Hi, I'm Kathleen, and I'm new here. My usual corner of the internet is frugalportland.com.
Today, I want to talk to you about why having a budget may not be the most important thing on earth, and how it's entirely possible to achieve your financial goals without one.
What is a Budget?
Simply put, a budget is the outcome of evaluating your spending, and setting limits in different categories. Tracking your spending is important, to be sure, and if you don't want to do it yourself, well, that's what Mint.com is for.
The Budget Alternative
Keeping a budget made me fret and worry. Those of you who have ever fretted and worried know as well as I do that nothing good can come from these.I mean, no one ever worried their way toward financial independence.
So I tossed it. I figured, hey, I have some fixed costs — rent, car payment, car insurance, and student loan payment — so why budget for those? Instead, I could write a real number down. I don't have to “stick to my rent budget” because nothing ever changes from month to month, unless I move. So, once I figured out my fixed costs, and figured out my savings goals, the rest went to bills.
I am a loyal and avid supporter of Mint, but I do not find their budget section useful. The section I turn to, after categorizing all my transactions (and you should use a credit card unless you carry a balance, because it's much easier to track!) is goals. I have several goals going: pay off student loans, pay off car, save x dollars in an emergency fund, save for retirement. Mint sets them up so that they tell you when you'll achieve those goals, and if you're ahead or behind. To me, this is MUCH more effective than, “hey, last month you spent $78 more on groceries than you budget for” though I can't figure out how to turn those alerts off.
Will it Work for You?
I'm not positive that my no-budget solution will work for everyone, but I think that figuring out your fixed costs and automating your bill payments frees up a lot of space in your mind. And that space can be used to figure out a way to make more money, which will help you achieve your goals much more quickly than worrying about every cup of coffee you buy.
Do you follow a budget? Does it work for you?