I confess, I’ve violated one of the cardinal rules of personal finance…

I’ve not followed one of the cardinal rules of personal finance bloggers lately. In fact, I haven’t strictly followed this rule in about three years!

I confess it. I don’t have a strict budget… I don’t account or track every dollar anymore. I’m not even sure it matters that much at this point.

Let’s rewind a bit…

Up until three years ago, I made and kept strict budgets. I tracked every dollar taken in and every dollar that went out. I knew, more or less, where every dollar would come from and where every dollar would go. I started every year by making a budget. I updated that budget frequently. It was kept on a simple Excel spreadsheet and at its peak was used to time when to make payments and where to spend any windfalls or extra income so as to maximize the benefit.

Why did I do that? Well, it’s simple. The process of monitoring income motivated me to work harder and earn more. The process of monitoring outflows prevented me from “losing track” of dollars. The process of writing the budget also served as an exercise in reflecting on priorities. In each of these respects, budgeting was good and helpful.

So why did I stop budgeting?

The truth is…years of strict budgeting worked…And also, it was sucking up a lot of time being so bogged down in the details.

Budgeting is habit forming.

As a result of those years of budgeting, we developed good habits that we still carry. What habits does budgeting build?

  1. Paying ourselves first. Budgeting required us to allocate funds for paying student loans and saving. We made sure to live around our goals and focused on paying off all debt and saving. We still pay ourselves first. Saving remains a huge priority regardless of whether there is a strict budget, we will continue to pay ourselves first out of force of habit.
  2. Knowing where our money goes. While we don’t have a fixed budget anymore, we still track all of our fixed expenses. We’re no longer bogged down in the minutia of day to day but we know how much the fixed expenses cost us. Moreover, we periodically make sure we’re using any extra services that cost us monthly fees. If the benefits aren’t worth the expense, we ditch the subscription.
  3. Discipline on spending. Years of budgeting has taught us not to spend frivolously outside of what we can afford. We no longer need to fixate on every purchase because it no longer requires a major planning effort to avoid spending beyond our priorities.

Budgeting produces tangible results.

And of course, it’s not just habits that we built. The results of years of budgeting have had some positive effects that are measurable and tangible.

  1. The student loans are paid off. This takes a lot of stress away when dealing with our finances. It frees up a lot of monthly cash flow for saving, traveling, and Baby Up.
  2. We have an emergency fund already built up. Life has less stress when you have a reasonable emergency fund set up from years of diligent budgeting. We’re ready for most emergencies so we can focus on putting our income to work for us.
  3. All those budgets motivated us to raise our income. Budgeting makes you very cognizant of two things: 1) how much you spend; and 2) how much you earn. I found budgeting was a huge motivator because I could not or would not cut my expenses to the point of deprivation to achieve debt repayment and savings rate goals. High income means that we’re able to meet our savings goals without as much cash flow stress.

We now automate as much as possible. Monthly expenses are paid automatically. Monthly savings is taken automatically. Monthly investments are automatic. All of this automation has taken the place of our budget in many regards. By taking choice out of things, inertia and compounding will simply do the heavy lifting for us — even if we are blasphemously forgetting to draft and adhere to strict budgets.

That said… Budgeting would still be a good thing for us and anyone else. In fact, we’d be better off if we were budgeting.


Mr. UpwardlyMobile