I don’t keep a budget and I think my personal finances are better without it.
Yep. You read that right. And it’s not because I’m so rich I don’t need one.
Before I begin on my anti-budget rant, I want to state what is probably the obvious. Personal finance is very much what it’s called: personal. This means finding whatever system, budget, or mentality work for YOU personally. There is no absolute rule for how you must handle your money to ensure you handle it successfully. For me, personally, I feel the recommended budgets by many financial experts cost me more money than they save me.
This post may contain affiliate links. All opinions are my own.
Why I don’t like budgets
First off, does anyone actually like budgets? They’re just not that fun.
My disdain for them boils down to this:
I don’t have the time.
I’ve tried the recommended systems. I’ve tried to keep track of every single thing I buy on a spreadsheet or on my phone. It works okay, but I don’t usually remember to do it with every purchase and I don’t really see the point.
I’ve also tried the cash only system where I take out my spending money in cash for the month and use only that. It usually just results in my frustration that I could be benefiting from credit card points but instead using cash.
What I really can’t imagine is how budgets must be for couples. The envelope systems, checking in on every purchase, it sounds stressful!
Some of these systems have maybe ended up saving me a couple of extra dollars a month, but nothing significant. What they do take a lot of is time, and the amount of time I spent budgeting each single item each month and keeping track of it was not worth what I was saving.
Instead, I use my extra time side hustling and making more money.
This is why I feel like budgeting actually wastes me more money than saves me.
My personal “budget”
I do have a system that helps me save each month, it’s just not as traditional as budget.
What I do is automate my savings. This means that once a month, the day after I’m paid, I have automatic systems in place that transfer money from my checking account to my savings account.
I don’t have to do anything.
Two of my favorite personal finance books, The Automatic Millionaire and Rich Bitch (seriously, Nicole Lapin is my queen), explain the power of automated savings. If you don’t see the money and have to physically take it from your checking account, it’s less painful and easier to save.
This is the same concept that comes with setting aside your 401k for retirement. If that money is taken out of your paycheck before you see it, it doesn’t feel like you’re losing it as much.
My automated savings accounts
PAY YOURSELF FIRST: The ‘magic formula’ for building financial security for life https://t.co/zwDEiVbXAt via @bi_strategy
— David Bach (@AuthorDavidBach) January 5, 2017
I use Capital One 360 for my savings accounts and it’s AMAZING. I’ll never go back.
1- it has sub-savings accounts like you see below, so I can divide up where all my money is going;
2- it has a much higher interest rate than big banks like Chase, Wells Fargo, etc.;
3- it has no minimum requirement! They don’t charge you to bank with them.
Here is a screenshot of each of the “sub-savings” accounts I have set up. Each month, my savings account automatically pulls a set amount from my checking and puts them into my savings in these categories.
Here’s a brief breakdown of each account:
Pay off student loans
This should be pretty self-explanatory, but you might be wondering why I have a savings account for these instead of just paying more toward my loans each month. The answer is that I’ve already set my monthly loan payment at a pretty aggressive rate, over 20% of my total income. The money I have after that may vary month to month, but because of potential error in the bank’s calculation, I want my monthly payments to remain the same.
This is also the savings account I would use if I had an emergency. I don’t need that money to pay off my student loans. But, if I can build it up and pay them off sooner, great! You can read more about my student loan pay off journey here.
Roth IRA 2017
I’ve already maxed out my Roth IRA for 2016 (but if you haven’t, don’t worry, you still have until April 15th!). But, I wanted to start saving now to max out my Roth IRA in 2017. Maxing out that contribution means giving $5,500/year, and I have until April 2018 (16 months from now) to save that up. So, I divided $5,500 by 16 and would need to contribute $343.75/ month to save up for that. I can’t pay quite that right now, but I pay as close to it as I can!
