Is budgeting necessary if you live a simple and frugal life?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
User avatar
momar
Posts: 1359
Joined: Sun Nov 13, 2011 11:51 am

Re: Is budgeting necessary if you live a simple and frugal l

Post by momar »

Why go through the hassle of budgeting when 90%+ of my non mortgage spending is done with credit cards, and they offer increasingly sophisticated tools for figuring out where my money goes?

At the most basic level, I know more or less what I spend in a month by looking at my primary credit card statement. If I want to figure out where it is all going, I can just sort it into categories online.
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
scrabbler1
Posts: 2797
Joined: Fri Nov 20, 2009 1:39 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by scrabbler1 »

The term "budgeting" can mean different things to different people.

For me, it means monitoring (but not regulating) my expenses and making sure my monthly cash inflows can handle my expenses, some of which are less frequent (i.e. quarterly, semi-annual, annual) and often larger than my regular monthly ones. This is important so I can determine my "true" surplus funds available to invest elsewhere while maintaining my desired cushion to cover small, unforeseen expenses.
SimonJester
Posts: 2500
Joined: Tue Aug 16, 2011 12:39 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by SimonJester »

The difference between having a budget and no budget (ie budget by economic scarcity); without a budget you get to find out what happened to your money last month, with a budget you get to tell your money what you want it to do FOR YOU this month.

Like many on this thread we budgeted via the economic scarcity model. Sent 15% into 401ks spent the rest, I had somewhat of a budget in my head and DW and I tended to be frugal spenders anyways. About two years ago I decided to put down a written budget, I was amazed at how much "extra" money we had after paying the bills and necessities each month. Where did this extra money go each month? death by a thousand paper cuts. Once the budget was finalized we found an extra 30% of our income we could put towards savings / investing!

I use spreadsheets for the written monthly budget it doesn't change all that much, I use quicken to track the spending against the budget. I use the spreadsheet to track where we will be in 5, 10 20 and 30 years out. I know a lot can change in even 5 years but its nice to see where we will need to replace a vehicle, where we will need to send the kids to college... Where we can fit in vacations...
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin
Topic Author
tsfdma
Posts: 107
Joined: Wed Feb 01, 2012 10:19 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by tsfdma »

Reading Chapter 2 in Andrew tobias' book really changed my life. I have always been frugal, but all you need in life is one great saying specific to the task at hand to really embed this disposition permanently within your core. For me "A penny saved is two pennies earned" did it for me. I find that Im happier and more productive the simplier I keep my life, so this is no sacrifice by any stretch of the imagination. I buy what i need, and spend when i need to spend. My gut tells me whether or not I truly need something and if in question I ponder on Tobias' "A penny saved is two pennies earned". Realizing that my true (as most people here) tax obligation is 50%( When combining all taxes total), i then see that if i spend 50 dollars on dinner, that I really just pissed away 100 dollars. We all work hard for a money, think about it next time you are inclined to spend on something that isnt necessary! One of the wealthiest men I ever knew personally told me " The key to happiness is keeping your life as simple as possible, that includes keeping a budget. Finance isnt complicated. It should be simple enough to where you can keep your budget in your head, if it's not then you do need a budget, and that in and of itself is a problem"
umfundi
Posts: 3361
Joined: Tue Jun 07, 2011 5:26 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by umfundi »

tsfdma wrote:I personally don't keep a budget as not spending money is ingrained in my DNA. I've heard mixed reviews on whether budgets are necessary for those that are minimalists and frugal by nature. Andrew Tobias says for these types of people will not derive benefits vs time put into budgeting spreadsheeting. Just like to get the opinions of the knowledgable here.
I think you need to figure out for yourself if you need a budget.

Do you know what you spend, on what? If not, keep track of everything you spend for a few months. (For us, the surprise was over 2% of our income on newspapers and magazines.) Get a little notebook and keep track of your discretionary spending. Consider other forms of consumption. How many miles do you drive? How many phone calls? How much garbage do you generate in a week? How much water, heating fuel, and electricity do you use?

Work out your monthly cash flow. That will give you the big picture. Income vs. savings, taxes, housing, transportation, ... Once you have the big picture, you don't have to track it.

If there are no surprises, you probably don't need a budget. In any event, you only need a budget for things you want to control. Likely that is discretionary spending on restaurants, entertainment, hobbies, groceries, services, lunch at work, ...

Having the knowledge is very empowering. I think it is a very bad idea to just spend what's left over, even if that is after savings.

Develop a sense of what things cost, and the resources they consume. A light bulb, or a computer, left on overnight. A bathtub full of hot water. A load of laundry. Mileage on your car. Coffee made at home. Five gallons of boiling water.

I am not at all suggesting anyone should be miserly about items like these. But, if you have an idea of what they cost, you will find yourself making quick, and informed, trade-off decisions.

What does it cost when your teenager spends 30 minutes in the shower?

