You might be shocked by this admission. As a personal finance blogger, I don’t follow a strict budget.
Sorry to disappoint you, but strict budgeting just isn’t something we do in our household.
Before you freak out, there are ways to control your money without budgeting.
In fact, because we don’t budget we must pay extra close attention to our finances and do other things to make up for the fact that we don’t budget.
If you can follow the guidelines below, you might not need a budget either.
1) Have Crazy Amounts Of Self Control
Living without a budget requires crazy amounts of self control. You can’t just buy everything in sight just because you don’t have a budget.
Instead, you need to control your spending to ensure that you’re not spending more than you earn while still reaching your other goals.
The only difference between having a budget and not having a budget is the fact that you don’t have a set dollar amount you can spend in each category.
The money can be spent wherever you want in any given month, but once the money is gone, it’s still gone, budget or no budget.
You’ll have to pay extra close attention to what is a need versus what is a want. You must buy needs first and only buy wants when you have money leftover. Otherwise you’ll be in a nasty situation quickly. Self control is so vital to living without a budget.
2) Commit To Never Incurring Consumer Debt
It’s easy to swipe the credit card one too many times when you’re living without a budget. To live without a budget successfully, you must have a huge commitment to never incurring consumer debt. That means always knowing how much money you have in the bank to pay off your credit card at the end of the month.
Don’t ever allow yourself to spend money before you have it. Even spending a day before your next paycheck will lead you down a slippery slope if you don’t have a budget. It can be done, but it isn’t easy.
3) Track Your Spending Religiously
Even though you don’t have a budget, you’ll still need to track your spending religiously. I personally use Quicken and download my account activity a couple of times a week to make sure I know how my finances are doing.
If you don’t use Quicken, you can use other services like Mint or track all of your spending in Excel or on a sheet of paper. It doesn’t matter how you track your finances, but if you’re living without a budget you must track your expenses extremely accurately and often to be able to survive and thrive financially.
4) Analyze Your Spending Frequently
You can’t just stop at tracking your spending! You must frequently analyze your spending when you’re living without a budget. Look at your expenses and determine what is normal versus what might be getting a bit out of control. Don’t just compile your spending reports, actually analyze them.
It might be normal to have a couple of months of higher spending around the holidays, but only if you can afford it. Likewise, you might have a high spending month when you have to replace your tires on your car. Just make sure that you can afford these purchases by cutting expenses in other months or living well below your means.
5) Take Action When Spending Gets Out Of Control
Take action and correct expense categories that are getting out of hand as soon as you see a pattern of unwanted increased spending. When you don’t have a budget, it is very important to spot trends early and take action to correct them.
6) Create And Execute A Short And Long Term Goal Plan
Just because you don’t budget doesn’t mean you can avoid creating a short and long term goal plan for your money. Come up with a list of money goals you have in the next year and a list of goals that could be many years away. Try to put a dollar amount with each of these goals and plan on how you expect to reach them.
Whether you want a 70″ flat screen TV in 6 months and need to save $300 a month to get it, or you want to put 20% down on a $400,000 home in 5 years, you must have a plan to reach your future money goals.
It doesn’t just stop at creating a plan either. If you actually want to make these purchases, you’ll have to start putting money away today. By creating an executing a short and long term goal plan for your money, you just might be able to avoid having a traditional budget.
7) Systematize Saving And Investing
The problem with not having a budget is most people spend every penny that hits your bank account. You can’t do this if you want to live without a budget. Instead, you must systematize your saving and investing. In fact, you need to do it in a way that pays yourself first, too.
Automate your investing through paycheck contributions to your 401(k) or other retirement plan at work. Then, automate your investments to your Roth IRA or regular IRA through your brokerage account.
Automate your savings through a direct deposit from your paycheck into a savings account. Alternatively, you can set up automatic transfers from your checking account to your savings account on payday or the day after with banks like Capital One 360 which I have used for years.
You can even automate your savings for some of your short and long term goals by setting up targeted accounts named after your goal. This is another feature of Capital One 360 that I love.
Does All Of This Sound Like Too Much Work?
If the seven guidelines listed above sound like a lot of work, that’s because they are. In fact, it might just be easier to create and follow a budget rather than spend all of the time required to keep up with these necessary guidelines. Who would have thought it’d just be easier to follow a simple budget?
What’re your thoughts? Do you think everyone must have a budget? Or do these seven guidelines above allow you to skip making a budget? Would you add any other guidelines? I’d love to hear your thoughts in the comments below.