Oh budgets… we have a love/ hate relationship. Right now I hate them. So I stopped doing them. Haha! Now that may come off as a surprise for a personal finance blogger. This guy should be dotting his I’s and crossing his T’s. Who doesn’t do a budget? Your money is just leaving you, pfffttt.
Recently Ai from The Budget Diaries asked if I would do an interview about budgeting with her. I was happy to do it, but was surprised to see her reply stating I’m the first one who doesn’t budget. You can check out that interview here, although I will rehash a bit of it on this post.
WHAT IS A BUDGET?
Well I’m sure most people know what a budget is but just in case. A budget is basically a form you fill out before the beginning of the month stating your expected income and expenses for the following month. Personally I used the following categories to sort them out.
- Mortgage/ property taxes
- Condo fees
- water heater rental
- Dog food/vet
- Stuff not budgeted
There would be a spot for the date and 3 different headings across the top. Proposed Monthly Totals, Actual (Month Ending) and then the difference plus/minus. At the bottom I had a spot for Total money deposited into account and then a spot for how much extra money remaining.
This is one of our original budgets. Yup I still got it. Keep in mind its from 2011. While our incomes have changed so have our monthly payments… And we got smarter. Silver investing? Nope! Bank Fee’s – Yeah right…. we don’t pay any of those anymore. (looking back I would add at least one new category -vacations)
So clearly I used to do budgets.. and I think they did help us. When I was hardcore Dave Ramsey we were watching every penny. We had over 60k in debts (not including mortgage) and did a lot to eliminate all those debts. The big argument about budgets is that it tells your money where to go. If not your money will just disappear. I won’t argue that at all.
WE WERE ARGUING THOUGH
The thing is we were arguing though. See this example budget 270 bucks in gifts? We were going full force debt mode and were giving away 10% of our income at the time. (In hindsight I have no clue why our income is so low in this budget, maybe we didn’t include debt payments? gone on vacation?) Overbudget on electricity, groceries, dog and almost 100 bucks in non budgeted items?
Every time we were going over budget there was definitely some bantering going on. Now did we do our best to knock those numbers down next month? probably. This is a August budget so we probably went camping or something and messed these numbers. Anyways it was really frustrating for me to do these budgets and then there was always things popping up and killing the budget.
We most likely saved more, but it was killing the spark in the relationship. She would ask want to go out for dinner tonight? Are you crazy its not in the budget.
We grind-ed it out for roughly 2.5 yrs to pay down all our debt (and got married during that time). Budget’s definitely helped but for us personally we thought there had to be a different way.
PAY YOURSELF FIRST
I know I have brought it up time and time again but I’m a huge fan of just paying yourself first. Once you have paid off all your debts, (except mortgage) why not? You need to enjoy your money as well. If either of us feel like a spur of the moment dinner date. That’s fantastic! I know roughly what we spend on every bill each month. So we allocate a certain amount to investing right when we get it. The rest is free money to do what we like. Now if it comes to payday again and there’s more money than needed in the account, Ill throw more to our investments.
This is personal finance though. Everyone’s different and utilize different techniques. Will it take us longer to reach FI? Yeah for sure, haha. Will the lack of budgets fend off the grey hairs? Hopefully. Right now this works for us. We both are on the same page and don’t just “blow” money. Who knows what will happen in the future though….
The more I listen to choosefi podcast’s the more I think of selling our house, Taking the profits and paying cash for a smaller house in a lower cost of living place. Investing the rest and almost going into semi retirement already. Clearly if we did that, a budget would be critical. The wife’s not there though. Maybe we should start listening to them in the car.
It was a cool interview with Ai, and opened my eyes a bit. What would our savings rate be if we went hardcore budget again? With the wife on mat leave currently, it probably wouldn’t be crazy, but once she returns to work? Would I still be a budget nazi? Also I was shocked to be the first who doesn’t budget. Hmmmm…. Curious do you still do a monthly budget? Have you ever?