Keith
Déjà Vu is not a prediction
tim1999
Posts: 4203
Joined: Tue Dec 16, 2008 6:16 am

Re: Is budgeting necessary if you live a simple and frugal l

Post by tim1999 »

I don't keep a formal budget, but I know roughly what I spend annually in various categories.
umfundi
Posts: 3361
Joined: Tue Jun 07, 2011 5:26 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by umfundi »

tsfdma wrote:Reading Chapter 2 in Andrew tobias' book really changed my life. I have always been frugal, but all you need in life is one great saying specific to the task at hand to really embed this disposition permanently within your core. For me "A penny saved is two pennies earned" did it for me. I find that Im happier and more productive the simplier I keep my life, so this is no sacrifice by any stretch of the imagination. I buy what i need, and spend when i need to spend. My gut tells me whether or not I truly need something and if in question I ponder on Tobias' "A penny saved is two pennies earned". Realizing that my true (as most people here) tax obligation is 50%( When combining all taxes total), i then see that if i spend 50 dollars on dinner, that I really just pissed away 100 dollars. We all work hard for a money, think about it next time you are inclined to spend on something that isnt necessary! One of the wealthiest men I ever knew personally told me " The key to happiness is keeping your life as simple as possible, that includes keeping a budget. Finance isnt complicated. It should be simple enough to where you can keep your budget in your head, if it's not then you do need a budget, and that in and of itself is a problem"
So, here is another thing you need to develop a sense of:

How many hours do you actually have to work to generate $100 of discretionary spending? That discretionary money is the cream, you should spend it wisely. It probably cost you a lot more than you think it does.

Keith
Déjà Vu is not a prediction
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Is budgeting necessary if you live a simple and frugal l

Post by The Wizard »

SimonJester wrote:The difference between having a budget and no budget (ie budget by economic scarcity); without a budget you get to find out what happened to your money last month, with a budget you get to tell your money what you want it to do FOR YOU this month...
Baloney (no disrespect intended).
How does that deal with a $700 car repair bill like I had a while back?
Or how will that deal with gas prices that are 10% higher than they were just a while ago?
If you're a spendaholic, then YES, you need to do something to deal with that problem.
But even a non-spendaholic has to deal with the reality of unexpected expenses...
Attempted new signature...
JimInIllinois
Posts: 405
Joined: Wed Dec 22, 2010 8:55 am

Re: Is budgeting necessary if you live a simple and frugal l

Post by JimInIllinois »

I thought this discussion could use some statistics, so I created a budgeting poll:
http://www.bogleheads.org/forum/viewtop ... =2&t=91475
sscritic
Posts: 21853
Joined: Thu Sep 06, 2007 8:36 am

Re: Is budgeting necessary if you live a simple and frugal l

Post by sscritic »

I think I live a simple and somewhat frugal life. Let's just say my spending is well below my income.

I don't budget in the sense of setting out in advance what I will be spending in March. Sorry, I don't know. My granddaughter's birthday is in April, so I will buy the present in March, and I don't limit myself to $20 or $200 for her present. It will be what it will be on the day that I buy it.

I do track my expenses after the fact.

P.S. My rent is known in advance, so I guess you could say I budget my rent, but I don't budget anything else. Nothing else is fixed in advance.
User avatar
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Is budgeting necessary if you live a simple and frugal l

Post by abuss368 »

I think it is an individual thing. Whatever works best for the person. Use any and all "tools" available at one's disposal to stay "on track" and avoid any money problems.

I personally don't prepare a budget and never have. I am also Quicken free for 2 1/2 years. I know what the monthly expenditures are and when they are paid. Mostly everything is monthly EFT these days anyway so it makes it much easier from a budgeting standpoint.

I do use a simple Excel file with multiple columns that agrees to the savings account balance. This may be a simple form of budgeting. Lately however, I am considering downsizing that file as well to be more simple.
John C. Bogle: “Simplicity is the master key to financial success."
JimInIllinois
Posts: 405
Joined: Wed Dec 22, 2010 8:55 am

Re: Is budgeting necessary if you live a simple and frugal l

Post by JimInIllinois »

Fallible wrote:I don't like budgeting and I am frugal, but I think a personal budget can be valuable during major transitions in life, such as changing careers, retirement, etc. It will help, even force, you to know where you stand financially and help you adjust. And I'd continue it until the transition is over and you're settled into a new lifestyle. Having done it several times in my life, each time I've been surprised to discover spending habits that needed to be corrected.
Did you do a full-blown spending plan, set a weekly limit, or just track your spending and try to find things to cut?
Pam01
Posts: 314
Joined: Sun Mar 11, 2007 3:20 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by Pam01 »

I sort of budget. I mean, I know what my monthly fixed expenses are (includes monthly bills and annual payments like insurance and taxes). So each month I set aside money for those. I set aside money for fun stuff like vacation. The rest I save.

