My Confession: I'm Not Doing a Budget for 2008

Shortly after I wrote How We Budget, my plan was to put together our budget for 2008. As I started, I wondered why I should go to the trouble. After all:

• I rarely refer to the budget throughout the year -- having "ignored" the budgets I've done for the past several years.

• We have our spending completely under control. We're frugal and we track everything via Quicken. I look at how we're doing every month through a few Quicken reports -- why create another document simply for the sake of doing so?

• We have a good amount of surplus between what we make and what we spend, so there's plenty of room for error.

Early on in our lives, a budget was vital for us. It helped us pay off debts, start saving, start giving, and the like. It was one of the key documents we used to keep us on track. Now after 17 years, we've "got it" and have other (Quicken) ways to help us manage that essentially do the same thing as a budget. So why take the time to create one?

We'll see how this year goes and if need be, I'll do one for 2009. Otherwise, 2007 could have been the last year of budgeting for me.

The Money Blog Network is doing a group writing project on the issue of budgeting. If you'd like to read more on this topic, see these posts:

• Living On A Budget: Don’t Knock It Until You Try It
• A budget in your head isn’t really a budget
• A Free and Simple Budget Planner
• The Fine Art of ‘Reverse Budgeting’
• Actual vs. Budget Report, January 2008

Comments

[MMJ]

Your decision makes sense. It would be great to be in a position to make that choice. Lets see how it plays out.

[Brca1]

You will probably catch a little flak for this but I agree with you. When my wife and I were grad students it was absolutely vital to budget to the penny, in order to save and be able to pay the bills every month. Now with better paying jobs and with years of frugality and savings already in place I don't have the time or the need to budget every penny. It's more like every dollar now and only once a quarter using Quicken. This isn't about standard of living creep, every week (my wife and I are paid on alternating weeks, no doubt this helps me in not budgeting) about 52% of our net automatically transfers into savings of one sort or the other. Since we "pay ourselves first" budgeting becomes meaningless for us. It works for us, your mileage may vary.

[Richard]

No budget, talking about living on the edge.

I say good for you I've never budgeted, just lived below my means and saved my money. As a result I've got a decent nest egg, enjoy a nice steak dinner once or twice a month and generally have the freedom to buy whatever I want, with cash.

[Kevin]

I'm in the same boat as you, I don't make an annual budget. Now that we're to the point we've paid off all our non-mortgage debt and we are pretty picky about what we spend money on, I don't really see the need. Not to mention I'm a CPA so I dutifully track everything in Quicken and review it monthly.

We are focusing on big picture stuff now like saving for our next house and vacations to Maine and Ireland in 2009. Much more fun that trying to scrimp and save just to get by!

[Veteran Military Wife at Life Lessons of a Military Wife]

Technically, if you take your amount for retirement, savings and kids' college off the top of your paycheck..and pay with cash or debit cards as you go along, you don't need to budget...you can stop giving it out when it's gone until the next paycheck. But the reality for me anyway, is that I look at spending (and not spending) money as a game. If I spent $500 one month on groceries, I like to see how much more I can shave off next month, and if you don't know what you spent last month and the last, you don't know if that's realistic or not. Also, you want to keep in the guidelines of what you should be spending...no matter what your income is, if you spend more than 35% on housing and 12% on food (as examples)...you could be headed for financial derailment...a budget can give you a heads up before you get there!

I have never had a budget. Other than the one in my head. If people are dedicated to savings and there finances then they really don't need one. That and my wife and I are not big spenders on a daily basis other than the fixed expenses are only expenses are a yearly vacation and a nice dinner once and awhile.I just do a year end spending report to see if there are anywhere I can save money, but things are usual fine.If people are focused on the big picture the little things are easier to see.

[GLM]

I agree with you - with hindsight experience. When we were first married - 28 years ago a budget was essential for our survival. It helped us plan for upcomming expences, helped us as a couple priortize spending and get a better handle on what we could afford.This lasted about 15 years - when the budget finally allowed more slack and our spending patterns were formed it slowly became less needed .

