants flare up sometimes. I have taken foreign language classes at night (2X per weeks). That adds 9 or 10 meals per month at a restaurant near class site plus sometimes drinks after class with classmates.

        There usually seems to be one large charge per month that I have to “budget” for – 6 month car insurance premiums, annual home insurance premium, tax bill, theater subscription renewal, car registration renewal, professional license renewal, etc. Those large annual/semiannual expenses are what cause me to move money around. I try to charge them all so it give me 3 to 6 weeks lead time to move the money into my checking account. I had a car accident last year with a $2,000 deductible so that put me underwater that month. Over the course of a year, these expenses still keep my annual take-home pay to be greater than my annual expenses but any given month can show a deficit or close to break-even. That’s one reason I don’t budget. I don’t want to get too worked up over a monthly deficit.

  4. Wall Street Physician
    Wall Street Physician March 20, 2017

    I keep track of my spending in Mint and have setup budgets within the program, but rarely if ever adjust my spending based on my preset budgets for food, mortgage, etc. I principally use it to track my spending and make sure I don’t go completely overboard in a particular category in a given month. In that sense, I use the Mint budgeting tool retrospectively as opposed to in real-time during a given month.

    • March 20, 2017

      I tend to do it old school in excel because I’m paranoid about information security, but I hear great things about mint. If my brokerage account ever creates a read only view I’d be all over one of here apps. It sounds like we’re both aligned on a look back approach to spend optimization.

  5. MMD
    MMD March 20, 2017

    To some degree, we have a very similar approach with putting everything on the credit card (though I still think of this as simply another form of budgeting since there are still imposed fixed and variable limits). Regardless, my aim is not to spend the least. I simply to try to get the best deal I can get. That way I know I’m maximizing the value.

    • March 20, 2017

      MMD, were on the same page there. My goal is to maximize my happiness while spending the least amount to bring that happiness. Deprivation is never my goal. Thanks for adding your thoughts.

  6. Mr. Need2save
    Mr. Need2save March 20, 2017

    Almost all of our expenditures are done using credit cards (which we pay off in full every month) so that we get better insight into our spending – and the cash back doesn’t hurt either.

    We’ve been using Mint for a few years to track our expenses, so as you’ve mentioned, we know what are normal months look like. It did take us a couple of years to get comfortable with providing Mint with all of our account information. It does make it super simple to catch any anomalies in our spending that need a closer look.

    So really no hard budget for us either.

    MUSTARD SEED MONEY March 20, 2017

    For the most part my finances are now on autopilot. They’re within $100 each month so we for the most part we don’t really budget. Now if things go way out control within our food category my wife and I might sit down to figure things out. But for the most part like i said things are pretty steady at this point 🙂

    • March 20, 2017

      It’s funny how finances settle into a routine after a while. Good habits are thankfully just as easy to continue as bad once established.

  8. Ten Factorial Rocks (TFR)
    Ten Factorial Rocks (TFR) March 21, 2017

    Budgeting works only at the fringes of finance. By that I mean when income and expenses are close to each other. After mastering the concept of nonlinear income growth and controlled expenses, budgeting hardly is worth the effort because your month starts with a massive savings of 30,40 or 50% of income and what’s left over is allocated for expenses, and for disciplined people, even that has some leftover so at the end of the month, some more money gets transferred into investment account. Budgeting is great until you master the art of money management, but not after. It’s somewhat like a tri-cycle, it’s requires to get on it for the first time, but after the kid learns that, the right thing to do is to remove the third wheel so that the kid learns a ‘higher order’ balance on a 2-wheel bike.

    • March 21, 2017

      I love the analogy. Thanks for stopping by.

  9. Go Finance Yourself!
    Go Finance Yourself! March 21, 2017

    Your approach is very similar to mine. All variable expenses go on our credit card each month and I have a good idea of how much we spend on average each month. We’re comfortable in our current lifestyle, so like you, my main goal is making sure our costs to begin to creep up. Knowing this average amount we spend each month allows me to dump the excess into investments. I do have a detailed savings plan of how much I should be able to save/invest each month based on our average expenditures.

    The approach works well for us because we’re not trying to cut every unnecessary expenditure. My approach more centers around earning more which allows us to maintain our lifestyle and save more at the same time.

    • March 22, 2017

      Exactly, there comes a point where your household is fairly efficient and there is not much left to cu that won’t hurt, then you need to shift your focus to earnings.

