Why You Might Not Need a Budget

Why You Might Not Need a Budget

Last updated May 13th, 2019.

5 minute read

Budgets, budgets, budgets! It seems like they’re all the rage. You’ve probably scoured the internet trying to learn how to budget. They must be an absolute necessity, right? Hold on there – not so fast.

In this post, I’m going to go why a budget may actually not be necessary. But first, some background.

I’ve mentioned it before, but I attended not one, but two book launches for Grant Sabatier’s new book, Financial Freedom. Both were in the area here, so I figured – why not?

The reason I’m bringing it up again is one of the things Grant talks about in the book is budgets. He said he doesn’t really have a budget. I don’t either, and I always thought I was breaking some cardinal sin of personal finance.

I felt validated, but it wasn’t just him validating my bad habit. In reality, budgets aren’t necessarily the holy grail that every man, woman, and child (hah) must have.

Typically, I haven’t had a personal budget because I haven’t felt I needed one. I don’t have children and my finances are relatively simple. Also, I don’t usually live paycheck to paycheck, meaning I have some breathing room.

I think this all makes sense, but Grant takes it a step further.

The Scarcity Mindset

The scarcity mindset is the major problem Grant cites when it comes to budgets. The idea here is that budgets teach you to make your pennies go as far as possible.

After all, if you’re in danger of going over budget and you aren’t doing anything to increase your income, that is your only option.

But as many in the personal finance world say, you can always make more money. Money is a virtually infinite resource; you can always make more of it.

As such, you’d probably be better served to try to increase your income if you’re having trouble making ends meet. Sure, that may not be possible for everyone, but it’s generally going to be more effective than stretching out your pennies.

One exception I would, though, is interest. I hate interest. It’s just the worst. Although some types are worse than others.

For example, with a mortgage, you pay interest, but you get the benefit of having a roof over your head. That’s in contrast to interest on student loans and credit cards, which give you little tangible benefit.

So, yes, eliminating debt is important. That said, increasing your income can help with that, too.

The Big Three

I talk about the “big three” a lot – housing, transportation, and food. That’s not without good reason since as Americans, we spend as much as 75% of our incomes on these three items. Grant brings this up in his book, too.

These expenses don’t vary every month, meaning you aren’t going to unexpectedly go over budget on them. And this doesn’t include other non-variable expenses you may have. Some utilities have flat rates as well.

In other words, you could find yourself fussing over less than 25% of your budget. If you make $50,000, 25% would be $12,500 – not an insignificant amount of money, sure, but the other $37,500 may already be accounted for.

Thus, if you can significantly reduce your big three expenses, it can make budgeting for those smaller expenses seem like a waste of time.

Of course, this is not to say that no one should ever have a budget.

How to Budget: When Do Budgets Make Sense?

There are definitely a lot of scenarios in which it makes sense to keep a budget.

In a guest post I wrote not too long ago, I mentioned that someone trying to climb out of credit card debt may want to start a budget.

Similarly, younger people who are fresh out of college could benefit from a budget. Or, really, anyone who doesn’t have their money under control and doesn’t know where they are spending it.  Someone who is on a low income might need a budget.

Basically, if you don’t even know where your money is going, a budget is a great place to start. But if your expenses stay mostly the same every month, I think the budget may become less important once you understand how you spend your money.

In addition, if your expenses are much more complicated than mine, a budget can still make sense as well. If you have several children and a lot of variable expenses, then you still may want to keep a monthly budget.

If this is you, here is a great guide for how to make a budget.

Of course, this is all purely hypothetical and your experience may vary. The point is, I see budgets as more of a learning exercise than a ball and chain meant to keep you in line every month.

Different Budgets for Different Folks

Any time I read about budgets, it seems like they’re being sold as something that, again, everyone has to have. Rarely (if ever) does a post qualify the fact that perhaps your expenses are fairly simple and you can focus on the big three.

But yes, that is the point I’m making here. Everyone’s situation is different, and as such, you need a solution that is tailored to your own circumstances.

If you have a lot to keep track of, or if you’re trying to get on track financially, maybe you need a budget.

Or maybe you don’t. It all depends.

Rather than assuming you need a budget because everyone talks about them, I would go through your expenses. Look at your bank statements and maybe list all of your regular expenses in a spreadsheet.

What percentage does the big three account for? Do you have a lot of expenses that are variable? And so on.

I’m not saying budgets are bad by any means. They’re a tool. But just like you don’t use a screwdriver when sawing a piece of wood, it’s important to use the right tools at the right time.

There is a ton of information out there about budgets, but do you need a budget? The answer to that question is less clear than you may think.

Hey there. My name is Bob Haegele and I blog about personal finance here at The Frugal Fellow. I’m also an alternative energy and EV enthusiast and have recently become semi-vegetarian. Another thing I started doing recently? Dog walking. I’m now doing that as a side hustle and loving it! I’m now working toward financial independence making money via my own ventures. If you’d like to work together, send me an email.

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This Post Has 4 Comments

  1. Excellent post. Interesting perspective. I do agree, the strick budgeting is not for everyone. I do believe everyone needs a form of budgeting though, even of it’s a gross one. Companies have budgets for a reason. We utilize the reverse budget style now. Invest what percentage we planned and leave the rest in the joint account. We aim for 5 k. If we are below it, no issues, if we overshoot, we move to traditional excel budget to see what changed. Here is a post on why budgeting might not be for everyone.
    https://drbreatheeasyfinance.com/which-of-the-following-is-not-a-benefit-of-budgeting/

  2. don’t have a traditional budget. Instead, I have a set amount of money each week that has to last at least 7 days. Preferably, it lasts 9 or 10, but it just depends on the week. I hate tracking spending in different categories and stressing out over how much to allot for each area of the budget so… Yeah, this system works for me. I know how much money is going out, but I don’t have to budget every cent.

    1. I like that, too. Rather than spending hours in Excel spreadsheets, you have a system that works for you.

    2. Abigail – I could not agree more with your approach! In fact, my co-founder and I have developed and iOS app that is built to track personal spending exactly like that. You put in your recurring income and expenses and saving goals, and then it gives you your weekly “Allowance”. You can then use the app to track your spending against that allowance, either entered manually or automatically imported from your bank. I’d love your thoughts on it. If you or if there are other readers who might want to try it out, you can get access to our beta at weeklybudgeting.com or click this link to access it via TestFlight – https://testflight.apple.com/join/5mEhAVUQ . Let me know what you think!

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