When a Budget Really Isn’t

April 26, 2010 by  
Filed under Budgeting

A topic frequently covered by personal finance bloggers is “budgeting.” (I’ve already commented on another dominant yet misguided topic: “How to improve your credit score.”) I read a post last week by a blogger who claimed to have a budget while saying that she hated budgeting. I think her “I hate budgeting” feeling trumped the “I have a budget” pronouncement because the numbers she reported were budget busters, both wide and deep. I’m not going to call her out by linking to her post. There isn’t much worth reading over there anyway unless you are the type that likes to stare at accident scenes.

My impression is that most people who claim to have a budget are not actually following a budget. Rather, they are merely tracking spending. The “I have a budget” pretense arises when they retrospectively discover if their actual spending conformed to their so-called budgeted spending across multiple categories. If they blew through a spending category, it’s “oh well, budgets are hard” and move on the next month, dragging their “budget” along for the ride.

Sorry, but operating in accordance with a budget requires more discipline than that.  A decision to spend should be made in consideration of the spending limit set in your budget. If your spending is maxed out in a discretionary category, you stop sending in that category. Merely looking back at what you spent is interesting history but not financial planning.

Unfortunately, the paycheck-to-paycheck crowd are better at history than they are at planning or budgeting. If you want to mess with someone who claims to be following a budget, ask them toward the end of the month how their food and entertainment spending compares – on that day – to the amounts they budgeted for that month. If they can’t tell you with any precision, you’ve exposed them as a faux budgeter.

Mr. ToughMoneyLove is not being a hypocrite here. We don’t pretend to operate with a true budget. We have a spending plan that includes non-discretionary categories plus saving, investing for retirement, and college expenses for son number 3. Everything else fits into discretionary spending. After 32 years of marriage and no consumer debt, we pretty much have a handle on that. But that will change when we retire.

We’re already working on a retirement spending plan that will need to be a lot more rigorous. Our retirement spending plan is a long term work in progress. Right now, it mostly guides us in how we need to invest to fund our plan.

So where do you come down on this issue?

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5 Responses to “When a Budget Really Isn’t”
  1. Joe P. says:

    I don’t bother to budget. I track my expenses to find out if I’m saving more or less than I intend to, and adjust my discretionary spending to compensate. If I were to ever actually budget, I’d use direct deposit to do the real work for me. And once one has set aside money for non-discretionary bills and savings (including retirement), there’s no real need to classify the money further; you know you have X dollars a day to spend on discretionary living expenses, and whatever you do with that information is an adjustment to the reality of what you can afford.

  2. MasterPo says:

    Budget? My budget is my total paycheck!

    Seriously, around here prices have gone sooooooooooooooooooo far UP in the last year I just don’t know…And that’s before gas hit $3/gal today.

    I used to be able to budget well, including pocket/discretionary spending cash and planned savings/investment each pay check. Now, 5 bags of groceries costs $60 and doesn’t even last a week! (trust me, it’s not full of lobsters and caviar)

  3. Finance Junkie says:

    Totally agree. I used to go crazy trying to plan every line of a budget but it was stressful and totally not worth the effort- I think especially true when you are in a relationship- after all each person needs to be able to make their own spending decisions (at least to a point). Now we just look at the big picture. All contributions are automated and I make sure the bank balance is going up each month. Way less stress & much better results!

  4. Holly says:

    We use YNAB to track our spending. I ‘budget’ $500/mo. for our family of five (kids are 14, 12, and 10). This month w/confirmation, Easter, and birthday paries, the food bill was over $750!

    My husband calls it our “Fudget”.

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