  10. Matt @ Optimize Your Life
    Matt @ Optimize Your Life March 21, 2017

    I’m largely in your camp. I automate my savings and don’t really set a budget. I do use YNAB, but more for tracking expenses and budgeting longer term than for budgeting month to month. I’ll plug spending and savings numbers into a spreadsheet at the end of each month and be able to see if our spending is out of line or needs to be corrected in any way.

  11. Rich @
    Rich @ March 22, 2017

    I track cash flow closely but don’t use a budget to dictate spending. I find that our spending is *lumpy*. One month is low and the next month we go on vacation or buy a car and it changes the whole year. I haven’t quite figured out how to account for that, but thankfully our income is high enough to supply an adequate buffer when we “take our lumps”.

    On the bright side we also have positive lumps from investments that even out the negative lumps 🙂

    • March 22, 2017

      Our spending is actually fairly regular oddly enough. We do have travel but usually hacking covers that. The actual categories within the spending are where I seem to jump around. In January it might be consumer goods, February its clothes, etc.

  12. Four Pillar Freedom
    Four Pillar Freedom March 25, 2017

    I also don’t have a budget, my main reason being that the time commitment to keep a strict budget isn’t worth it to me. By tracking my net worth each month I can get a solid of idea of my monthly spending and whether or not it’s out of control. I prefer to keep track of my expenses loosely this way. I really like your mindset towards budgeting – it definitely has its benefits for less seasoned rookies but for people who are naturally strong savers a budget isn’t always necessary.

  13. Our Next Life
    Our Next Life March 26, 2017

    YES! We are completely on the same page as you. We keep things under control by artificially constraining what we have to spend by making most of our paychecks instantly disappear to savings and Vanguard, and then keep the amount in checking fairly low as a proportion of our earnings. Then we live on that. Of course, I recognize that’s terrible advice for someone just learning to get their spending under control, and there was a time when we paid cash for everything to teach ourselves to make do with what we had. But now that we’re set with good habits, we see absolutely no reason to budget in the usual sense.

  14. Kevin Drevik
    Kevin Drevik April 26, 2017

    I guess I have a “partial budget” that I use. Every year I build a budget with about ten generic descriptions (property taxes, groceries, home repair, gas/electric, internet/phone, etc.) and get a monthly budget figure based on the previous year.

    A key part of it is paying myself first from the get go (I’m up to almost 50% of my take home salary).

    I then track my spending each month in these broad categories (maybe an hour a month of checking). I typically leave sufficient surplus funds to suck up major variances. At the 6 month mark and the end of the year, I relook at spending and adjust as necessary.

    Again, it works for me – which is the key here

    • April 26, 2017

      So true, find a process and stick with it is the best recommendation.

  15. Gasem
    Gasem October 29, 2017

    I think with the tools available today I don’t see how you can not develop a budget. I use Mint to track my bank and credit card, and except for a few things like my power bill which gets swept out of my bank account, I charge everything and pay it off each month. A monthly budget is ridiculous constraint. My homeowners insurance is like $4K once a year in August so it doesn’t fit “monthly”. I have 2 kids in college and there are per semester expenses that have nothing to do with monthly budgets. BUT I do have a to the dollar accurate picture of my yearly expenses. Evaluating every point on a line is one way to draw a line. Having this kind of data is critical to understanding your needs come FIRE time.

    I am retired and a clear understanding of the money flow is very different than during the accumulation years when I did the thumb nail approach. I always made excessive money so I didn’t pay much close attention, but had I, I would be probably hundreds of thousands ahead. The other tracker is a financial aggregator for all of my various accounts. It’s the only way to get a clear picture of your risk and net worth. I use a product called black diamond reporting through my financial advisor but a good free one is personal capital.

    I download my mint transactions to a cvs file and paste it into a running spread sheet where I can make any adjustments I need and voila’ Takes 10 minutes a month. Knowledge is power

    • FullTimeFinance
      FullTimeFinance October 29, 2017

      I think it’s a matter of degree. For example, I don’t care how much I spent eating out in June. I do care if my spending increased significantly overall for an entire year. I also monitor for consistent upward trending Categories, but more on a yearly basis. In a way saying you plan on sticking around an average spending line is a budget. In another way it is not since I don’t have say 400 dollars allocated to food, I have certain spending allocated to the month/year. I’m comfortable with current spending levels so my target is cost maintenance rather then cost reduction. Ultimately it’s whatever works for you.

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