Author Topic: "Wah, wah, wah: budgeting is too haaaard, so we're going to say it's overrated"  (Read 11273 times)

TheGrimSqueaker

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For your reading amusement: people simply can't be bothered to write down what they spend from year to year, and they don't keep extra emergency money available for, well, emergencies, therefore "budgets" are the problem. The solution is to spend randomly and hope for the best, according to this author.

http://www.slate.com/articles/business/the_bills/2015/06/personal_budgets_are_overrated_seriously.html

Hunny156

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Sounds like she needed to write something in order to cover some of her extra bills this month...

I keep a budget, but we are savvy enough now that it is more of a reference tool.  Of how much we should be saving.  Which I then turned into a series of charts, to track savings from all sources.  Seriously, I have projections going into 2020, although I hope to be FIRE before that.

I really enjoy using Excel!

zoltani

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Good try, but maybe you didn't see this paragraph.

"So what should you do? Well, it helps to think of managing your finances as surfing a wave. When I got in touch with Harris at Personal Capital to ask him about his remark from last year, he suggested people simply monitor their expenses with great frequency, because the more you track spending, the easier it is to recalibrate when needed. In fact, itís likely youíll cut back altogether if you watch your outflows regularly. When behavioral economists Yaron Levi and Shlomo Benartzi studied the issue for Personal Capital, they discovered that new users of the firmís app, which allows people to monitor both their bank and investment accounts, reduced their grocery bills by 20 percent and overall spending by more than 15 percent in the four months after installation."


KCM5

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I'm probably not a model for financial planning, but in general I do spend randomly and hope for success. Granted, our random spending also includes a set amount of 50% of our income going to savings, so it works. And we don't make a lot of money, so this isn't some high income thing. Budgeting would probably increase that, but it seems like too much work (man do I sound ridiculous).

Edited to add: good thing I don't write articles about not budgeting. It would make me sound even more ridiculous!

Chris22

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I'm probably not a model for financial planning, but in general I do spend randomly and hope for success. Granted, our random spending also includes a set amount of 50% of our income going to savings, so it works. And we don't make a lot of money, so this isn't some high income thing. Budgeting would probably increase that, but it seems like too much work (man do I sound ridiculous).

Edited to add: good thing I don't write articles about not budgeting. It would make me sound even more ridiculous!

I'm the same way.  My savings comes out automatically with my paycheck.  I'm not trying to budget too much further than "don't take money out of savings."  It's more of a "should I pay for this unusual item out of this week's paycheck or next week's to avoid taking money from savings?"

zoltani

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Seriously, budgets are overrated, I don't use one. I simply set a target amount (percentage) of my paycheck that I want to save and save that. The rest is money for bills, groceries, etc. I track my expenses, but I do not like to budget in the traditional sense of "i have $100 left in the budget this month for groceries and it is only the 5th".

golden1

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That gave me a chuckle.  Just because you have a lot of unplanned expenses that aren't month to month isn't the reason to chuck making a budget.  Just add a line item for "Misc Expenses" and estimate based on last years random expenses what you will need to save.  Then have an emergency fund in case you happen to have a particularly bad year.   

dsmexpat

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I run a very tight budget but there again I don't get paid shit. It's all very well for the 70k+ income people to say "I save half and make do with the rest" but that's because the rest is a shitton of money that by itself doesn't really need a budget. To maintain a comparable savings rate on, for example, 25k takes a budget. You can't just save half of a 25k income unless you have your expenses mapped out in detail.

stlbrah

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It seemed to me that the article was written for the author to seek some sort of validation for her own issues.

Most of us probably don't even really have a budget, but more of a set of rules to follow.

Faraday

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That gave me a chuckle.  Just because you have a lot of unplanned expenses that aren't month to month isn't the reason to chuck making a budget.  Just add a line item for "Misc Expenses" and estimate based on last years random expenses what you will need to save.  Then have an emergency fund in case you happen to have a particularly bad year.

We've got a lot of writings and verbage here that really go against the fundamental assumption of that article: "That we are all just little leaves in a rushing river of randomness being swept by capitalism from birth to death...." The financial helplessness described in that article is repugnant and vulgar to the determined, optimistic and badass Frugalist. 

Indeed. the very fundamental underpinning of badassity is taking control!

TheGrimSqueaker

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Good try, but maybe you didn't see this paragraph.

