To Budget, Or NOT To Budget

I have a dirty little money secret.

I’ve never lied about it, but I’ve never shared it despite something like 12 years tweeting about personal finance.

I DON’T KEEP A BUDGET.

I know — it’s downright BLASPHEMOUS! It’s the foundation of All Things Personal Finance & Financial Planning, and I don’t do it! I’ve heard and read a million times from every single money blogger and book that you must have a budget and keep track of it, but I’ve just never felt the need for it personally. I’ve tried – I really have! – but it seems to fall by the wayside fairly quickly, like using a planner or a diet tracking app, and often for the same reason. The input is boringly consistent, so why bother punching it in over and over again?

My Super-Minimalist “Budgeting”

Alternatively what I work with is a number that represents my typical spending in a month, which varies by maybe $100. I put some serious effort into coming up with that number – but just once. From there, I know that as long as I bring in that much plus 1/12th of non-monthly expenses and 15-20% for taxes, I’m covered. Yeah, I know I threw a couple of things in there that take some figuring…but again, just once.

I co-own my house with my retired mother (this is my version of a “house hack”), all expenses are 50-50, and that number for me is $2430. If I suddenly couldn’t work and had to go bare bones, I know I could decrease that to $1400 by cutting out the mortgage overpayment, eating out, Roth IRA contributions (really not optional for me though) and my monthly chiropractic plan. There, that’s exactly how I budget.

What Goes Into Your Number

All expenses that are monthly and fairly fixed – then round up a bit. These usually include mortgage/rent, utilities, loan and debt repayments, groceries, prescriptions, insurances, hair cuts, gas, subscriptions, child care, pets, lawncare, even eating out and other entertainment if that’s part of your typical behavior. This isn’t about making the number as small as possible – this is just based on your existing lifestyle. This isn’t about going on a spending diet…well, unless you find that this number is above or uncomfortably close to your income. But that’s a whole ‘nother blog post.

Then there’s the non-monthly expenses that are so easily forgotten and are different for everyone. Like how is it only 6 weeks until Christmas I haven’t bought a single present, and oh crap, homeowner’s insurance is due. Stuff like that.

Unfortunately there are predictable-yet-unpredictable expenses too. They suck. Like you know you need to replace your tires at 50,000 miles and it’s a big fat money-drop all at once, but who’s really got the bandwidth and discipline to squirrel away $20 a month for 4 years? And I can’t not mention my personal favorite – the freakin’ dentist. Yeah, guess who just got four crowns this month. FOUR. Ugh, at least it cost a whole lot less than the one I got in 2007 that involved root canal and a post. I’m still not sure if my mouth hurt worse than my wallet, or the other way around. It was horrendously painful for a week.

These Numbers Are SUPER Important for Freelancers

If you’re a budgeting minimalist like me or just generally averse to the B-word, all you really need is that One Number. When I hit that $2430 number every month….well, I wish I could say I ring a bell or bang a gong or something fun and noisy like that, but it’s more likely a silent mental fist-pump. Appropriate for a money nerd from New Jersey, right? Anyway, it means that 85% of any earnings (remember, taxes…blech) for the rest of the month go towards things that make me happy – buying, saving, investing, donating, upgrading, spoiling (I’m a childless aunt, so this is a thing).

Got big seasonal swings in expenses? Yup, I know about those – electricity for me in Florida was $70 in winter and $210 in summer, and I never complained because the ease and comfort of air conditioning is worth every.damn.penny. Once you’ve been in your current home for a year, it’s safe to put your utilities on the budget plan that pretty much all companies offer, where you pay the same every month.

Got big seasonal swings in income? It only matters if you’re not hitting your number even in the slow months. If that’s the case, there are a few ways to handle that. My favorite one is to plan vacations for those weeks. This is not a joke! In my slow periods, I still hit my number but with very little extra, which means the opportunity cost of taking time off then is as low as it gets. Another way is to figure out how short you’ll be those months, divide your typical shortfall among the good months, and add it on to your minimum income numbers I mention above. I don’t know about you, but I’d rather just take a vacation 🙂

20 Minutes A Month

20 minutes is truly all I spend on my One-Number Budget, and it’s mostly spent reconciling shared expenses with my housemate-mom right before the mortgage is due. There are some serious advantages to handling your money this way….stay tuned!