I don't stress if one spending category is up a month. It usually averages to whatever I set aside for the month. I make sure I also save for fun stuff like vacation so that I can spend that without guilt. If I want to go to a nice restaurant for dinner one day or want to go on a nice impulse vacation, I can pay for that with these fun savings without stressing that it is coming out of my future retirement savings.

This way I enjoy the present as well as take care of the future.
chaz
Posts: 13604
Joined: Tue Feb 27, 2007 1:44 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by chaz »

Pam01 wrote:I sort of budget. I mean, I know what my monthly fixed expenses are (includes monthly bills and annual payments like insurance and taxes). So each month I set aside money for those. I set aside money for fun stuff like vacation. The rest I save.

I don't stress if one spending category is up a month. It usually averages to whatever I set aside for the month. I make sure I also save for fun stuff like vacation so that I can spend that without guilt. If I want to go to a nice restaurant for dinner one day or want to go on a nice impulse vacation, I can pay for that with these fun savings without stressing that it is coming out of my future retirement savings.

This way I enjoy the present as well as take care of the future.
My situation is similar.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page
Default User BR
Posts: 7502
Joined: Mon Dec 17, 2007 6:32 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by Default User BR »

I neither budget nor track expenses. I don't need the former as I am naturally cheap thrifty and live well below my income. The latter I don't care about. I know roughly what I spend on things, and I wouldn't do anything with information if I had it. Why do I care what my monthly pizza expenditures amount to? I will not change my pizza consumption as a result.


Brian
User avatar
BHCadet
Posts: 391
Joined: Sat Jan 14, 2012 11:47 pm
Location: SoCal

Re: Is budgeting necessary if you live a simple and frugal l

Post by BHCadet »

No, since we always have money left at the end of the month for additional savings, we don't have a budget.
However, we do track our spending using Quicken since we can download our credit cards and credit union transactions to it.
So, we know where our money goes and we can identify where to cut back if necessary.
Pucky
Posts: 4
Joined: Sun Jan 02, 2011 6:38 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by Pucky »

It's amzing to me to see the number of folks with huge savings via Boglehead tenants to not budget! For myself, budgeting is not a HAVE TO, it's a WANT to. By this, I mean that we plan everything so that everything desired can be achieved. Need a new car? Check, we pay ourselves $500/month each towards the new one (that accumulation is sitting nicely at Vanguard growing faster than the initial deposit). Want to have an extravagant vacation? We plan for it.

The easiest method to explain when talking to others, as it seems I always have extra funds when they do not is to say this: Our income is literally a pie. If I take a larger slice for a given period for something unplanned, then there is less for that which is planned. Basic economics- unlimited desires with finite resources.

As such, we maximize our 401k, invest in rental properties (50% down to ensure positive cash flows for places bought at severe discounts), save Roth to max, plan for normal expenses...and plan for "blow money" as well. Do we sit down to the penny and allocate? Yes...do we track this day by day? No, way too much effort. On average, it takes about an hour a month to fully reconcile. If there is a need, my wife and I sit down and discuss and change our budget.

Overall, if nothing else, I no longer get mad she went out and "blew" $1000 on a purse, as we each have a category and she saves...that is, put plainly we don't argue about money anymore because we are a team and all of our expenses (no matter what) are agreed upon by both of us in advance.

Makes for a much more pleasant marriage!!
Pucky :beer
User avatar
tractorguy
Posts: 679
Joined: Wed May 19, 2010 6:32 pm
Location: Chicago Suburb

Re: Is budgeting necessary if you live a simple and frugal l

Post by tractorguy »

Budgeting is a tool to prioritize and control spending so that the lowest priority wants don't steal money from the must haves (eg taxes) and highest priority wants. If you are already doing that naturally, you don't need to pull the tool out of the tool box. Budgets only help ifyou need them AND if you have the discipline to take action when your expenses exceed budget.

I never "followed a budget" for my 30 years of working life. We did track savings rate. As long as it was high enough to make sure that our long term goals would be met (college for 4 kids and a comfortable retirement), we spent without worrying about a budget. My wife and I are both thrifty and we didn't have any problem living below our means naturally.

I did also start using Quicken to track credit card purchases about 4 years before retirement. This allowed me to estimate how much I would spend in retirement and decide if I had enough to retire early. A year + 1/2 into retirement, I'm now checking my yearly expenditures vs my estimated spend rate to make sure that the plan was realistic. So far no worries and I don't have to switch to monthly tracking and control.
Lorne
JimInIllinois
Posts: 405
Joined: Wed Dec 22, 2010 8:55 am

Re: Is budgeting necessary if you live a simple and frugal l

Post by JimInIllinois »

Linking in the poll results:
http://www.bogleheads.org/forum/viewtop ... =2&t=91475

25% of Bogleheads have a budget and enjoy following it.

7% have a budget and don't follow it well. Nobody forces themselves to follow a budget.