"So what should you do? Well, it helps to think of managing your finances as surfing a wave. When I got in touch with Harris at Personal Capital to ask him about his remark from last year, he suggested people simply monitor their expenses with great frequency, because the more you track spending, the easier it is to recalibrate when needed. In fact, itís likely youíll cut back altogether if you watch your outflows regularly. When behavioral economists Yaron Levi and Shlomo Benartzi studied the issue for Personal Capital, they discovered that new users of the firmís app, which allows people to monitor both their bank and investment accounts, reduced their grocery bills by 20 percent and overall spending by more than 15 percent in the four months after installation."

I saw it, but the recommendation is not going to help the author. The author's problem is that she spends too much. Like most people, she grossly overestimates what she can safely afford, and fails to set aside enough to cover the predictable but irregular expenses, or the unpredictable ones.

Tracking past expenses will only help people who are willing to accept the notion that they can learn from past experience. This author doesn't seem to be in this category, because it's not the first time she's been financially embarrassed, and she definitely didn't pick up on the "annual" part of the annual condo assessment she had to pay last year. She actually seems to think her current situation is some kind of catastrophic, Nassim Nicholas Taleb style "black swan" experience. In reality it's a predictable consequence of her basic failure to keep her own ducks in a row.

The only reason there's not money in her account to cover the new expenses (one predictable, one not) is because it had already been spent on something else. Her money was not destroyed in a global economic collapse, nor was it stolen or vacuumed away by space aliens. Nobody lost their job or was hospitalized. These are normal expenses for the lifestyle the happy couple has chosen. They simply need to start cutting back until they've got enough to build a nice slush fund. That will tide them over until they either get better at budgeting (it takes practice), or develop an intuitive feel for financial equilibrium, which will give them spending habits proportionate to their income and also the ability to determine which expenses they can or cannot afford.

Those of us who don't use a written budget are simply good enough at predicting their future incomes and expenses, and prioritizing "needs" versus "wants", and selecting items that fall within what they can actually afford. They can do all of this without having to write anything down. It's a skill that comes with practice and experience. In some ways, it's like being able to do math in your head.

People who can't do math in their heads require a pencil or a calculator. This author, lacking the financial equivalent of being able to do math in her head, rejected the pencil and the calculator. You just can't fix that.

WildJager

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I think the most useful aspect of a budget is retroactive analysis, as the CEO of Personal Capital alluded to.  Most people have no idea what they spend on what.  I track that, and use averages to set our budget to follow suit.  This allowed us to see frivolous spending and cut it, thereby reducing our overall "budget".

Designing a budget also allows for guilt free pleasure spending for partners that use joint banking accounts.  My wife and I have our own personal monthly spending money to use as we please.  This helps alleviate the feeling that you're letting the other down by spending money on silly things like beer.

All said and done, tracking this data allows you to accurately see what you're spending and saving, and how to adjust the course if necessary.  You'll never be able to navigate the waters of financial independence on blind faith alone.  Even those who say you don't use a budget, by virtue of knowing how much you're saving (and known income) you are budgeting. 

zoltani

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Good try, but maybe you didn't see this paragraph.

"So what should you do? Well, it helps to think of managing your finances as surfing a wave. When I got in touch with Harris at Personal Capital to ask him about his remark from last year, he suggested people simply monitor their expenses with great frequency, because the more you track spending, the easier it is to recalibrate when needed. In fact, itís likely youíll cut back altogether if you watch your outflows regularly. When behavioral economists Yaron Levi and Shlomo Benartzi studied the issue for Personal Capital, they discovered that new users of the firmís app, which allows people to monitor both their bank and investment accounts, reduced their grocery bills by 20 percent and overall spending by more than 15 percent in the four months after installation."

I saw it, but the recommendation is not going to help the author. The author's problem is that she spends too much. Like most people, she grossly overestimates what she can safely afford, and fails to set aside enough to cover the predictable but irregular expenses, or the unpredictable ones.

Tracking past expenses will only help people who are willing to accept the notion that they can learn from past experience. This author doesn't seem to be in this category, because it's not the first time she's been financially embarrassed, and she definitely didn't pick up on the "annual" part of the annual condo assessment she had to pay last year. She actually seems to think her current situation is some kind of catastrophic, Nassim Nicholas Taleb style "black swan" experience. In reality it's a predictable consequence of her basic failure to keep her own ducks in a row.

