To Budget or Not To Budget

A key division between personal finance/Mustachian bloggers like myself is whether or not one keeps a strict budget.

Some bloggers keep excellent budgets. The Goblin Chief comes to mind, as does The Barefoot Budgeter. Both account for every penny and The Goblin Chief does a particularly impressive job of keeping set-aside funds for a variety of categoires. The other school of thought is, essentially, “just spend as little as possible.” My favorite examples of this approach are Frugalwoods and, of course, Mr. Money Mustache. These people track their spending, but they don’t sit down and draw up a list of how much money they are allowed to spend in each category. For the record, the Frugalwoods family and the Money Mustache family both practice a level of fiscal discipline to which I can only aspire.

I tend to embrace a hybrid approach. In most categories, I simply try to spend as little as possible and choose carefully where my dollars go to make sure each purchase is really enhancing my life. I do, however, set a goal for my grocery expenses that I try not to exceed. (The folks over at Planting Our Pennies seem to have a similar approach, albeit with a much larger amount of income to work with.)

No approach is “right.” In general, I think keeping a strict budget is advisable if you

  • have a very limited income and limited savings, meaning that a slip would mean debt; or
  • have had trouble controlling your spending in the past, such that you need to figure out a “reasonable” number and practice limiting yourself to it; or
  • just really like budgeting.

None of those things apply to me. I have two other reasons that I don’t budget:

  • Mr. FP will not keep to a budget; and
  • I have a bad tendency to live up to the budget.

Years ago, we experimented with each having a set amount of personal spending money each month. Mr. FP didn’t always arbitrarily limit himself, and I would up buying things I didn’t necessarily need or splurging on edible treats just because I could. To be clear, Mr. FP is generally a frugal fellow. But in October, for instance, he went out and spent over $400 on coats, and no budget would have stopped him. He wanted new coats, he researched them carefully, and he wanted the best damn coats he could get. Now, I might have objected to this, but the two coats he was replacing dated to approximately 1997. One was a delaminated raincoat, and the other was one of those giant puffy Starter jackets popular in the era. If he gets 17 years out of these, too, I will consider it money well spent.

Grocery money is a separate issue more amenable to budgeting, I find. One’s needs month to month are more similar. And my goal amount is so low, there is no danger of my spending up to it. I’ve always been over it, but I keep trying! “Budget” isn’t even really the right word, because I always keep buying groceries when I run out of grocery money before I run out of month (I do, however, keep it minimal—I stop buying luxuries like almond milk and we eat more of our cheapest meals, like black bean burgers and homemade pizza).

Do you keep a budget? Why or why not?

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About frugalparagon

I'm a part-time librarian and mom to two small boys. I blog about striving for the long-term goal of financial independence while running a tight ship at home.

13 responses to “To Budget or Not To Budget”

  1. agoodstewardess says :

    I am pretty much the exact same as you! Nice to hear someone else does it like that. I find it too hard to predict at the beginning of the month our varying needs to be strict about the budget. And we generally try to spend as little as possible, but I do have set budget goals in Mint that I try not to exceed :).

  2. Cee says :

    I do keep a loose budget. Every Friday I go to the bank and take out our spending money for the week. It is split 4 ways: groceries, household, my husband, and myself. Once the money is gone, it is gone until the following Friday. Using cash for everything has really made me stop and think if something is worth handing my hard earned money over for it to be in my life/house. We are saving a lot of money now because of this. It has really helped with Christmas shopping as well. There has been no temptation to over spend at all.

    • frugalparagon says :

      It’s funny how everybody is different! Cash doesn’t feel like “real” money to me, because it’s almost like once I take it out of the bank, I’ve somehow already spent it. And it won’t show up to haunt me on the credit card statement. But I know that most people work the other way :-).

  3. Mrs. Frugalwoods says :

    Thanks so much for including us–I really appreciate it! The budget-free life works well for us. We just operate from the perspective that we’re not going to spend any money and, since we obviously are going to spend money, we keep it as low as possible. Our goal is low expenses & high savings, so this approach fits with that nicely. But, I think you make a great point that everyone is different and should find the system that works best for them!

  4. mrs ssc says :

    We keep a loose budget. I track all the money that goes out to bills, but I don’t necessarily break down every credit card into categories. But, a few months of the year, I will track every little penny. I find that its a good balance for us. Often those months I’m checking stuff out with a fine-tooth-comb we find that there are areas to improve. But, by not doing that every month, we don’t turn budgeting into a tedious chore that we will grow to resent.

  5. David says :

    Well, you obviously know my position on budgeting 😉 Thanks for the mention!

    A couple reasons we use a strict budget with the ‘sinking funds’ approach: we have a lot of debt, but as long as I work, our income is highly variable. This lets us set aside more in big months to smooth out the lean months, but still know what a ‘safe’ amount to put towards debt prepayment is. Even when we drop to the Alchemist being the sole earner, there are months with large chunks of extra income which is needed throughout the year.

    Every partnership or situation is different, but it’s a lot easier for both of us to tell the other ‘it’s not in the budget’ than it is to simply say ‘no’. Saying no leads to fights. Making the budget the ‘enemy’ lets us both have a dialogue about priorities and making sure the budget serves our needs. 9/10 the budget wins the day because we designed it to meet goals we had when perfectly calm and sane, not frazzled like we are many times when we feel the “need” to spend the money.

    Eventually we might not need it, but once you make the habit of budgeting and tracking spending, it’s super easy to maintain. I spend more time on the blog posts about the budget than I do on actually running it month to month.

    • frugalparagon says :

      You’re welcome! Your reasoning makes a lot of sense. We certainly sailed a little close to the wind some months (in the past) in order to pay off debt so I can see how your sinking funds approach lets you pay down the maximum safe amount. (It’ll be gone before you know it!)

  6. thesingledollar says :

    Budgeting to the penny is working well for me, since I have a pretty low income, I’m “old” (35, not 25), and I need to work hard and fast right now if I’m going to catch up to where I feel I should be by age 40 or so.

    I’ve been tweaking my system as I go along, though, to make it work better with my particular quirks. I did set up three sinking funds: phone bill, health, and repairs. I’m also taking out a set amount in cash to use every month for groceries, toiletries, and incidentals (coffee, postage, that kind of thing) and absolutely expect to spend all of it. Aside from that and from assigning cash to bills (rent, insurance), I’m trying to move anything left at the end of the month into a short-term savings account. My initial plan was to let any leftovers at the end of the month accumulate in a slush fund in my checking account, but I’m afraid I’d take that as an invitation to spend up to the budget, as you put it, so while I don’t want to necessarily lock that cash up in retirement funds, I do want it somewhere a little more protected from my urge to buy a whole new wardrobe 🙂

    • frugalparagon says :

      Yeah, that make sense. We keep our spare cash in an Ally account, which is a good compromise–we can get to the money in two business days, but it’s not at our regular credit union. Plus, better interest rate! Right now we also have Capital One 360 accounts because we did their Black Friday special.

  7. Petrish @ Debt Free Martini says :

    I am a firm believer that budget should be everyone’s best friend. When I started taking my budget seriously it changed my life forever.

  8. Zambian Lady says :

    I have a loose budget because I basically buy the same things every month. I used to have a strict budget and track my spending, but stopped when I got my spending habits to a level where they were second nature to me.

  9. James says :

    I’m right there with ya. My focus has always been on limiting fixed expenses (live in a tiny apartment, no car, max out tax shelters) and maximizing income. My calculation is that by doing this, I manage to save around 36k/year…which, coincidentally, is almost exactly what I put away every this year. Only a tiny bit less.

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