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Home » Budgeting

Do You Need a Budget?

Last updated by on January 16, 2016

I have been running a personal finance blog for over six years now, but I have a dirty little confession…

These days, I don’t budget.

<insert crowd hush and record scratch/rewind sound effect>

“Woah, hold on a sec – a personal finance blogger who doesn’t budget? That’s sacrilege!”

Let me explain.

I still track our spending. And about once per year, I’ll review and look for ways to cut back. It’s a great use of time and I actually enjoy it.

Setting an arbitrary budget to be managed on a monthly basis after years of personal finance optimization? Well… it just seems like overkill.

Why? Here’s my thought process…

I know what our static monthly/annual expenses are:

  • term life insurance (static over length of term)
  • student loan (static over length of loan)
  • mortgage (static over length of loan)
  • telecom (static per month)
  • health insurance (static per month)
  • property tax (low year/year fluctuation)

… and they’ve all been optimized.

Then there are utilities:

  • water
  • electricity
  • gas

… monthly costs do vary, but I’ve done everything I am willing to pay for to keep costs low – CFL’s/LED’s, low flow showerhead, insulating pipes, identifying standby appliances through using an energy meter, etc. (check out my money saving products page for some ideas/suggestions). The result is that costs have actually declined each of the last few years in each area. Yes, there will be market price fluctuations that are out of our control, but I feel like we’ve done 95% of what we can do to limit our costs outside of a huge installation project like solar or replacing our furnace and water heater (when that time comes, we will buy highly efficient versions).

What’s left is really only 5 areas where we need to focus our attention:

  • home/auto insurance: consistent monthly, but larger annual increases than I’d like. The challenge/solution is to periodically review through quotes across multiple providers.
  • grocery/household goods: we live pretty extravagantly here – buying mostly organic and high quality food – but we still try to keep costs down through bulk purchases – and we use a 6% cash back grocery rewards card to cut costs.
  • restaurant: we spend less than $1,000 annually per year and only go out on special/social occasions and some while traveling.
  • auto fuel: these days 90% of our use is from my wife’s twice-weekly commute (one of the benefits of choosing a part-time job). I ride a bike to work and take a bus (with a pass subsidized by my employer) when polar vortexes hit, so no costs there. We could cut this expense further though.
  • other: less than $1,000 annual, and includes entertainment, vacation (minus restaurant), clothing, etc. Some back of napkin math tells me that we’ve actually sold enough stuff to completely offset this expense category, the last few years.

There is still room for tweaking each of those five areas – but I have a fairly good handle on it just through reviewing my expenses annually and looking for room for improvement. If pressed, I know where I’d focus my attention.

After all has been calculated, we spend only about 40% of the average 2-person household.

Is it beneficial for me to set and micro-manage a budget every month? Probably not.

Do you Need a Budget?

you need a budgetLets lead with this – EVERYONE, at a minimum, should track their spending on a monthly basis. Simply add up everything you’ve spent through check, cash, and debit/credit card. If you’ve never done this, it will be enlightening. You can’t get to a level of minor tweaking without having a good pulse on what your spending is.

While everyone should track their spending, there are those that need to actively micro-manage a budget every month.

I’m talking about budgeting for real, by literal definition of the term:

  1. tracking recent spending averages per month
  2. setting a monthly spending cap per category (ideally less or far less than current spend levels)
  3. staying under the cap
  4. actively monitoring progress and holding everyone accountable
  5. wash, rinse, repeat

If you fall in to one of the following categories, just tracking spending is not enough, you need to budget:

  1. If you are living paycheck-to-paycheck and have little room for error or emergency
  2. If you have debt with high APR (5%+) that needs to be paid off aggressively
  3. If you have aggressive savings goals and are not happy with current spend levels
  4. If you take a huge income hit (i.e. laid off)
  5. If you are the kind of person who needs to hold yourself accountable
  6. If you live with someone who needs to be held accountable
  7. If it’s been a few years since you’ve tracked your spending and you’ve let things slip a bit

It shouldn’t even be considered optional. You need to right the ship, and do it right away! Falling in to one of these categories could spell disaster – and if you’re in more than one, you should install a giant fire alarm in your home that sounds until you’ve completed the exercise.

To get you started, a few years back, I created a free budget planning spreadsheet. I still use it to track my spending and you can use it to do the same or to start micro-managing your budget.

The rest is up to you, my friends.

Budgeting Discussion:

  • Do you budget? Why or why not?
  • Do you track your monthly spending? Why or why not?
  • What did your monthly spending look like over the last year?

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About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 10,000+ others by getting FREE email updates. You can also explore every post I have written, in order.

  • We still have a budget but similar to you most categories are rather fixed and we only really keep an eye on our grocery spending. Mostly what I tweak in our budget is our savings rates to our targeted savings accounts, because in the last year or two we’ve spent far less than we projected to on our irregular expenses.

  • I do set a budget in Mint, but I really just check in (on my smartphone) to make sure I’m earning more than I’m spending. Like you, there are a few categories I have to keep an eye on, such as food and dining. When I first set out to pay off my $86,000 mortgage early, I had a strict budget. I was definitely helpful getting myself on track. Now, I’m on auto-pilot!

