Budgeting, Shmudgeting: Is Budgeting for the Birds?
Do you hate to budget? Many people do. The very word “budget” makes them chafe as though they were being physically restrained. Others are huge budgeting fans, assigning every dollar a name (a la Dave Ramsey) and planning out their spending for the month with glee.
Then there’s me. I do have a spending plan, and I know how to budget, but realistically since I pretty much do the same thing every month anyway, I don’t give it a lot of thought. It also helps that my fixed expenses are very low, so I always have “extra” money to work with. (Unlike a few years back, when I basically had no money coming in and higher expenses.)
The long and the short of it is that while I’m a huge believer in the benefits of budgeting, if I had to pick a camp it’d be more the budgeting, shmudgeting one. That’s pretty much because I’ve automated my budgeting, though — so it doesn’t seem as though it’s something I’m actively doing.
Which is nonsense, of course.
What I really do is automatically send my money to a bunch of places, and then do whatever I want with the rest of it. As a result, I get the benefits of budgeting while enjoying feeling like I’m not. Here’s how it works.
Pretax stuff is up first. Of course, I have the usual stuff (taxes, FICA, and insurance) taken out of my check pre-tax. I set aside money for retirement pre-tax too. This means I have money sent to my 401K and my Roth 401K before I get my check. It ends up being a pretty big chunk of my check (because I’m behind on retirement contributions and trying to make up for lost time.) Then of course, the rest of my check actually goes into my checking account and is then mine to distribute.
The first thing I do when the money arrives in my account two times each month is send a chunk of the money to our joint account. (If you haven’t guessed, my husband and I have his, hers, and ours accounts.) That money then gets distributed to cover all of our joint bills, which includes things like electricity, groceries, internet service, our house payment, property taxes, and homeowner’s insurance. Previously, that money would have also been sent to various savings accounts for things like travel & appliance repair. But since we’re putting so much energy toward getting our house paid off, a big chunk now goes toward our mortgage instead.
I have a good-sized emergency fund now, but while I was building that up, that was next on my list to contribute to like clockwork.
Then come my individual bills which lately are mainly things related to my business. But it also includes things like car insurance and various expenses for my son. After that, it’s all fun and games — things that I want to do; like going out to eat or sending extra money toward our mortgage. (Yes, to me extra to the mortgage is fun. I love seeing that balance go down.) And once that’s done I’ll move travel back up to top of the list of fun.
Organized, but not restricted
This all means that I’m essentially organized (because everything goes into the appropriate budget “bucket”) but that I still feel like I’m free to do whatever I want with my money. Of course, you can feel equally free to do whatever you want if you write out a new budget each month. Getting what you really want is the whole point of budgeting. But this is a way that feels freeing to me, and allows me to do it all pretty mindlessly after the initial set up.
And isn’t that what personal finance is all about? Managing your money in a way that works for you and allows you to reach your goals? I’m thinking so.