Budgets – Do you do them? I don’t Anymore…
Budgets – Do you do them? I don’t Anymore…
Oh budgets… we have a love/ hate relationship. Right now I hate them. So I stopped doing them. haha! Now that may come off as a surprise for a personal finance blogger. This guy should be dotting his I’s and crossing his T’s. Who doesn’t do a budget? Your money is just leaving you, pfffttt.
Recently Ai from The Budget Diaries asked if I would do a interview about budgeting with her. I was happy to do it, but was surprised to see her reply stating I’m the first one who doesn’t budget. You can check out that interview here, Although I will rehash a bit of it on this post.
What is a budget?
Well I’m sure most people know what a budget is but just in case. A budget is basically a form you fill out before the beginning of the month stating your expected income and expenses for the following month. Personally I used the following category’s to sort them out.
- Entertainment
- Giving
- Saving
- Mortgage/ property taxes
- Condo fees
- Electricity
- Gas
- Phone/cable/internet
- water heater rental
- Groceries
- Dog food/vet
- Investing
- Stuff not budgeted
There would be a spot for the date and 3 different headings across the top. Proposed Monthly Totals, Actual (Month Ending) and then the difference plus/minus. At the bottom I had a spot for Total money deposited into account and then a spot for how much extra money remaining.
This is one of our original budgets. Yup I still got it. Keep in mind its from 2011. While our incomes have changed so have our monthly payments… And we got smarter. Silver investing? Nope! Bank Fee’s – Yeah right…. we don’t pay any of those anymore. (looking back I would add at least one new category -vacations)
So clearly I used to do budgets.. and I think they did help us. When I was hardcore Dave Ramsey we were watching every penny. We had over 60k in debts (not including mortgage) and did a lot to eliminate all those debts. The big argument about budgets is that it tells your money where to go. If not your money will just disappear. I won’t argue that at all.
We Were Arguing Though
The thing is we were arguing though. See this example budget 270 bucks in gifts? Dam we were going full force debt mode and were giving away 10% of our income at the time. (In hindsight I have no clue why our income is so low in this budget, maybe we didn’t include debt payments? gone on vacation?) Over budget on electricity, groceries, Dog and almost 100 bucks in non budgeted items?
Every time we were going over budget there was definitely some bantering going on. Now did we do our best to knock those numbers down next month? probably. This is a August budget so we probably went camping or something and messed these numbers. Anyways it was really frustrating for me to do these budgets and then there was always things popping up and killing the budget.
We most likely saved more, but it was killing the spark in the relationship. She would ask want to go out for dinner tonight? Are you crazy its not in the budget.
We grind-ed it out for roughly 2.5 yrs to pay down all our debt (and got married during that time). Budget’s definitely helped but for us personally we thought there had to be a different way.
Pay Yourself First
I know I have brought it up time and time again but I’m a huge fan of just paying yourself first. Once you have paid off all your debts, (except mortgage) why not? You need to enjoy your money as well. If either of us feel like a spur of the moment dinner date. That’s fantastic! I know roughly what we spend on every bill each month. So we allocate a certain amount to investing in dividend stocks right when we get it. The rest is free money to do what we like. Now if it comes to payday again and there’s more money than needed in the account, Ill throw more to our investments.
Personal Finance
This is personal finance though. Everyone’s different and utilize different techniques. Will it take us longer to reach Financial Independence? Yeah for sure, haha. Will the lack of budgets fend off the grey hairs? Hopefully. Right now this works for us. We both are on the same page and don’t just “blow” money. Who knows what will happen in the future though….
The more I listen to choosefi podcast’s the more I think of selling our house, Taking the profits and paying cash for a smaller house in a lower cost of living place. Investing the rest and almost going into semi retirement already. Clearly if we did that, a budget would be critical. The wife’s not there though. Maybe we should start listening to them in the car.
End
It was a cool interview with Ai, and opened my eyes a bit. What would our savings rate be if we went hardcore budget again? With the wife on mat leave currently, it probably wouldn’t be crazy, but once she returns to work? Would I still be a budget nazi? Also I was shocked to be the first who doesn’t budget. Hmmmm…. Curious do you still do a monthly budget? Have you ever?
Let me know,
Cheers!
Hey I’m Rob, creator of Passive Canadian Income.
In 2011 me and my wife had almost $60,000 in debt and a negative $7,000 Net Worth. Through hard work and financial education we paid all that off. Now we are focusing on increasing our Passive Income Streams to make the money work for us. Feel Free to Follow along the Journey by clicking the Social Media links below or subscribing to get notified of new posts on the sidebar.
As soon as you develop that state of mind where you keep money in check all the time, you technically can drop de budget. Some sense of what goes in and out is enough at that stage. Starting to have the same feeling about our budget!
hey cheese
Exactly! Almost every month the main expenses are the same and becomes somewhat clockwork.
Just don’t waste money on stupid shit (constantly) haha
cheers
Hi Rob, I really enjoy reading how you did all this. Not sure about downsizing. The cost of selling your home and buying a smaller, cheaper one could eat up a lot of those profits. We are in the same boat and decided to stay put for now. Keep up the good work!