45% of Bogleheads save/invest first, spend what they need, and save/invest the rest - they are naturally frugal.

Conclusion: Budgeting only works for people who enjoy it and is not necessary for most Bogleheads.

Next question: Is budgeting beneficial if you live a simple and frugal life?
lightheir
Posts: 2684
Joined: Mon Oct 03, 2011 11:43 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by lightheir »

I've tried both budgeting and non-budgeting, and I think it really depends on your habits and finances. (Duh but true.)

If you're one of the folks that tends to open their bank account and be pleasantly surprised that it's increasing consistently, AND you've also accounted for the future retirements savings, I don't think you need a budget. This is how I've come to operate. If your lifestyle costs are significantly below your income, there's no need to waste more time and mental energy fretting over it.

Now, however, if you are encountering situations where you're even wondering if you're going to be short in the future, I absolutely think you should budget until you ingrain sustainable habits.

When my wife and I purchased a house, in a 'real' neighborhood and then had a baby on top of it, and saw how quickly we were hemorrhaging money, we suddenly went from total non-budgters to knowing where every last dollar went for a year and projecting into the future to make sure all was square. Now that we're back on track, I don't use the budget anymore, but I do use mint.com to get a snapshot of the finances every month so I can see if there are any big outliers to worry about.

I actually think the most important part of budgeting is just knowing where you spend your money. If you don't know what your top 3-5 big expenditures are at the minimum and how much they cost you per year, it's probably good to do a budget. In discussions, I find folks who don't budget or track finances put an inordinate importance on grocery bills because they're seemingly controllable, when in reality, unplanned overspending on one trip or luxury item could put you in the hole 4-5x the amount of going all no-frills on groceries. (I still shop no-frills myself, though.)

I'll also admit that I found the routine of trying to predict and pigeonhole dollars into little preset cubbies was more stressful than practical for me, due to the vagaries of life in which you might get a big unexpected bill one month, but then not see another bill for several months. I found I was spending more time messing with my so-called budget to make it all fit rather than spending that valuable time to develop a more holistic approach to my big-picture finances, such as rebalancing the portfolio.
Default User BR
Posts: 7502
Joined: Mon Dec 17, 2007 6:32 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by Default User BR »

Pucky wrote:It's amzing to me to see the number of folks with huge savings via Boglehead tenants to not budget! For myself, budgeting is not a HAVE TO, it's a WANT to. By this, I mean that we plan everything so that everything desired can be achieved. Need a new car? Check, we pay ourselves $500/month each towards the new one (that accumulation is sitting nicely at Vanguard growing faster than the initial deposit). Want to have an extravagant vacation? We plan for it.
That just indicates that you are not naturally thrifty. Which is not a pejorative statement. Things like extravagant vacations won't even enter the heads of some of us. We don't even WANT them. I live a life that spends approximately 30%-35% of my gross income. Things like a new vehicle or modest travel are just paid out of liquid. It doesn't need to be budgeted or specifically saved for, as the saving took place long ago.


Brian
User avatar
auntie
Posts: 347
Joined: Mon Dec 08, 2008 11:49 am

Re: Is budgeting necessary if you live a simple and frugal l

Post by auntie »

When I found myself single and suddenly living with a new and unknown set of expenses I started cutting expenses to the bone. It took me about 3 months of paying attention to believe that I would be fine with income vs outgo. Since then I haven't paid close attention. My net worth seems to keep growing no matter how careless I am. Of course I'm one of the (cheapest/ stingyest/ frugalest) people I've ever known, which probably has a lot to do with it.

I can't imagine spending more than comes in on any kind of regular basis.
High risk does not equal high reward. It equals high risk of no reward.
lightheir
Posts: 2684
Joined: Mon Oct 03, 2011 11:43 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by lightheir »

I'd be curious to see how many aforementioned 'frugal' folks who are easily getting by are doing so with recently born or young kids. It's definitely doable, but it also changes the spend/save equation dramatically when a new little one arrives.
lexie2000
Posts: 149
Joined: Tue Dec 13, 2011 1:06 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by lexie2000 »

Pucky wrote:It's amzing to me to see the number of folks with huge savings via Boglehead tenants to not budget! For myself, budgeting is not a HAVE TO, it's a WANT to. By this, I mean that we plan everything so that everything desired can be achieved. Need a new car? Check, we pay ourselves $500/month each towards the new one (that accumulation is sitting nicely at Vanguard growing faster than the initial deposit). Want to have an extravagant vacation? We plan for it.
There are two ways of saving for larger purchases. We have never saved $X dollars a month for a car or a vacation or anything in particular. We just saved...period. The savings grew to the point where we had enough money to buy a new car when we needed to or to take a nice vacation if we wanted to and to cover life's more expensive "oh shits" that seem to happen. When the paychecks came in, maximum 401k contributions had already been deducted, more money was deposited to savings, the rest was free to be spent, and anything leftover would be saved. It's just a different way of doing the same thing that you are doing without going through the exercise of having a formal "budget". Some people need more structure than others and everyone should do whatever works best for them.
lexie2000
Posts: 149
Joined: Tue Dec 13, 2011 1:06 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by lexie2000 »