  • Tom says:


    I applaud your low spending (40% of the avg 2 person household I think comes out to about $1800/mo, using the BLS 2011 averages).

    I took a look at my own spending and think that if we trimmed out all of the fat, the best (wishful thinking included) we could do is $2500/mo, although we are more close to $3600/mo right now.

    You may have posted this before, but I’m really curious to know your monthly spending in a little more detail, even if it’s broad categories. It might give me (and other readers) a better idea of where we are overspending, compared to your gold standard.

  • Steve M says:

    We’ve started using an app on our phones called Level Money. It simplifies your budget down to daily, weekly and month spending. It has been extremely helpful to have a general idea of how much money per day I have to spend including restaurants, groceries, and entertainment. In any case, we are usually over budget by a bit every month. Since using this app for the first time last month, we were right on target with our budget.

    It’s daily coffee, grocery store runs, and entertainment that can make or break a budget.

  • Ron Ablang says:

    We don’t have a budget either. We just try (and almost always succeed in) to spend less than what we take home.

  • Amanda M. says:

    I have a slightly OCD Excel sheet with calculations and dropdowns all over the place. Started it 2 years ago, took a break when I moved to CA, then recently started again after the relocation expenses finally died down (the mortgage and rent payment together would have made me cry, but I sold my house, so I don’t need to worry about that anymore). I enter all expenses from my CC’s and bank accounts, then sort into 18 categories. I’ve highlighted the categories that I would need to pay in the event of a loss of income (totals ~$2300 for one person per month, but this is including my $1700 rent payment in the Bay Area of San Fran).

    I’m not in any of the categories that you’ve spelled out, but I don’t want to follow the pack of my generation spending my retirement funds on shoes and clothing now.

  • Kim says:

    We are a lot like you. I used to be a meticulous budgeter and it helped me get out of debt from credit cards, car payment & student loans. Then when I got married & combined finances, we optimized all of our recurring expenses down to the gnat’s ass, and live pretty loosely with things like groceries & going out (it’s about the same each month anyway). I still track our spending and saving since we have an aggressive FIRE goal and it helps stay on track knowing how much progress we’re making. The only thing we really “budget” for now is on vacations, we spend (as a family of 3) about an average of $500/day for everything from airfare + lodging + entertainment + food + souvenirs, whether we’re in Key West, Hawaii, Yellowstone… this past year we did a week in NC for more like $250/day and were very proud 🙂

  • ~Matt~ says:

    1. Yes i budget, in a not to exceed $ XX.XX format for Mint. It has been working well for me. I do not often change my budgeted amount. Once maybe twice a year i will review fixed expenses and compare with the latest offers.

    2. I review my day to day spending with mint on my tablet, though I could manage checking once a week.

    3. Over the past year gas consumption has gone down a bit. I have been a little more focused on dining out closer to home where generally parking is free and where the smaller town means smaller prices and less gas to get there. Really there was not much room for modification and for the year all financial goals were met.

    My budget was built not counting over time with my straight take home pay. The total I earned for the month (-) budgets (-) savings goal, the change left over is generally a bonus for me to with as I please. I could be more focused but my monthly savings goal is roughly 35% of my take home so it works for me.

  • Marcus says:

    I use YNAB and it has been working great so far for me. I highly recommend it.

  • Really a very interesting topic!!! U know actually, in our country we are all so sold on the “high life” that many of us live beyond our means. But passing with time we have to realistic with our “play” money and have to plan carefully our Daily activities. Sometimes when we give a serious look on our monthly budget, we think how can we make our pay check last longer. If anyone asks me about my budgeting then my answer is yes I am doing. My budget is divided in to two parts. Few are based on my weekly expenses and some depends on monthly payment. I always try to pay my crucial bills first. For e.g. pay the essential bills like grocery and medicine first, these are comes under weekly budget. Housing, utilities, car, all these comes under monthly expenses. And these are also control our expenses. Which decide how much I can spend weekly on my food and all other expenses. At last I am thinking about my credit card payments.

  • Chris says:

    I do, but being self-employed, I express my expenses in a dollar per day format. At this point, all I have to do make more per day than I spend and I’m golden!

  • A few years ago I used to budget religously because I knew that I didn’t know what I was doing! and budgeting seemed like the best way to get a handle of finances. I started doing so well that I just stopped unfortunately I didn’t realize the reason I was doing so well was BECAUSE I was budgeting so it back to the drawing for mr

  • Don says:

    I budget, but as a single student living in a college town with little extra income, there aren’t too many decisions I have to make to keep in budget.

    Most of my essentials are more or less automated. I buy more or less the same things each month as far as grocery, so there isn’t that much variation in my spending there.

    I set aside $100 each month as non-grocery/food spending. This includes any small home improvement, getting a hair cut, or extra money for restaurants. To me, its good to know if near or at the end of the month, there is something left over there to buy something extra for myself, or not.

    Other than that, 90% of my spending/savings is more or less automated, so I only make decisions about a small pocket of money. I still keep a budget for that reason.


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