The only reason there's not money in her account to cover the new expenses (one predictable, one not) is because it had already been spent on something else. Her money was not destroyed in a global economic collapse, nor was it stolen or vacuumed away by space aliens. Nobody lost their job or was hospitalized. These are normal expenses for the lifestyle the happy couple has chosen. They simply need to start cutting back until they've got enough to build a nice slush fund. That will tide them over until they either get better at budgeting (it takes practice), or develop an intuitive feel for financial equilibrium, which will give them spending habits proportionate to their income and also the ability to determine which expenses they can or cannot afford.

Those of us who don't use a written budget are simply good enough at predicting their future incomes and expenses, and prioritizing "needs" versus "wants", and selecting items that fall within what they can actually afford. They can do all of this without having to write anything down. It's a skill that comes with practice and experience. In some ways, it's like being able to do math in your head.

People who can't do math in their heads require a pencil or a calculator. This author, lacking the financial equivalent of being able to do math in her head, rejected the pencil and the calculator. You just can't fix that.

Holy shit! if you spend this much time analyzing articles like this you must be a VERY busy person!

Faraday

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Quote
author=TheGrimSqueaker link=topic=38297.msg686257#msg686257 date=1433531160]
...
The only reason there's not money in her account to cover the new expenses (one predictable, one not) is because it had already been spent on something else. Her money was not destroyed in a global economic collapse, nor was it stolen or vacuumed away by space aliens

Holy crap that's hilarious AND important. This is what I mean when I was talking about the helplessness and resignation inherent in her point of view.

Quote
author=WildJager link=topic=38297.msg686319#msg686319 date=1433534938]
I think the most useful aspect of a budget is retroactive analysis, as the CEO of Personal Capital alluded to.  Most people have no idea what they spend on what.  I track that, and use averages to set our budget to follow suit.  This allowed us to see frivolous spending and cut it, thereby reducing our overall "budget".

Designing a budget also allows for guilt free pleasure spending for partners that use joint banking accounts.  My wife and I have our own personal monthly spending money to use as we please.  This helps alleviate the feeling that you're letting the other down by spending money on silly things like beer.

All said and done, tracking this data allows you to accurately see what you're spending and saving, and how to adjust the course if necessary.  You'll never be able to navigate the waters of financial independence on blind faith alone.  Even those who say you don't use a budget, by virtue of knowing how much you're saving (and known income) you are budgeting.

Strongly Agreed WildJager!

- Budgeting showed me what things I can streamline. Cellphone contracts, cable TV and car payments all stood out clearly as items that could be eliminated. Now I'm working on more difficult items, like refinancing the mortgage, requoting insurance or reducing the cost of fuel and energy.

- Budgeting showed me to quit getting mad at DW for $10-$30 out of her paycheck on the occasional small item for herself when there are other far higher expenses (10x or more) that I could conquer instead. It's foolish to harp about 30 bucks when there's $300 you could go after and not change your standard of living one iota...

 About the most amazing thing you can say about that article is...she got PAID TO WRITE THAT...and from someone besides "THE ONION"?!?!?!
« Last Edit: June 07, 2015, 06:54:50 AM by mefla »

RocketSurgeon

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This is like the third dumb article from Slate that I'v seen on these forums. I don't think they're written primarily to inform. Bait 'em with a controversial headline and gobble up that ad revenue.

Jags4186

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I've read this bitch's stupid book pound foolish. Basically her entire career is complaining about the "system", complaining about personal finance gurus, and offering no solutions.  Insufferable. Sure things aren't perfect in the United States but you could easily live in Somalia or Bangledesh.

Faraday

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I've read this bitch's stupid book pound foolish. Basically her entire career is complaining about the "system", complaining about personal finance gurus, and offering no solutions.  Insufferable. Sure things aren't perfect in the United States but you could easily live in Somalia or Bangledesh.

I like direct language like that - you pushed me to take a look at the book on Amazon and read what they will let you see (I also found a review of the book on Business Week website.) Overall I have to agree and my initial thoughts about the encouragement AGAINST budgeting still stand. You'd have to be a nutjob not to budget and not to save. And I just don't know who-the-hell she's talking about when she says "give up lattes, be rich" is getting said by someone.

I mean, you can spend a fair chunk of money on lattes if you got them every day at Starbucks, but no one is stupid enough to think that ONLY cutting out lattes will somehow magically make you rich. I don't know anyone who drinks a half million dollars worth of starbuck's lattes.