lightheir wrote:I'd be curious to see how many aforementioned 'frugal' folks who are easily getting by are doing so with recently born or young kids. It's definitely doable, but it also changes the spend/save equation dramatically when a new little one arrives.
You can do it if you wait to start a family until you can "easily get by". I know that this does not seem like an option to most people, but it works. We continued maxing out retirement savings and still put a little extra away even though it was not as much as it had been; but it didn't matter. We already had money saved for that new car or nice vacation or whatever. Our main goal after the little one came along was to pay off our high interest rate mortgage.
stan1
Posts: 14235
Joined: Mon Oct 08, 2007 4:35 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by stan1 »

There are a lot of people on this forum who have very good incomes and spend a lot less than they make.

People who make $200K/yr with expenses that total $100K/yr can buy whatever they want when they need it. A budget is not necessary.

Its harder for people that make $40K/yr and have $39K/yr in expenses. These folks likely need a budget. They don't post to this board very often.
Warning: I am about 80% satisficer (accepting of good enough) and 20% maximizer
ladybug810
Posts: 11
Joined: Wed Feb 15, 2012 7:13 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by ladybug810 »

I'm a very new Boglehead, but I too am surprised to see the number of folks who are able to save so easily without a budget! My sanity depends on budgeting, for several reasons. Thankfully, I'm enough of a nerd I actually enjoy it. :)

1. My husband's income is variable (he's in sales). In order for me to sleep at night, I have to know that we've prioritized our spending. We have no debt except a small mortgage, we're saving for retirement, and have a healthy emergency fund, but I still find the budget immensely helpful. I tracked our spending for years before doing a budget, and while it gave me a clear picture of what we were spending our money on, it didn't help at all with reaching our future goals.

2. I'm naturally more of a spender than a saver. Compared to the average "Jones" family I probably look like a miser, but it's my husband who is the natural saver. Budgeting gives me boundaries so I don't have to feel guilty about the splurges I do make, because I know there's still money set aside for the other things we need and want.

3. I just find it very helpful to see a visual representation of how our money is allocated. I use a budgeting program that has virtual envelopes, which is perfect for this. If we just had a big pile of money, my stomach would be in knots. I'd be asking myself, "Could we really take that vacation without taking money away from car insurance, child support, the electric bill, or the dog's medications?"

Maybe in my next life I'll be a natural saver. :lol:
ladybug810
Posts: 11
Joined: Wed Feb 15, 2012 7:13 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by ladybug810 »

stan1 wrote:There are a lot of people on this forum who have very good incomes and spend a lot less than they make.

People who make $200K/yr with expenses that total $100K/yr can buy whatever they want when they need it. A budget is not necessary.

Its harder for people that make $40K/yr and have $39K/yr in expenses. These folks likely need a budget. They don't post to this board very often.
Or, in the case of my husband and I..... we have a very good income and spend a lot less than we make because we (through a budget) planned to spend less than we earn on our regular expenses, so we could plan what we wanted to do with the leftover money. 8-)

I do see the point you were trying to make though, and know a lot of people in the latter category.
epilnk
Posts: 2717
Joined: Wed Apr 18, 2007 7:05 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by epilnk »

lexie2000 wrote:
lightheir wrote:I'd be curious to see how many aforementioned 'frugal' folks who are easily getting by are doing so with recently born or young kids. It's definitely doable, but it also changes the spend/save equation dramatically when a new little one arrives.
You can do it if you wait to start a family until you can "easily get by". I know that this does not seem like an option to most people, but it works. We continued maxing out retirement savings and still put a little extra away even though it was not as much as it had been; but it didn't matter. We already had money saved for that new car or nice vacation or whatever. Our main goal after the little one came along was to pay off our high interest rate mortgage.
This, of course, is the big quandary in family planning. I'd never try to discourage people from having their children young - youth has many benefits, not the least of which is higher fertility. But I am in a profession where most people start their families well past 30. That extra decade makes a big difference; with a young family, financial stability is sweet.
Default User BR
Posts: 7502
Joined: Mon Dec 17, 2007 6:32 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by Default User BR »

lightheir wrote:I'd be curious to see how many aforementioned 'frugal' folks who are easily getting by are doing so with recently born or young kids. It's definitely doable, but it also changes the spend/save equation dramatically when a new little one arrives.
That's besides the point. The question was whether it is necessary. Not "necessary under certain circumstances". You seem to be taking it as if the no-budget folks are thinking that they're "better". It's not the case, at least from me. I merely report my situation.


