To Budget or Not to Budget

to budget or not to budgetBudgets are all the rage across the personal finance world. If you visit a personal finance site or blog there is a good chance you will see articles on budgets ad nauseam. You will find how to budget, what to budget, when to budget, where to budget, why to budget, and everything in between.

And for good reason too. Budgets can be an extremely useful and beneficial tool for both those trying to get their finances in order and for those savvy experts who know everything there is to know about the personal finance world.

So you would think that a couple who managed to pay off over $140k of debt in just less than three years would be dedicated, disciplined, and detailed budgeters, right?

Nope, try again.

What is Budgeting?

You probably already know what budgeting is, but just in case you do not, then let us take a quick review. In a nutshell, budgeting is tracking your monthly income and expenses to ensure you achieve a pre-determined target or goal amount. The emphasis of budgeting is usually placed on the expense side since income is generally more fixed or stable (you get your same salary or pay each month) while expenses are more variable and within your control.

For example, in a budget, you would establish spending limits on items like rent, groceries, utilities, tv, entertainment, gas, etc. and then you’d track your actual expenditures in an attempt to spend at or less than your target.

Overall, budgets are used to help to achieve a larger goal such as paying off student loans, saving for a down payment for a house or a car, or just to be frugal and increase your savings or have more money available to invest.

Why We do Not Budget

  • Micromanagement – Micromanagement can exist in the workplace. With budgeting, it can exist in the household.
    • Of each other – By nature I have a stronger money mindset than my wife. She has come a long way and is much more conscientious with spending than she used to be. That said, she is still more prone to splurges than I am. I am not going to micromanage or get on her case for going to Starbucks a few times or purchasing a couple of new shirts. Likewise, I do not want her looking over my shoulder scrutinizing everything I buy either. That type of oversight, or nagging if you will, would be more counterproductive to our relationship than some reduced expenses from detailed budgeting. There is too much potential for finger pointing and playing the blame game for blowing a strict budget.
    • Of small expenses – Budgeting can be done at varying levels of detail. I would drive myself crazy if I scrutinized so many small to medium expenses. Ok, crazy is an exaggeration. However, I have no intention of being a budget perfectionist due to the concept of materiality. Materiality means some things are bigger or more critical than others. The large items are material, or important, and should be focused on to ensure they are accurate. Conversely, immaterial amounts aren’t as vital. Although we do not officially budget, we do keep tabs on and discuss larger expenditures.
  • Too Time Consuming – We have busy lives. We have two young children ages 1 and 3 that take up inordinate amounts of time. My wife commutes 2 hours round trip a day. There’s all the cleaning, yard work, grocery shopping, other errands, etc. As it is, we often time feel like we do not even have enough time to breathe. There simply is not time to sit down to set up a monthly budget, tally all our expenses, and figure out where and why we might have gone amiss in our spending. Yes, we could de-prioritize other tasks to focus on budgeting. We do not though because the value added from detailed, or micro, budgeting is not there for us.
  • Missing the Budget Target – What happens when you miss the expense limit you have set for one or more of your categories? Do you get furious and berate yourself? Pat yourself on the back and try again next time? Get depressed and go spiraling out of control with a “screw it all” spending spree? Stuff happens and setting stringent spending limits each month just seems like a recipe for frustration. There are so many things both within and out of your control that can derail a budget. Let’s say I set a $200 budget limit for gas but the price of gas goes up drastically in a month and then we take an unexpected trip to visit the in-laws. We end up spending $250. We missed the spending limit and I feel like I wasted my time bothering to come up with a budget for it in the first place.

Do you budget? If yes, are your efforts worth it? Do you ever encounter the problems listed above? If you do not budget, what are your reasons?

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10 Responses to To Budget or Not to Budget

  1. Michelle September 14, 2015 at 8:28 am #

    We have a budget but we are not too detailed with it. We have it working like a smooth system now so it doesn’t take any time out of our day.
    Michelle recently posted…5 Home Businesses You Can Start Right NowMy Profile

    • Mr. Utopia September 14, 2015 at 5:18 pm #

      Having a smooth system that doesn’t take much time is the way to go if you are going to budget.

  2. Luke Fitzgerald @ FinanciallyFitz September 15, 2015 at 5:31 am #

    We got married in 2013 and have been budgeting ever since. For us, it’s easily been the best decision we’ve made. I think we were both a little hesitant when we started. But within a few months we say the power that it gave us. It put us in a position to do more of the things we want to do and less of the things that we dont want to do.

    We’ve gotten down to where every month is essentially the exact same budget. Rarely do we have to spend more than two minutes at the beginning of each month. We’re at a sweet spot right now with the amount of “categories” so we don’t micromanage too much. We’re getting better at mastering the paradox of budgeting – being strict and at the same time loose.

    It definitely takes time in the beginning but it gets easier and easier and the pay off is well worth the initial inconvenience.
    Luke Fitzgerald @ FinanciallyFitz recently posted…Irrational Fears – Part 3 – Game Show!My Profile

    • Mr. Utopia September 15, 2015 at 8:03 pm #

      Glad to hear it, Luke. Like I mentioned, budgeting can be an awesome tool if the drawbacks I have mentioned aren’t too prohibitive. It sure sounds like you guys are harnessing the power of budgeting. Perfecting the process as you go along makes sense to me.

  3. Kim@Eyesonthedollar September 15, 2015 at 8:02 pm #

    We aren’t as strict now as when we were paying off debt. We have a basic budget but it has lots of flexibility built in. It’s mainly so we don’t creep back into the habit of not being mindful with our spending.
    Kim@Eyesonthedollar recently posted…4 Smart Money Moves That Never Worked For MeMy Profile

    • Mr. Utopia September 15, 2015 at 8:45 pm #

      Being burdened with debt can almost force you to be more strict with budgeting although, as was in our case, it still is not a requirement. I can relate much more to what you have described – the higher level, flexible approach that helps you stay on track overall.

  4. DC @ Young Adult Money September 16, 2015 at 9:32 am #

    We don’t budget per se, but we do track our income/spending each month and have been doing that for over 3 years. I think tracking can be enough for some people, especially if your spending is relatively flat. It’s not difficult to make adjustments without having a hard budget, imo, and we’ve done that when we notice some things being more than we’d like them to be.
    DC @ Young Adult Money recently posted…7 Reasons Millennials Need Life Insurance ASAPMy Profile

    • Mr. Utopia September 16, 2015 at 7:34 pm #

      I agree about tracking and adjusting accordingly (without having specific targets) being enough for some people. It really depends on each person’s financial situation, goals, and preferences.

  5. Janet September 16, 2015 at 10:01 am #

    I only semi-budget as well – round numbers for a guideline. Instead of using cash and keeping a bunch of receipts, I try to put as much as possible on one CC and pay it off weekly. That helps me keep those little misc expenses that I don’t really think about to a minimum.
    Janet recently posted…Norwex is Coming to YOU in September!My Profile

    • Mr. Utopia September 16, 2015 at 7:37 pm #

      Making weekly credit card payments is an interesting approach to managing your expenses. I can see how that might allow you to stay on top of your spending easier.

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