I like one single thing about the book: that she calls out the finance industry for the scams it has perpetrated on the public. I've lost money on recommended stocks that I found out later were actually intended to fail, I've lost money in a mutual fund managed by a reputable, mainstream financial company that went down after 2006-2008 and *never* recovered, and I've had money taken from a prior employer's 401k because "I didn't move it out fast enough".

Since the Fidelity lawsuit, these practices have become much less common, but it's still a risk we all face. What I wish is that she had stuck to facts, done a little more "real reporting" and tried to identify ways for the common investor to avoid or mitigate the damage done by the thieves.

sleepyguy

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Saying that is a bit much, budgets works.  BUT I'm the EXACT same way as you... I don't follow anything... 50%+ goes away to investments and such... the other for living... whatever leftover goes into investments again, rinse and repeat... easy game :)

Seriously, budgets are overrated, I don't use one. I simply set a target amount (percentage) of my paycheck that I want to save and save that. The rest is money for bills, groceries, etc. I track my expenses, but I do not like to budget in the traditional sense of "i have $100 left in the budget this month for groceries and it is only the 5th".

I'm a red panda

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I use the "spend randomly and hope for the best" method of budgeting.  I have never cared what I spend, I get what I want when I want it. I look at the balances at the end of the month and make sure things are okay- if they seem to be low, then I try to decrease excess spending the next month, but mostly I don't really care.

My savings rate is above 50%.

If you have a reasonable income, "don't buy shit you don't need" is a fine way to budget.
If you are someone who can barely make ends meet with necessities (and cable TV is not one of them!), then this probably won't work.

mtn

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Meh... I don't budget too much. I have my savings set up into different vehicles at the beginning of the year. I have a few shorter term goals that I'm going for. After that, I just make sure that I don't spend on shit I don't need. Unless I really want it. Like Stanley Cup Final tickets.

I also make sure though that if it were to all hit the fan, my emergancy bucket could cover everything--and then I don't use it, even in an "emergency" I'm using a credit card. And if that were to all hit the fan, I have a deeper, less liquid emergency fund that would cover everything.

And that is before we even hit retirement accounts or guitars.

I'm a red panda

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After that, I just make sure that I don't spend on shit I don't need. Unless I really want it.


That is exactly how my "budget" works.
Didn't even hesitate to buy the new kayak or book a cruise. 
But try to decide if I want to buy soda when it isn't on sale- that I will waffle on for ages. (And then usually don't. Soda is ridiculously expensive.)

AJ

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Holy shit! if you spend this much time analyzing articles like this you must be a VERY busy person!

This dig at the OP was unnecessary and did not contribute anything useful to the conversation. He/She took time to reply thoughtfully to your comment and your response to that was immature.

Jags4186

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I've read this bitch's stupid book pound foolish. Basically her entire career is complaining about the "system", complaining about personal finance gurus, and offering no solutions.  Insufferable. Sure things aren't perfect in the United States but you could easily live in Somalia or Bangledesh.

I like direct language like that - you pushed me to take a look at the book on Amazon and read what they will let you see (I also found a review of the book on Business Week website.) Overall I have to agree and my initial thoughts about the encouragement AGAINST budgeting still stand. You'd have to be a nutjob not to budget and not to save. And I just don't know who-the-hell she's talking about when she says "give up lattes, be rich" is getting said by someone.

I mean, you can spend a fair chunk of money on lattes if you got them every day at Starbucks, but no one is stupid enough to think that ONLY cutting out lattes will somehow magically make you rich. I don't know anyone who drinks a half million dollars worth of starbuck's lattes.

I like one single thing about the book: that she calls out the finance industry for the scams it has perpetrated on the public. I've lost money on recommended stocks that I found out later were actually intended to fail, I've lost money in a mutual fund managed by a reputable, mainstream financial company that went down after 2006-2008 and *never* recovered, and I've had money taken from a prior employer's 401k because "I didn't move it out fast enough".

Since the Fidelity lawsuit, these practices have become much less common, but it's still a risk we all face. What I wish is that she had stuck to facts, done a little more "real reporting" and tried to identify ways for the common investor to avoid or mitigate the damage done by the thieves.

Olen's main argument in her book was that you SHOULD be able to buy the latte and get ahead. We're being taken down by overbearing healthcare costs and shady finance people.

Yes, I agree that healthcare costs are a lot (for the uninsured or underinsured). Yes, I agree that there are mutual funds and financial advisors who make exhibiting commissions.