Brian
Mudpuppy
Posts: 7409
Joined: Sat Aug 27, 2011 2:26 am
Location: Sunny California

Re: Is budgeting necessary if you live a simple and frugal l

Post by Mudpuppy »

I wonder how much of this discussion (and the associated poll) is being derailed by different interpretations of the word "budget". For me, I do not see a budget as a strict pigeonhole of only "$xyz for ABC this month", but rather an amortized analysis of categorical expenses over certain time periods (year to date, last 3 months, last year and last three years for me). As long as my amortized expenses are staying within their budgetary boundaries (adjusted for inflation and life's changes) then I don't worry if one month is over (or even if 3 months are over) because the long-term spending is on track. And if I see a category exceeding its boundary, I don't suddenly "diet", but rather analyze why to see if the boundary was incorrect/unrealistic to begin with.

Judging by the comments, many of the non-budgeting crowd seem to see budgets as strictly "$xyz on ABC this month", while many of the expense tracking and budgeting crowd seem to see it more as an amortized analysis over time. I just have to wonder how much of the disagreement and disparity in approaches might come from a simple semantic misunderstanding.
User avatar
VictoriaF
Posts: 20122
Joined: Tue Feb 27, 2007 6:27 am
Location: Black Swan Lake

Re: Is budgeting necessary if you live a simple and frugal l

Post by VictoriaF »

Mudpuppy wrote:I wonder how much of this discussion (and the associated poll) is being derailed by different interpretations of the word "budget".
"Budget" is like "diet." Some interpret diet as a strict sequence of specific meals of specific portion sizes. For others diet is a set of general rules and preferences with respect to what they eat.

Likewise, budgeting may range from meeting specific dollar values for each category of expenses every month and every year -- to having a rough idea of how much one can afford to spend and where one's priorities lie.

Victoria
Inventor of the Bogleheads Secret Handshake | Winner of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
User avatar
novastepp
Posts: 340
Joined: Sun Apr 03, 2011 8:13 pm
Location: Indiana

Re: Is budgeting necessary if you live a simple and frugal l

Post by novastepp »

VictoriaF wrote:
Mudpuppy wrote:I wonder how much of this discussion (and the associated poll) is being derailed by different interpretations of the word "budget".
"Budget" is like "diet." Some interpret diet as a strict sequence of specific meals of specific portion sizes. For others diet is a set of general rules and preferences with respect to what they eat.

Likewise, budgeting may range from meeting specific dollar values for each category of expenses every month and every year -- to having a rough idea of how much one can afford to spend and where one's priorities lie.

Victoria

Haha, exactly what I was going to say, almost verbatim. I have a diet, but I am athletic, active, and enjoy lifting weights. So my diet is just my interest in what I'm eating meal to meal.

In regard to a budget, my wife and I are young and are paying off student loans, saving for a house, and learning about our expenses with a 9 month old son. We used a budget as a way to gauge where we were and what our spending looked like. We are now able to navigate month-to-month without looking at it.


We used our budget as a learning tool at first, and now its the old road map we no longer need to revisit because we know our way.
lightheir
Posts: 2684
Joined: Mon Oct 03, 2011 11:43 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by lightheir »

Default User BR wrote:
lightheir wrote:I'd be curious to see how many aforementioned 'frugal' folks who are easily getting by are doing so with recently born or young kids. It's definitely doable, but it also changes the spend/save equation dramatically when a new little one arrives.
That's besides the point. The question was whether it is necessary. Not "necessary under certain circumstances". You seem to be taking it as if the no-budget folks are thinking that they're "better". It's not the case, at least from me. I merely report my situation.


Brian
No - it's just that I think most folks would agree with me that what once worked as a single or even two-adult family sans kids often changes dramatically once those little ones are accounted for.

What seems totally unnecessary as a single person or two working adults, takes a whole nother life of its own once dependents appear, be it young kids or frail parents. I'm not sure where you got me saying budgeting people think they're 'better' - that's seems more of a projection of something you're reading into my post.
stan1
Posts: 14235
Joined: Mon Oct 08, 2007 4:35 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by stan1 »

The issue with kids is necessity vice nice to have, and I have seen many parents with incomes over $150K/yr convince themselves that nice to haves are necessities, such as:

- Buying a 10 year old and an 8 year old their own iPads to use while driving in the car (they'll fight if they aren't entertained)
- Youth sports leagues that can cost thousands of dollars per year FOR EACH SPORT
Warning: I am about 80% satisficer (accepting of good enough) and 20% maximizer
rrt
Posts: 49
Joined: Sun Feb 26, 2012 11:01 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by rrt »

Reading this with interest because the wife has been downsized. So app 40 to 50% of our income has disappeared, at least for the moment. Starting to put our first real budget together.

Thank you all for the insights.
Default User BR
Posts: 7502
Joined: Mon Dec 17, 2007 6:32 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by Default User BR »

Mudpuppy wrote:Judging by the comments, many of the non-budgeting crowd seem to see budgets as strictly "$xyz on ABC this month", while many of the expense tracking and budgeting crowd seem to see it more as an amortized analysis over time. I just have to wonder how much of the disagreement and disparity in approaches might come from a simple semantic misunderstanding.
To be clear then, I don't need or use a budget of any description.


