I do not use or typically recommend detailed budgets, only a discretionary spending ‘cap’ to stay under each month. But that feels a little unconventional in the money coaching realm. So why no categorized budget? Here’s my reasons:
What's In This Post
1. Practical advice for long term money success
I am all about practicality when it comes to helping others with their money. Managing money is a lifelong skill and is also quite personal. Therefore, regrettable choices will be made once in awhile and bad and good luck will come your way here and there, not to mention your needs will naturally change month to month, year to year. Practical advice that acknowledges these ups and downs I believe helps people stick to the overall plan and not give up. Categorized budgets feel quite rigid which is less practical to implement for most. They might be great for a temporary blitz, but I’m less convinced as a long term mode of managing spending. Repeated failure to stick to the numbers can degrade the motivation needed to keep trying.
More flexible budget approaches I’ve heard allow you to move money from category to category as the month progresses. In effect, this is just respecting the overall discretionary spending cap (my preferred method), but with a lot more accounting. Or if you have unspent money in a certain category, you essentially have a free pass to just spend in that category anyway, whether you need something or not. This sounds good at face value, like a little reward for not spending excessively.
But the idea of getting ‘assigned’ spending just because the money is there scrapes against my frugal bones! I wouldn’t want an odd or lucky month to give us a pass on unnecessary spending, because I know another month is coming when the opposite will happen. Instead, I’d rather see you put that unspent money in savings and, like I’ve said before, only when money is getting stale in the savings account is it time to start thinking of new ways to spend it. And really, let’s use that towards our big dreams and ways we want to better our lives instead- whether that’s giving more to others, saving for something you see for your future, or getting that much closer to retirement from the conventional 9-5.
Alternatively, by internalizing a frugal mindset you will slowly but naturally spend below your means, simply by adopting different values about stuff and money. In doing so, you can increasingly shift more available (unspent!) money intentionally towards pre-planned expenditures that fit with your priorities and values, stuff you’ve already spent time planning for, as opposed to a few extra dollars in the entertainment category for a particular month.
Therefore, when using just a single ‘cap’ on discretionary spending each month coupled to adopting frugal habits, anything ‘extra’ is naturally just kept in your account without a budget pointing out that you have 50 freebie clothing bucks available sending you straight to [insert favorite clothing store].com. And in months you overspend, you can evaluate those transactions (conveniently on your credit card account, if you’re using plastic) with your frugal glasses on and learn where you can do better going forward, instead of having technically ‘failed’ had you been using a categorized budget.
2. Simplicity of managing the monthly bills
Operating with a single cap on total discretionary spending each month, especially when that total is conveniently tallied on a credit card, you have one record to enter into your monthly bills spreadsheet and one bill to schedule. You can analyze your spending online using credit card account tools, but yet aren’t responsible for recording every transaction to an app or spreadsheet or notebook to do so. No matter how slick the process (like in an app), it is still an extra step to manage which is a pain, especially when you’re picking up essentials with a young child in tow or trying not to touch your phone because of a global pandemic. Just sayin’.
My spreadsheet system is admittedly extremely simple. Other ultimate bundles of spreadsheets out there do look quite fancy with lots of nifty features for tweaking your dollars, but again… I’m all about practical + simple. Magic duo!
3. Intrinsic vs. extrinsic spending control
I view a budget as a sort of extrinsic spending control requiring will power to adhere to it month after month, whereas adopting a frugal mindset ultimately informs your spending through intrinsic, internalized values. The spending cap I recommend you identify is also an outside limitation (you could say high level budget) you need to will yourself to honor, but it’s one number, not five or more you have to adhere to. And when you being to embrace more frugal values, it begins to happen more naturally.
I would define being frugal as desiring to consume less resources, chiefly your own resources- money. But also consume less stuff, driving less demand on the world making and selling and throwing away more and more stuff. And of course this then slows the consumption of natural resources and all that goes along with our constant demand for stuff. Moving towards a more frugal mindset means you may be seeing the value in owning less things (less to manage, clean, store, etc) or you’re more carefully valuing your time (how many hours of my work is this worth?). More topics around being frugal with money will be coming up on the blog, so stay tuned for more thoughts there to help you perhaps tiptoe towards becoming frugal.
In terms of its effects on excess spending, internalizing frugalness is more of a ‘root cause’ solution. A categorized budget may be a good ‘treatment’ for overspending, but until you actually desire to buy fewer things, it will always be a bit more of a battle. An ounce of prevention is worth a pound of cure!
In conclusion…
Ultimately, methods you find work for you, you should definitely follow! For people who like a highly structured plan or need drastic spending control measures, implementing a budget, even if temporarily, is a great approach. First and foremost, do what works. My advice is based on what I feel is the most practical and simple to implement because this increases the likelihood of success along the way. Over time, internalizing new money management habits and just the way you think about money and things I believe is crucial to becoming a master over your money and stopping money or stuff from having power over you. So, try rolling some frugalness around in your thoughts and see how it fits. I hope you can find some aspects of a frugal mindset that help you on your journey to intentional and strategic money management.
“To kindness and love, the things we need most.”
The Grinch (2018)