But she shits on people like Suze Orman and Dave Ramsey who preach to the ignorant or the lost souls caught up in spendypants habits and say they should get out of debt, they should save for retirement, they should invest instead of saving money in a savings account.  She acts like they're the problem.

No the problem is people are dumb and they want what they want and buy what they want whether or not they have the money.

If someone goes bankrupt because of healthcare costs in sorry. If someone goes bankrupt because of healthcare costs because they have a boat and 3 cars and a vacation home I say shame on you--you obviously spent your money on toys and not proper insurances. 

The game may be somewhat rigged--but everyone knows it going in and the information is readily available on the Internet on how to "beat the game". This website is proof of that. 

celticmyst08

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If someone goes bankrupt because of healthcare costs in sorry. If someone goes bankrupt because of healthcare costs because they have a boat and 3 cars and a vacation home I say shame on you--you obviously spent your money on toys and not proper insurances. 

I see a number of bankruptcy documents at my job, and it's always interesting to read through the list of creditors and debt amounts. More often than not, there are at least 2 car loans, a boat/motorcycle payment, 5-6 store credit cards, etc. It's extremely rare for me to see a bankruptcy where the only (or largest) debt is medical. Obviously this is purely anecdotal, and I can't know the full story/context of each bankruptcy, but yeah. I'd imagine that the medical debt may be the tipping point for a lot of bankruptcies, since medical issues -- while expensive to pay for -- can also cause you to miss work, so your paycheck to paycheck lifestyle implodes, and then you get another debt tacked on top of the ones you already have and could barely pay in the first place.

mtn

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After that, I just make sure that I don't spend on shit I don't need. Unless I really want it.


That is exactly how my "budget" works.
Didn't even hesitate to buy the new kayak or book a cruise. 
But try to decide if I want to buy soda when it isn't on sale- that I will waffle on for ages. (And then usually don't. Soda is ridiculously expensive.)

Bingo. Except it is pop, not soda. But I agree--I need a new computer. Would cost about $200-$300. And I can't pull the trigger, even though I have more than enough in a bank account I completely forgot I had until they sent me a new debit card. But I'm getting by just fine on a combination of the cell phone, work computer, parents computer, and my failling 5 year old computer.

Jags4186

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After that, I just make sure that I don't spend on shit I don't need. Unless I really want it.


That is exactly how my "budget" works.
Didn't even hesitate to buy the new kayak or book a cruise. 
But try to decide if I want to buy soda when it isn't on sale- that I will waffle on for ages. (And then usually don't. Soda is ridiculously expensive.)

Bingo. Except it is pop, not soda. But I agree--I need a new computer. Would cost about $200-$300. And I can't pull the trigger, even though I have more than enough in a bank account I completely forgot I had until they sent me a new debit card. But I'm getting by just fine on a combination of the cell phone, work computer, parents computer, and my failling 5 year old computer.

I like to buy refurbished computers on tigerdirect. You can get a nice off lease machine for $75-$200 depending on what you're looking for.  Plus you get warranty that you wouldn't get on eBay.

Faraday

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...(good stuff here)...
But she shits on people like Suze Orman and Dave Ramsey who preach to the ignorant or the lost souls caught up in spendypants habits and say they should get out of debt, they should save for retirement, they should invest instead of saving money in a savings account.  She acts like they're the problem.

No the problem is people are dumb and they want what they want and buy what they want whether or not they have the money.

Jags - with you solid on that. Orman and Ramsey have their...quirks and failings but I would never kick them in their Jesus (har), given that they are sometimes cause people to end up here. I'd heard of Dave Ramsey for years before I ever knew who he was, and Suze Orman always gives great tips for budgeting, paying off debt, etc. I'm not sure what kind of a person you must be if you think Orman and Ramsey both suck....bad enough to write a book about it?!?

The fatalism makes me wonder if she'd shit on the MMM philosophy and frugalism and self-responsiblity just to defend the point of the book.
« Last Edit: June 09, 2015, 11:55:30 AM by mefla »

No Name Guy

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No surprise that this author (one Ms. Helaine Olen) wrote this turd of an article.  Add yet another waste of memory and bandwidth to her long list of failed efforts.  Her time would have been better spent cleaning the dog shit off her comforters herself*.

Then again, she's writing to the mindset that rolls around on the floor, wallowing in their own filth that they "can't do it.  I can't take care of myself.  I neeeeeeedddddd someone to heeeeellllllpppppp me. Oh woe is me without that high paying job I'm entitled to.  You OWE it to me to see I'm taken care of." 

