A Budget is Unnecessary

I am going to make a bold statement.  A budget is unnecessary.   A budget is one of several financial reports, i.e. net worth, income and expense, and cash flow, that can be used to help guide you and your family on how to allocate your income.

A budget will not answer why you are overspending, lack savings, or can’t pay down your debt.

Having a budget may not work for everyone.  This article will explore why a budget is unnecessary in a traditional sense.

Budgets Have a Negative Connotation

Certain personalities prefer the limitations a budget can set.  For others, it makes them feel squeezed, uncomfortable, and guilty when they blow their budget. Much like when you diet, these emotions can lead to feeling like a failure. Many others are not really sure how a budget should be used.

My Confession

From someone who teaches individuals and families how to budget, I personally do not budget.  I never have used one to run my household. Before I go further, let me clarify an important point, I have never been a spendthrift.  As a child, I was not centered on having possessions and adopted the concept of saving at a very early age.

As an adult, I embraced the concept of not spending more than my income. During my marriage, my late husband and I never purchased anything using a credit card without the knowledge that we had the money pay for it in the bank. This kept our expenses in check.

Three Tips on How to Manage Money Without a Budget

I managed the household mostly by implementing these three tips below:

Carefully Consider Each Purchase Based on its own Merit.

Ask yourself, “Do I really want to spend (whatever the price is listed) on this product, item, or service?” You may want to picture how and when you will use it.

In other words, filter each decision and make a conscious choice as to whether this purchase is worth it.  To be clear, you will still buy things and services that you don’t need or use.  The point is, it will cut down on these purchases.

Each Partner Needs Their Spending Money

Each partner should have their own spending money.  As a couple discuss what expenses the spending money should and should not include. From there decide on the frequency, i.e. weekly, bi-weekly, or monthly and the amount.

As a side note, you have eliminated several categories that you would otherwise need to budget.

Use Cash for Groceries and Eating Out

The three largest expenditures for a typical household are housing, transportation (auto loans, leases, maintenance), and food.  The easiest way to keep food cost down is to use cash.  Decide on a monthly or weekly amount. You can have two different amounts, one for the grocery store and one for eating out.

Again, no need to keep any records unless you want to track groceries verses eating out.

Replace a Budget with an Annual Spending Review

While, I am suggesting you can eliminate a budget, you should have periodic reviews of your spending and savings. You want to make sure that it stays within a certain range.  You may not realize, in a year, how much you are spending in various categories.

For me, I prepare annual reviews. Last year, I spent much less on groceries and eating out than I thought and a little more than I would like on clothing.  Since clothing was more than I had anticipated, I am watching it more closely during the year.  My overall spending, interestingly, has stayed about the same for many years.

Final Thoughts

If budgeting is not working for you, then perhaps a budget is unnecessary.  There are other ways to monitor your spending and saving.  Using a budget does not guarantee financial stability.  What’s more important is learning how to monitor your spending.

What do you think?  Is a budget unnecessary?