After the two above categories, I give the most to this account. I have a lot of trips planned for this year and there’s nothing worse than coming back from a vacation and feeling like you can’t do anything for weeks to make up for your money spent! Luckily, I don’t have to save a ton. I’ve still got plenty of frequent flyer miles stored up thanks to my favorite credit card hacking technique.
The expensive parts of traveling this year will be wedding gifts + attire! Who else is feeling like all of the sudden, everyone they know is getting engaged?!
It’s really important to me to give money each year. And, I believe the more you give, the more you receive. It’s a positive cycle. Bonus: it’s tax deductible!
I live in New York and want to get married in New York. I’m guessing it’s going to be pricey! And, I don’t want to rely on my parents to have to pay for everything at all. The days of the bride’s parents paying for everything evolved from the system of dowries, which is basically men being paid for their bride. We live in the 21st century. Just, no. That is all.
I set just a bit aside each month for when and if I want to buy something pricier than my usual range. This way, I don’t feel guilty and it wouldn’t disrupt my savings. The money will already be there.
Please note that when it comes to my side hustle money, I actually put 50% of it into this account. I use this technique from Ramit Sethi, who uses it as a way to motivate you to continue side hustling. Treat yourself!
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Moving and House Keeping
As I’m only in my twenties, I’m still renting and don’t really plan on buying real estate for another five years or so. If you have ever rented in Manhattan, you know that it is actually the worst thing in the world. It’s expensive, things break (including your spirit), and it’s super unpredictable. I set a small amount of money aside each month so when I do move, it won’t be a huge financial burden and/or in case something breaks in my apartment and I need to replace it ASAP.
Similar to the above, I keep a small fund going in case I need to replace broken technology. A small $10 a month goes into this account. Then, if my iPhone gets stolen or broken, I can use whatever is in there to replace instead of having a huge surprise cost on my hands.
I have a target amount that I want to have before investing, so I set that aside here. Honestly, this account does see much right now, since I’m so focused on paying off my student loans. But, I do like that I have a foundation.
I just started this for 2017 and am excited about it. Do you go through that moment in December when buying Christmas presents when you think, “where in the world am I supposed to come up with the several hundred dollars I need for presents?” Me too! So, I divided up how much I spent on Christmas last year for friends and family by 12 and I set aside that amount each month. When December comes along, I’ll be so ready. 🙂
My non-budget for my monthly expenses
The above sub-saving amounts are automatically pulled from my checking account once a month the day after I receive one of my two monthly paychecks. The day after I receive the other monthly paycheck, my bank automatically sends in my rent check and my monthly student loans payment.
The rest of the money I have left over is what I spend month to month for my daily expenses. We can call that my “living” money. I spend NO TIME budgeting exactly how much I should spend on food or groceries or cabs or anything else.
It’s pretty much the greatest.
Rather, once a week or so, I’ll look at my bank account and make sure I’m relatively on track to have spent a fourth of my monthly “living” money that week and am not going over. If I feel I’ve spent a bit much, I cancel plans for that weekend. But that’s rarely the case.
My credit card usage
If you’re a budget guru who has totally disagreed with my outlook thus far of not budgeting, you’re really going to squirm when I say that I also only use credit cards.
I don’t take out my living money in cash or even use my debit card. I am actually a huge fan of credit cards as a way to get travel and cash back benefits.
And, cash= papercuts.
If you feel like you don’t have a good grasp of how much money you actually have with credit cards, you can simply check your outstanding balance at any time on your phone. If the outstanding balance is a bit higher than you want, then hold off for a couple of days.
My routine is to check my outstanding balance on my credit card once a week or so. I keep it under my living money (the money after my expenses and savings), and then at the end of the month, I can just pay it off in full.
What’s your personal finance system?
If you’re still with me, thanks for tuning in for my anti-budget rant. I hope you found it entertaining.
Do you have a personal finance hack? What works for you? I always love hearing new tips for how best to manage money. I definitely believe that building wealth has much less to do with your actual income than it does with how you spend it.
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By FAR, my favorite millennial hack for building wealth is side hustling.
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