Sadly, one sees a frighteningly high percentage of posters here on MMM Forums that also express the entitlement, woe is me / woe on what they do to me, life is hard mentality as expressed by Ms Olen.

* - Duh she didn't have any money to pay for the sick dog.  She pissed away what could have been plenty to pay for the dog vet bill on not one, but TWO down comforters.  Then again, to her blind-as-a-bat way of thinking, she'll never make this simple connection.

oinkette

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I don't budget.  I'm just not that analytical about it all. And I certainly don't want to keep checking to see that I'm in budget every day.  I simply spend as wisely as possible and keep enough in my checking account to cover any spur of the moment things, emergency fund for big surprises. It's served me quite well.

I think budgets tend to be for people who are either 1) analytical and like charts and lists and things like that and 2) people who have a history of overdrafting or otherwise spending more than they currently have.

Faraday

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I don't budget.  I'm just not that analytical about it all. And I certainly don't want to keep checking to see that I'm in budget every day.  I simply spend as wisely as possible and keep enough in my checking account to cover any spur of the moment things, emergency fund for big surprises. It's served me quite well.

I think budgets tend to be for people who are either 1) analytical and like charts and lists and things like that and 2) people who have a history of overdrafting or otherwise spending more than they currently have.

Wait a minute, wait a minute. (and BTW: I like your screen name, "oinkette"...superbe....)

It seems to me that "budgeting" can have two meanings here:

1) The act of documenting and planning periodic cash flows in and out, either on paper or electronically,
and in the broader sense:
2) Deliberate control and management of cash flows in and out.

So what I'm saying is, even you guys who say you aren't budgeting, still are if you are saving any significant amount of your paycheck. Your technique is just simple and fast and not necessarily written down.

By my definition, you are not budgeting if you don't document/plan AND you spend to zero every paycheck or go into overdraft.  That is, you really have no clue how to pace your purchases after  you get paid.

You guys who are saying you "don't budget" but put 1/2 your income into savings up front (and THEN spend to zero), IMHO, ARE actually BUDGETING, you just keep it in your head and keep your frugalistic goals in mind.

Your experienced feedback and thoughts welcomed.

MoneyCat

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I don't use a budget.  I also don't iron my socks.

What I do is transfer my bi-weekly contribution into savings and then just be as frugal as possible.  Anything leftover gets carried into the next month and/or also transferred into savings.  It works fine for me that way.

I'm a red panda

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You guys who are saying you "don't budget" but put 1/2 your income into savings up front (and THEN spend to zero), IMHO, ARE actually BUDGETING, you just keep it in your head and keep your frugalistic goals in mind.


I don't put half my income into "savings" up front and then spend to zero (I don't even know what spend to zero means). The only savings that is done "up front" is the 403b and Roth IRA. Work puts money in the bank. I spend it if I need to, or it stays there if I don't spend it.  When the bank balance gets too big I move it to investments.  There is no place for "savings" necessarily- my saving rate is just my unspent money.

At the end of the past 5 years, the amount of money in the bank/investments has been more than 50% of my income. 

There is NO pre-planning, and no thought to what I spend, except that if I need it, I get it. And if I want it I consider how strong that want is.


Moving half to "savings" (I assume that means an investment account?) up front sounds like a pain in the ass. Because what if I need more than the other half for whatever it is I wanted to buy that month. I'd have to keep track of how much I have left, and I have no interest in keeping track of things like that.
« Last Edit: June 11, 2015, 06:58:39 AM by iowajes »

daymare

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Only read the first page of the article, but I did read Olaine's Pound Foolish book recently.  I'll be honest, it was definitely complainy-pants.  And I think the book would be eye-opening to anybody who had never taken time to think critically about how personal finance gurus like Suze Orman and Dave Ramsey and David Bach (of the latte fame) make money, and how their incentives aren't always aligned with those of their listeners.  But not all that useful to people who had considered these things.

I personally don't budget at all - I do, however, obsessively track spending and know down to the penny how much we spend on everything (not off the top of my head, but all the info is in my personal spreadsheets).  To me, budgeting involves taking how much you make, and breaking up into categories of how much you can/want to spend in each.  My spending doesn't have anything to do with income, and it's not a budget.  I'm not a fan of budgeting, but again, I have the luxury of making enough money that there's slack in my spending, and a mentality where I have the ability to evaluate purchases before I make them.