Almost forgot your original question: I used to be a budget hound as well, until I realized that, as long as I put money aside right away, the rest is mine to spend. Plus, like you, I know our expenses by heart now.
haha thats awesome. Thanks Christine, love hearing that! You put a smile on my face.
sounds like you are on the right track as well if you have a general idea where your money is going now too! That and paying yourself first, might be the 2 most important things in personal finances.
As for downsizing maybe initially. But property taxes are high where i live and there’s some dirt cheap areas. Plus our house could sell for a nice chunk of change. =)
check out some info on geoarbitrage its definately really interesting!
Have a great day. Thanks again
Hi Rob,
Looking at property taxes as well is a very good idea! I guess I did not expect such a difference.
I should explain that we started by calculating our monthly expenses, opened a ‘house expenses account’ for this, and put a set amount of money in it for taxes, utilities, insurance, etc. Set and forget. During our accumulation years we paid purselves first, then had fun with what was left, and often we still had money left to invest. We are now retired and still have our house account. We just don’t save anymore, though I admit I still love stock trading and any money left at the end of the month still goes into stocks.
good points.
Great to hear Christine. It sounds like you are living the dream now. Your financial planning was fantastic. Nice work!
I’m in the same boat. I always aggressively pay myself first, and whatever is left I either spend, or throw into other investments.
I’m probably one of the less frugal money bloggers – but life is short – need to enjoy it now too. Pay yourself first, and everything will work out in the end.
hey Jordan
couldnt agree more. I kinda feel the same. I like to tip pretty well when we go out to eat, we hand out full choc bars at halloween (as divy dad pointed out, this aint something you see most bloggers do)
Live and love life now, but continue saving for the future.
cheers man!
We did budget at one time as well, but now we are also big proponents of paying ourselves first and we have been at this for awhile so we generally know what we are spending money on. With that said, I do still track our monthly expenditures once per month and then at the end of the year we evaluate and see where we spent less or more than we expected to based on our historical trends.
We are fortunate to be able to invest a decent amount of money every month, cover our bills and commitments, and still have some money for less frugal spending. As you noted, some months we don’t have as much discretionary spending and then I will direct extra into investments.
I guess one could say we technically still budget since I am tracking it, but in my mind it is not akin to what most consider budgeting. Part of that may be because the typical reaction to the word budget is one of restriction, or being miserly, and I don’t feel that fits us at all.
hey dd
I got to say thats a pretty good system. Might even giver a go just to keep a eye on the little stuff.
Anyways whatever you guys are doing is working. You been buying stocks left right and center, like todays blackrock buy!
keep it up man.
I have not done a real budget in years! We simply have a general idea of what we need to save and just work towards getting expenses to fit in with the rest of our income. Sometimes, things go upside down and our saving-goal falls by the wayside. Oh well, we move on to the next month!
hey Enoch
seems to be the general consensus around here. I guess it depends which side of the blogosphere your on. haha.
thanks for swinging by!
cheers
Hi hi.
Me and my Wife have a twist to the whole budget thing we find works for us.
We have 2 joint bank accounts.
I was able to get my paycheque to split between the 2.
Account 1 gets 600/week .
Thats where the mortage , insurance , resp for the kids , internet , all bills come out of. Plus a bit of savings. We figured out what the bills would be for the year/month , over estimated a bit and worked backwards off that. Cant change hydro and mortgage much.
Then the rest of the $$ go into account 2 for food , fun , gifts the rest.
Thats what we spend because that is what is left over after the bills are paid.
Hey Russ
Thats a great setup. When me and my wife ( then gf) first moved into a place together thats almost exactly what we did.
It works well too. Any financial planning is better than none.
Cheers Russ.
Budgeting can be very useful especially in the beginning stage of personal finance. Once you learn to control your money, you don’t have to budget anymore. I started to budget about 10 years ago and still do twice a month because of my preference. I also used my budget as an instrument to stress test mortgage payments before buying the property.
hey German
so true, both times we bought a house the budget was key to stress testing if we could afford one. The banks will easily say oh yeah we will give you x, but you dont necessarily want x. you want to feel comfortable still financially.
cheers
Hey Rob,
I think the important thing is that you at one time DID maintain a budget. As a result, you learned/figured out what your expenses were. You appreciate the exercise of knowing where your money is going and so now you can have some freedom regarding the necessity to do so.
I feel there’s a place for a budget, but also feel there is flexibility to take a break from it once the engine is running smoothly.
Take care,
Ryan
hey Ryan
Welcome man, love seeing new faces around here.
You make some great points. The budget did change our lives and opened our eyes to our finacial picture.
cheers
We don’t budget for our joint finances and I don’t budget for my own finances. I do pay myself first (love it) and we pay our joint account monthly too.
I tracked how much we spent on food a few times and that got a bit depressing so stopped, haha!
Great post Rob! No point arguing with your spouse when you are both doing a good job of tackling debt and adding to savings!
haha Gym
Seems like food is always the killer. Its so easy to get sidetracked in that area..
Pay yourself first makes everything so easy.
cheers