Brian
Default User BR
Posts: 7502
Joined: Mon Dec 17, 2007 6:32 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by Default User BR »

lightheir wrote:No - it's just that I think most folks would agree with me that what once worked as a single or even two-adult family sans kids often changes dramatically once those little ones are accounted for.
I don't understand the point. I DON'T have kids, so I don't need a budget. I never said anything about whether anyone else does.


Brian
umfundi
Posts: 3361
Joined: Tue Jun 07, 2011 5:26 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by umfundi »

To answer the original question, budgeting is not necessary if you live a simple and frugal life.

But, if that is true for you, how did you get there? How is it that you are so well able to live within your means that you almost don't have to think about it?

If I reflect on this, I realize there was a time when every penny was important to me, when I borrowed short-term loans from my parents for emergencies like car repairs, and when I didn't sleep well for months worrying about the purchase of and the mortgage on my first home.

At some point in your life, budgeting will likely be necessary and a critical tool to help you get where you need (or want) to be.

I suggest that those of us who are older and live well within our means tend to forget how we got there.

Keith
Déjà Vu is not a prediction
Grt2bOutdoors
Posts: 25617
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Is budgeting necessary if you live a simple and frugal l

Post by Grt2bOutdoors »

We've never had nor used a formal budget. It is more of a "mental budget". We subscribe to the economic scarcity mentality as many of the other posters have stated; max retirement plans at work and IRA's, max college savings, set aside a portion to our taxable investing accounts and increase that with any windfall (raises/bonus when they came), pay the mortgage,utilities,necessities like food and clothing, anything left over went into savings. Large discretionary spending came out of taxable savings and only after talking about it - no individualism when you are a couple.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Default User BR
Posts: 7502
Joined: Mon Dec 17, 2007 6:32 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by Default User BR »

umfundi wrote:To answer the original question, budgeting is not necessary if you live a simple and frugal life.

But, if that is true for you, how did you get there? How is it that you are so well able to live within your means that you almost don't have to think about it?
I lived at home until 21, working and going to school during early college years. By the time I got my own place, I had significant savings already. I have never had to have a budget.


Brian
bungalow10
Posts: 2311
Joined: Sat Apr 09, 2011 6:28 am
Location: Chicago North Shore

Re: Is budgeting necessary if you live a simple and frugal l

Post by bungalow10 »

Fallible wrote:
tsfdma wrote:I personally don't keep a budget as not spending money is ingrained in my DNA. I've heard mixed reviews on whether budgets are necessary for those that are minimalists and frugal by nature. Andrew Tobias says for these types of people will not derive benefits vs time put into budgeting spreadsheeting. Just like to get the opinions of the knowledgable here.
I don't like budgeting and I am frugal, but I think a personal budget can be valuable during major transitions in life, such as changing careers, retirement, etc. It will help, even force, you to know where you stand financially and help you adjust. And I'd continue it until the transition is over and you're settled into a new lifestyle. Having done it several times in my life, each time I've been surprised to discover spending habits that needed to be corrected.
+1

I am not a budgeter. I pay myself first and then spend the rest. I'm sure there is leakage, but I'm okay with that. We are in our early 30s with two kids, but have $280k in our retirement accounts. It's working okay for us.

However, I do write up budgets occasionally, to see if there are additional savings opportunities, or to see if we are living above our means. I did extensive budgeting when expecting our first and second babies, and when we paid off our last non-mortgage debt.
An elephant for a dime is only a good deal if you need an elephant and have a dime.
bungalow10
Posts: 2311
Joined: Sat Apr 09, 2011 6:28 am
Location: Chicago North Shore

Re: Is budgeting necessary if you live a simple and frugal l

Post by bungalow10 »

GRT2BOUTDOORS wrote:We subscribe to the economic scarcity mentality
I've never heard that term before, and I like it.
An elephant for a dime is only a good deal if you need an elephant and have a dime.
epilnk
Posts: 2717
Joined: Wed Apr 18, 2007 7:05 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by epilnk »

umfundi wrote:To answer the original question, budgeting is not necessary if you live a simple and frugal life.

But, if that is true for you, how did you get there? How is it that you are so well able to live within your means that you almost don't have to think about it?

If I reflect on this, I realize there was a time when every penny was important to me, when I borrowed short-term loans from my parents for emergencies like car repairs, and when I didn't sleep well for months worrying about the purchase of and the mortgage on my first home.

At some point in your life, budgeting will likely be necessary and a critical tool to help you get where you need (or want) to be.

I suggest that those of us who are older and live well within our means tend to forget how we got there.

