I have a confession to make. I’m not a perfect person. I know. It’s hard to believe.
But seriously. I know there are so many rules that you’re supposed to follow when it comes to personal finance. And I think I do a pretty good job at following most of them. I spend less than I earn. I transfer money automatically to my savings account every month. I contribute to my 401(k) up to the company match. I fully fund my Roth IRA every year.
There’s one thing that I don’t really do.
I don’t budget.
There. I’ve said it.
I was talking to a friend the other day, and she was lamenting how her mother was so impressed with her sister, because her sister budgets and has a vacation fund. This friend was unemployed, but had been staying above water thanks to her savings that she’d built up. She wanted recognition from her mother on this fact. I commended her! I’m very impressed by her high level of savings. I assured her that, once she got back to work, she could start a vacation fund if that’s something that is important to her. And that’s when my admission came out. I told her that I don’t have a budget, either.
Why don’t I have a budget?
I don’t have a budget because it would be really boring and not very useful. I have many consistent expenses every month (rent, utilities, car payment, student loans payment, etc.) which I know will happen each month. Most of those costs are pretty non-negotiable, though I would consider paying more towards my loans to lower the principle. The expenses I have every month that aren’t exactly the same each month are things like food (grocery store, lunches, dinners) and gas. But in those cases, I have a total that I try to stay under. I keep my grocery spending under $100 a month, and also keep my dining out to once a week, maximum, (and trade-off who pays with my boyfriend when we go out), and try to keep those expenses below $100 as well. I’m trying to cut down on how much I spend at the cafeteria (i.e. trying to bring my lunch more often, buying cheaper options) but I try to keep my expenses in the cafeteria below $30 a week. Yes, when you add up all this money over a year, it’s quite a bit of money. But I like going out to eat every once in a while. And I need to have groceries. I tend to spend less than any of the budgets. But I don’t actually budget the money, i.e. figure out what money I have available to spend, then divide it between all of my expenses. And I’m not really sure where I can lower any of my expenses (outside of the variable food), since I rarely go shopping.
So, am I making a big mistake by not budgeting? I know where my money goes by tracking my expenses (after the fact) with Mint. But I don’t plan things out. I just inherently know my limits, and try to avoid spending money when possible.