Now, I still have a list of our basic expences if only to know how long out emergency fund will carry us. I also know thru Quicken where the money goes. This is useful when planning retirement . We invest for the long term first - pay the bills and spend the "extra" guilt free.

[Chris Brooks]

I think this can work if you follow the "pay yourself first philosophy". Budgeting is more important for those that need to find ways to free up cash to pay down debt and begin savings. Once you have cleared the decks of bad debt and are automatically saving, I think you can cruise on auto-pilot without a budget.

Still... my wife and I have found that every couple of years we drift, especially as our income grows and it becomes easy for spending to grow with it. A heading check and "intervention" isn't a bad idea from time to time, and we find doing a monthly budget to be useful.

[planner]

I track my money similar to the way you track yours. I wrote briefly about a few weeks ago. I do consider this my "budgeting" type of activity. I put budget in quotes because people call it different things. You use different tools to get most of the same results. The name isn't as important as the value of the exercise.

[planner]

As for you, I agree you don't need a budget as a separate tool. You already have it in other forms, in being frugal (thinking before purchases) and reviewing in Quicken (measuring performance).

The only reasons I see for you to make a budget again would be if you wanted to track savings towards a new goal. Based on what I've read here those goals might be coming up with an extra $10k in general or adding another level of charitable contributions.

[AJ Cartwood]

I made a TON of money ... and developed a number of rules but, I ONLY EVER DID ONE BUDGET ... when I was just over broke ... even then, ALL I did was track all of my expenses (but, I tracked every single penny) for ONE MONTH.

It was a life-changing exercise, even so I never found the need to do it again ...

[DCS]

Once you have good money management hard wired into your brain, a combo of Quicken and automatic transfers does everything a written budget does. In fact, a budget is really the plan itself, not the paper where it's written. Throwing out the paper doesn't throw out the plan.

I wouldn't suggest someone with poor money skills budget this way to start. Before you get the hang of it you need limits to keep you on track. But I don't think for someone in your place that tossing the paper budget is a step back. Your good money management behaviors are second nature now.

In fact I think tossing it is a step forward - like learning to play an instrument by reading sheet music, then advancing to the point where you don't need notes on paper anymore. I say chuck 'em, rockstar.

[Rich Schmidt]

My wife and I have never really had a budget. We started our marriage with no debt, thanks to generous parents/grandparents, and we've always been committed to giving and saving well. Plus, we just aren't big spenders. Having a generous margin between our income and our expenses seems to make a budget a bit... superfluous.

[FS]

Whatever you call it - "budget" or "spending plan" or "tracking expenses in [fill in blank with name of software program or internet site]" - most of us are doing something to keep expenses less than income. That's key to a successful financial life!

Newbies...don't let experienced budgeters convince you to throw the budget "baby" out with the bathwater. Whatever system you use, use something to keep things in check.

(My personal preference is Mvelopes - it's like MS Money or Quicken with categories - but Mvelopes also shows you visually if you have money left to spend in a category/envelope based on your spending plan/budget.)

Best wishes!

[Debbie]

Hum, I do a quasi sorta floating budget thing. I have down what I need to put in different categories (mortgage, car insurance, health ins, etc) out of each paycheck. Some are absolute numbers like paying the mortgage others are more of an idea for things the house might need (trash bags, cleaning). If I run tight in one area then another area loses some money to cover it.

Do try to save a little bit out of every paycheck for the yearly bills that come up like car tags so not a mad scramble when it comes due.

Been doing this for over 20 years and it works. No bounced checks, bills paid on time and good credit rating.

[Debbie]

P.S.

using Mvelopes.com makes my floating budget work quickly and easily. You always know how much money you have.

[Mark]

Don't waste your money on Quicken or Money. Sure they have pretty color charts and graphs, but you can make up your own budget for nothing on your computer's Excel or other free spreadsheet software. Just take the information from your paystub, plug in your expenses and savings in one of the free online budget tools or calculators like the ones on Bloomberg.com.

Get an online checking account like ING Direct, or one that lets you track your spending and pay your bills online. Quicken and Money will never pay you interest either.