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Why I Don’t Care About a Monthly Budget

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Monthly BudgetIt is common to see personal finance bloggers share a monthly budget. This is usually done for one of a few reasons.  Motivation for themselves and their readers or for transparency on what they are spending.  I think for a lot of people they are very helpful and motivational for either the writer or the reader.  It’s also cool to take a look at what other people are spending in different categories.  Not that we encourage judgement on what other people spend their money on, because we don’t, however it is interesting to see what people spend just as a gut check to your spending. You won’t see a monthly budget here because we don’t focus on our budget like that.

How we Budget:

I get paid monthly so the bulk of our expenses are set up to support a monthly payment.  For some of our other big expenses like insurance (car, house and life) we pay those once a year.  It saves money as there is usually a fee to set up a monthly amount and it’s 1 less bill we have to pay each month.  We don’t have a car payment so the other expenses are mostly monthly like gas, water, hydro and then 6 times a year we have property taxes.  For the amounts that are not monthly we take the total amount that we believe we are going to pay that year and divide it by 12.  This monthly amount gets put into a fund (really a line in an Excel budget) and when the bill comes due we pay from there.

For other things like planned spending to renovate a basement or go on vacation we decide how much we want to allocate into those funds and put money aside.  When we are ready to spend the money we have it socked away already.  As extra protection we are also 1 month ahead on our bills.  Just an extra buffer but it helps to make sure if there are any issues we are covered.

Why I Don’t Care About the Month to Month:

As you can imagine budgeting like this could lead to a huge difference in money that is leaving our account on a month to month basis.  June is a difficult month since this is when the yearly car and house insurance comes due.  In this month we are always spending thousands of dollars more than we would in May or July.  So if I were to set a target of spending each month that month I would likely blow it out of the water.  When we have large purchases (like our car purchase) that would blow the budget out of the water as well.  I feel like every month we would have to justify why we spent what we spent if we had a specific monthly target in mind.

What I Could Do Instead:

I could set up a different budget every month to capture what I think we are going to spend.  For the month of June because I know we have very high bills that we need to pay that could be a higher budget amount than I would have in the month of May.  To me this seems like too much effort to change how much I am planning on spending each month.  Since I set up the budget at the front to cover off these expenses changing on a month to month basis seems like so much effort and truly, I’m lazy.

Where I Could Run Into Trouble:

We track every single cent we make and spend and we have years’ worth of data to look at.  If I don’t keep an eye on the money we are spending it could a slow drip to spending more money than we make.  If I start to see funds that we have slip down and we are constantly running into money issues then a monthly budget would be helpful.  It would focus us to not spend more than a certain amount of money each month to get us back on track.

Keeping Things the Same:

If I look at how we have been spending money since 2013 we have been spending less each year and saving more to retirement and putting more money onto our mortgage.  That along with our net worth increasing indicates to me that we are doing the right thing.  The concept of making extra work for ourselves to create a different monthly budget depending on where we are spending that month makes me cringe.  Again, I’m lazy to do stuff like that and since we have been doing this household budgeting thing for half a decade and things are under control I think we are going to keep things the way they are.  I’m much more concerned with how much we spend yearly as well as how much of then goes into our mortgage and our retirement savings. That to me is a measure of success with our money.

Here’s the Thing:

Some months are going to cost more and some months are going to be cheaper.  I don’t believe that I am a failure if I spend more money than a budget target that I set out for myself.  If you are trying to aggressively pay off debt then sticking to a monthly budget to funnel the extra money to your debt makes total sense.  But if you are clear of that and just living a life don’t feel that you need to put extra pressure on yourself to only spend a certain amount of money every month if you don’t want to. If you do, then cool, but you aren’t a failure if you go over a monthly budget.  Promise.

Do you set you set a monthly budget for yourself or do you plan your spending in the same way we do?  Share in the comments below.

Sarah

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7 comments

  1. Church says:

    I used to manage to a budget, but then I quickly realized I was not living my life all because I wanted to save a few bucks instead of taking my beautiful wife out for dinner to reconnect after a long work week or a couple of brewskis with my buddy.

    So I added a category at the very top of my budget called, “Savings Expense” and basically stop there. I know how much I am able to save before living expenses and therefore always try to hit that target. After expenses, if I am able to save more, GRAAAAAVY!

    Very insightful post! It is good to know that others are not so absorbed with the numbers either, just high level targets being achieved.

    • Couple of Sense says:

      I think a budget works in all different forms. We look at the numbers when making changes to the budget to understand what we have spent and how much we are going to save. Because we make contributions to retirement automatic that is covered off the top like you do as well.
      A budget is not suppose to be restrictive but a way to achieve your financial goals!
      Sarah

  2. Leigh says:

    I set monthly budgets for my personal spending, but we have an annual budget for our household spending. There’s no way I could handle the household spending with a monthly budget because as you say, there are so many large irregular expenses! I don’t even like looking at spending quarterly because those are really uneven too – I prefer to look at things halfway through the year instead. This year, we paid a bunch of wedding deposits (cake, photographer, DJ) in February. Property taxes, condo, umbrella, and car insurance, as well as travel are all paid irregularly and they’re definitely larger than many of our other expenses – our monthly spending has averaged $X per month YTD but has been anywhere from just under 0.5x to 2x, which makes for pretty crazy swings.

  3. Couple of Sense says:

    Looking at it every 6 months to a year makes sense. I have also know people to exclude things like planned spending which your wedding would include (congrats btw!). This is because it’s a 1 time spend that will not be repeated again. I personally record everything because I want to know where my money is going but looking at the numbers over the longer term makes much more sense with large bills.
    Sarah

    • Leigh says:

      Agreed! I record everything too, though for large planned spending like weddings I do keep a separate budget and then put it into the normal one just as “Wedding”. Last year, we remodeled our living room and did a nuptial agreement. This year, we are throwing a wedding reception, doing wills, and going on a honeymoon. Next year, we will likely have a large special assessment for our condo building. In five years, we could be looking at replacing our seven-year-old car. I find irregular spending to be surprisingly regular, with the irregular part only being the “what”.

      • Couple of Sense says:

        That is such a good point about irregular spending. It seems like you have a lot going on but it all sounds awesome!
        I am curious as someone who does not have to deal with condos how far in advance do you know about a special assessment? Does it give you enough time to plan ahead?
        Sarah

        • Leigh says:

          It is all awesome! 🙂 I didn’t mention that I also went back to grad school this year many years out of undergrad and it has been incredible! It’s just been an all-around great year, once I got past the emotionally heavy layoff from the fall.

          In our case, the special assessment is coming due to significant amounts of deferred maintenance. Basically, only stuff that happens every year has happened over the last ten years with no future planning or savings. This was one thing when the building was younger, but it has aged a lot and we don’t have the savings account to show for that. My husband apparently assumed it was coming and was prepared for it. Usually they’re due by July 1st of the period year in which it’s assessed and we’ve started preparing homeowners already, so that gives about a year to come up with the money? So sort of? I don’t know how this scale of special assessment will be handled though.

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