Keith
Not at all. It is precisely because I do remember how I got here that I have never had a budget. I didn't need one when I was younger, because for much of my life I had too little discretionary income. Preplanning expenditures would have been silly - I spent money if I had to, otherwise not. I didn't have a credit card, so going beyond my means was not an option. I didn't buy any "optional" college textbooks, and skipped one or two required ones. I wore mismatched socks because I couldn't afford to throw out one perfectly good sock simply because it's mate had a hole. I did way too much walking the month I didn't have money for a subway pass. I considered every single purchase carefully.

Now we have lots of money, and we've loosened the purse strings enough to enjoy it. Comfortable home, nice vacations. But I haven't forgotten how to weigh purchases. It's no longer, "do I absolutely need this?", but it's still, "could I, should I, wait or do without it?" I don't like to spend unnecessarily. The money saves itself.

Budgeting is a tool for people who have difficulty living within their means. For people just barely scraping by with a small margin for discretionary spending, it can be a useful tool to help identify areas of control. For those of us with more ample means, it depends on the mindset. If we look around us and tend to think, "I wish I had that", a budget might help. But if we live a simple and frugal life, look around at what we already have, and think "wow, this is great!", there's probably no need for a budget.
JimInIllinois
Posts: 405
Joined: Wed Dec 22, 2010 8:55 am

Re: Is budgeting necessary if you live a simple and frugal l

Post by JimInIllinois »

epilnk wrote:I don't like to spend unnecessarily. The money saves itself.
Perfect summary of the "naturally frugal" lifestyle. 8-)
ddunca1944
Posts: 941
Joined: Fri Apr 01, 2011 1:49 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by ddunca1944 »

Budgeting is a tool for people who have difficulty living within their means.
Perhaps I'm mis-reading this statement, but the implication here is that only people who aren't good with money need to use a budget.
I began budgeting in earnest when we got serious about retirement. These days I choose to continue using a budget because it is a tool for me to forecast future needs and prepare for them. When my husband needed some emergency dental work at the same time the property taxes were due - no problem. I had funds set aside for both. When he asked me if we really could afford an expensive vacation in Italy, I was able to show him the budget confirming that yes, we really could afford it. Without a budget, we'd both be afraid to spend anything that wasn't absolutely necessary.
User avatar
mmmodem
Posts: 2628
Joined: Thu May 20, 2010 1:22 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by mmmodem »

I started doing a budget when I was 16 and got my first job and bank account. I believe there were 5 entries in my checkbook before I abandoned it. Boy, was it ever tedious. I helped manage my sister's finances when I got older and had to make a budget. It was just as tedious but it was the only way I could convice my sister to cut back here so she could increase spending there.

Ever since then, I've never done hardcore budgeting. I don't see the point. DW and I are very frugal. I am downright cheap. Who cares if the budget tells me I am spending too much in one area? I already cut cable tv. I bag lunch. There's not a brand name on me that didn't come from Target or Ross. (So says the hare when the tortoise won the race, I guess.) But even if I could cut some more, I wouldn't want to because we're saving well over a 1/3 of our paychecks as it is. To live any more cheaply or to keep a budget (shudder) would start to impede on my quality of life. I don't see the point. I glance at the savings account since I pay the bills every month. When it gets substantially over our emergency fund amount, I make an extra mortgage payment. If it falls, I look into what I bought last month to justify it and make sure I don't buy anything expensive until it comes back up. That's about as much budgeting as I can take.
pchela
Posts: 11
Joined: Mon Feb 27, 2012 2:56 pm
Location: Spammer

Re: Is budgeting necessary if you live a simple and frugal l

Post by pchela »

Yes. I've never thought that I can save even with my not high income. When I started budgeting it worked great for me. You know how much money you spend and where they go.
lexie2000
Posts: 149
Joined: Tue Dec 13, 2011 1:06 pm

Re: Is budgeting necessary if you live a simple and frugal l

Post by lexie2000 »

umfundi wrote:To answer the original question, budgeting is not necessary if you live a simple and frugal life.

But, if that is true for you, how did you get there? How is it that you are so well able to live within your means that you almost don't have to think about it?
1. Started out with no consumer debt and kept it that way.

2. Used economic scarcity to save money instead of budgeting by slicing and dicing money into different categories.

3. Didn't buy stuff we couldn't afford .

4. Didn't play KUWJ. Made spending choices on OUR TERMS, not that of our co-workers, friends, or neighbors.

5. Made our money work harder by buying everything we needed or wanted at the lowest price possible.
User avatar
VictoriaF
Posts: 20122
Joined: Tue Feb 27, 2007 6:27 am
Location: Black Swan Lake

The paradox of budgeting

Post by VictoriaF »

The paradox of budgeting:
I track my expenses and maintain an approximate budget not because I really need it, but because I like what I see. If I did not like what I saw, I would probably need the budget more but be less inclined to maintain it.

Victoria
Inventor of the Bogleheads Secret Handshake | Winner of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
Post Reply