MrMoogle

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You guys who are saying you "don't budget" but put 1/2 your income into savings up front (and THEN spend to zero), IMHO, ARE actually BUDGETING, you just keep it in your head and keep your frugalistic goals in mind.


I don't put half my income into "savings" up front and then spend to zero (I don't even know what spend to zero means). The only savings that is done "up front" is the 403b and Roth IRA. Work puts money in the bank. I spend it if I need to, or it stays there if I don't spend it.  When the bank balance gets too big I move it to investments.  There is no place for "savings" necessarily- my saving rate is just my unspent money.

At the end of the past 5 years, the amount of money in the bank/investments has been more than 50% of my income. 

There is NO pre-planning, and no thought to what I spend, except that if I need it, I get it. And if I want it I consider how strong that want is.


Moving half to "savings" (I assume that means an investment account?) up front sounds like a pain in the ass. Because what if I need more than the other half for whatever it is I wanted to buy that month. I'd have to keep track of how much I have left, and I have no interest in keeping track of things like that.

This is me, but I also track ~ once a year and project to the next year, and compare to my last year's projection.  It's not a budget, as in I don't try to meet the projection.  My projection is somewhat planning.  Like this year I moved back to the US, so I knew I would need a vehicle, and some other one time items.  I did save some extra to cover that, instead of moving it to investments.

I'm frugal, and that's why I'll have a high savings rate, but if I think something is worth it, I'll buy it. 

I plan, and track, but I don't hold to a number, so I don't consider what I do budgeting. 

Sam E

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Honestly, I vastly prefer trimming back my expenses and simply forming better habits than charting out a budget to stick to. When I hear "budget" I think of calculating expenses and spending and tracking it all closely and giving yourself allowances... That just doesn't work for me.

In addition, if I'm "allowed" to spend, say, $200 per month on frivolity that will inevitably translate into spending exactly $200 every month. But if I don't grant myself that guideline I'll think more carefully about each purchase and how it might affect my saving. It's the same reason I don't carry cash. Cash, in my mind, is essentially spent money anyway, but if I pay with a debit card it makes me actually think, "Is this purchase worth tapping into my bank account for? Am I willing to reduce my entire sum of money over this?"

My "budgeting" is just to cut out all the fat in my expenses and then constantly flex my frugality muscles to gain better habits so that I just automatically spend very little money anyway. Much better than allocating allowances for me.

RetiredAt63

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No, they are soft drinks. With foam.

Amazing, the English language, three terms for one kind of drink.

But try to decide if I want to buy soda when it isn't on sale- that I will waffle on for ages. (And then usually don't. Soda is ridiculously expensive.)

Bingo. Except it is pop, not soda.

NorCal

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Whomever decided that budgets MUST include a detailed breakdown of every category of spending to the dollar needs to be beaten over the head with a large blunt object.

This is the straw-man that the article set up.

A budget where you decide $X goes to housing expense, $Y goes to the student loans, $Z goes towards savings, and $AA (I ran out of letters) goes towards everything else is still a budget.  Heck, it's a better budget.

r3dt4rget

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The people that say they don't budget just don't understand what budgeting means. It's impossible not to budget on a limited income. If you got paid $2000 this month you likely understand that you will encounter fixed monthly bills like utilities and food. You automatically factor those in when deciding how much can be saved or spent on other things. If you didn't budget, you would just spend any amount of money on anything regardless of what you had in your accounts.

Sam E

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The people that say they don't budget just don't understand what budgeting means. It's impossible not to budget on a limited income. If you got paid $2000 this month you likely understand that you will encounter fixed monthly bills like utilities and food. You automatically factor those in when deciding how much can be saved or spent on other things. If you didn't budget, you would just spend any amount of money on anything regardless of what you had in your accounts.

I think you're choosing to ignore the full connotations of the word "budget." Yes, by the definition of the word, putting any thought into spending allocation is technically budgeting. But when people talk about budgeting they're actually talking about laying out their income and expenses in a spreadsheet and giving themselves very specific allowances for certain things

If I told someone, "Yeah, I budget. I pay my bills, then I save whatever I don't spend when I get my next paycheck," that person would probably say that's not a budget, because "budget" implies something much more calculated and rigid to most people when discussing finances.

Connotations of words are just as important as their definitions and need to be understood and taken into account when reading articles like this.