I Don’t Have a Budget
Budgets are the first thing people think of when I tell them that I’m “into personal finance.” There’s an assumption going around that I’m the Great Supreme Queen of Budgeting, ruling over all of the lesser peons with my Glorious Budget of Power, Puppies, and Being Awesome.
Ok, so, no one has actually worded it like that.
Confession: I don’t use a budget. I’ve tried PearBudget, the simplest of the simple, easy, and awesome budgeting software. And for budgeting software, I like it quite a bit.
But I don’t use it. Sure, everyone once in a while, I open PearBudget up and fiddle with it and put in all the purchases I’ve made since I last played with it. But something always goes wrong. An expense doesn’t fit, or my spending is too erratic from month to month to make any sense within the confines of a budget.
I’m a college student. I spend a random amount of money on textbooks three times a year. I spend a fluctuating amount of money on gas every month. My income is dependent on what part of the school year it is. Often times, PearBudget will commend me one month for spending far less than I earned! Except that the only reason that ever happens is when I know that the next month, I’ve got a lot of expenses and less income. So then budgeting software yells at me the next month for spending more than the income for that month.
Perhaps there’s a piece of budgeting software or some system out there that would work perfectly for me. But I really don’t see any need to go out and find it. I don’t need a budget.
Instead, I just track and plan. I have a simple spreadsheet I made for myself in Excel. I use it to track every single penny I spend. And every penny I earn. I also estimate my future income and expenses for the month, so that I know whether I’m looking down the barrel of a “good month” or a “bad month.” Then I plan accordingly.
That’s it. And it works for me. It’s been working for me for almost two years now. So if you haven’t pulled your financial life together yet because you hate the idea of making a budget, then it’s time to get started. Just track what you spend and what you earn, and after a while, you’ll figure out whether yoy even need a budget at all.
Pear Budget - Really Friggin Easy Budgeting
My Friends Don’t Drink - Perhaps They Should!
Don’t Get Fooled by Shifty Car Mechanics
Feed the Pig, Win the Best Blog: Lazy Sunday
“Really Bad Advice” is Very Good Advice?
I have a very similar problem and what we did was open a separate savings account for periodic bills - so the same amount goes into it each month to cover expenses I don’t pay every month. I use the checkregister like features in Quicken and completly ignore their budget that they create. The outline for my months expenses I do in Excel (budget). I guess that sounds more complicated than it is.
Comment by Marie — April 17, 2008 @ 12:10 pm
What you described doing with your spreadsheet sounds a lot like a budget to me. I pretty much do the same thing. Each month I make a new sheet projecting my income and expenses for the next month, and as the month progresses I update it with the actual numbers. That way I have a plan for the month, and everything has been spent on paper on purpose before the month begins (as Dave Ramsey would say), but I also have the flexibility to adjust things as needed.
I also second Marie’s comment about irregular spending. For things like car tabs and plane tickets, I estimate what I’ll need, divide that by the number of months before I’ll need it, and put that much away each month in a separate account. You could do the same thing with textbooks. Even if you don’t know the exact amount, you could probably guesstimate it to some extent. Even if you’re wrong, at least you won’t have to come up with the whole amount in the month that you buy them; you’ll only have to come up with the difference between what you saved so far and the actual cost.
You could do the same thing with your income. When you get your student loan money, divide it by the number of months it’ll need to last, and ‘pay’ yourself that much each month in your spreadsheet.
Wow, this comment ended up way longer than I thought.
Comment by TV Girl — April 17, 2008 @ 12:43 pm
Hi. I just found your blog and have added it to my blogroll.
Comment by Beachgirl — April 18, 2008 @ 7:15 am
@ TV Girl -
I guess you could call what I do a “budget,” but it’s not a traditional one. And I think a lot of people don’t think about their money at all, because they think it would mean sitting down and doing all the math on a complicated budget and then trying to stick to a really rigid set of rules.
My whole point what that you can manage your money without having to do all that, and maybe if some people knew that, they would take the first step and get started.
Comment by Stephanie — April 18, 2008 @ 8:47 am
You’re definitely right that one of the reasons people don’t budget is that they think it’s too complicated and/or rigid. But in my experience, a budget not only CAN be simple and flexible, it MUST be that way in order to work at all. Even a math nerd who thought complicated and rigid sounded like fun would find that it wouldn’t work in reality.
Life is never the same two months in a row, and things can come up in the middle of the month. If your budget doesn’t reflect reality, there’s no point in having one. It simply won’t work.
Just my $.02.
Comment by TV Girl — April 18, 2008 @ 3:30 pm
[...] then there are people like Stephanie over at Poorer Than You—someone who doesn’t have a budget or a million dollars, and she’s doing just fine, thank-you-very-much. Oh, and before you ask, I do have a budget, [...]
Pingback by Budgets Are Overrated | Punny Money — April 22, 2008 @ 1:56 pm
[...] my spending gets out of line in a certain category I adjust my spending accordingly. Stephanie at Poorer than You uses a similar system and Nick at Punny Money has his own variation of the system. This system [...]
Pingback by Tight Fisted Miser » Blog Archive » Tracking Every Penny and My Non Budget — April 23, 2008 @ 6:23 pm
I think I agree with TV Girl, what you do is budgeting if you define budgeting as coming up with earning and spending plan like I do. But if you think of budgets as these ominous documents that meticulously categorize every single purchase you ever make and have 254 categories so that can run in an depth analysis to see if you can save more money by shopping at discount store 1 or discount store 2 then you don’t budget. I guess even budgeting isn’t safe from our preconceived notions about what they are an aren’t.
Comment by Steward — April 25, 2008 @ 3:51 pm
When you ‘review and plan’ - you budget.
If you follow that ‘plan’ - you budget.
Obviously you track; you get information - you adjust; you budget.
What you ‘allow’ is what you budget - if you didn’t allow, and it just happened - you track and adjust; you budget.
Comment by Diane — May 6, 2008 @ 3:47 pm
The meaning of budget is ‘an estimate of probable income and expenditures for a given period’.
So, you ‘budget’….
If you weren’t tracking and planning, then you’d be giving no thought to your financial situation - that would be ‘neglecting to plan and review and make adjustments’.
As you describe what you do, you do budget.
Comment by Diane — May 6, 2008 @ 3:51 pm
@ Diane
- You’re absolutely right. My purpose in writing this entry was to show people that a budget does not have to involve some kind of software, and it doesn’t have to be grand or restrictive. So many people don’t have a hold on their finances, because they hate traditional budgets. My point is that you don’t have to use those - something very basic can work very well, especially if you have irregular income.
Comment by Stephanie — May 6, 2008 @ 4:27 pm
I don’t have a budget either.
I always live way below my means .
I’m practicing being content with what I’ve got, which means that I don’t feel it necessary to spend every penny I’ve got.
If you’re conscientious, you can live without a budget.
It is nice to know what you are making and what you are spending, if you aren’t sure. Spending time knowing about your personal finances is something I recommend to everybody.
Comment by Monty Loree — May 7, 2008 @ 12:11 pm