Lately I have been thinking a lot about budgets, primarily because I have come across many posts about the importance of following a household budget. I know that many in the PF community are big fans of budgets, and I think here in the CMF household we are too, but I after reading many blog posts on the subject I am starting to get the feeling that the way budgeting is conducted in our household is really different from the way it is done in others’ homes.
First of all, let me say that I am in awe of those folks out there who create and stick to strict multi-category (food, housing, utilities, clothing, etc) household budgets during the month. Sincerely I salute you. You possess a level of personal organizational skills that we here in the CMF household seem to be woefully lacking in!
We really did try that type of budgeting for about five months. We’ve read a bazillion personal finance books and nearly every one recommends following a budget like that, so we did it for a while.
Here’s the problem we ran into: Although we generally consider ourselves to be organized people, we discovered that we are super unorganized when it comes to anticipating monthly expenses. For example, we each do some traveling on occasion for our jobs, and we have to pay for those work-related travel expenses ourselves and then be reimbursed when we submit the receipts later on. But do you think that we could ever get our act together enough to take that into account when we created our monthly budget? Nooo, one of us always forgot, which messed up our budget. Sometimes we put work expenses on our credit cards, but we hated doing that because the time for us to be reimbursed for these expenses always varied, so we never knew if we’d have the money back before the credit card bill came due. Since we budgeted our savings based on the rest of the budget (and we always pay ourselves first, so the savings money was heading out of the checking account right after we got paid), there was no fallback except to take money back out of our savings account, which we found ourselves doing on a regular basis and we totally hated.
But work expenses weren’t the only problem. It never failed, when we were creating our monthly budget we always forgot to budget for something. Mom is coming to visit and I promised to take her to this cool museum a couple hours away, hubs forgot he’s going hunting with his buddies and needs a hunting license and ammo, whatever! It was always something that we were forgetting. We were forever going over or under budget (usually over) in different categories because we couldn’t get it together enough to think it all through beforehand, which was frustrating.
So after a few months, we decided that we were going to go crazy if we kept trying to budget that way. Instead we created a lazy budget for ourselves. What is a lazy budget, you ask? Well, it’s sort of a budget and sort of not a budget. Basically, what we do these days is this: immediately after we get paid we take a fixed amount of money and move it into our main savings account, which is in a different bank (so it is not easily transferrable back to checking). Whatever is left is spendable. That’s it.
OK, maybe that’s not entirely it. I watch our checking account closely, usually logging in to our bank site every day, reviewing the upcoming bills that will be going out, etc, to make sure that things are going as expected with the cash outflow and that it does not look like we are going to run out of money before we get paid again. This is somewhat easier for us these days because we both get paid every two weeks now, so I only have to keep the expenses for the next couple weeks in mind when I review the checking account. If there are lots of extra expenses I may decrease the amount that we are sending to the mortgage company (since we are currently overpaying our mortgage to get rid of it faster). If it looks like we may be cutting it close at the end, we are usually able to make things stretch until payday by scrounging in the cupboards, putting off or doing without other purchases, etc. We also keep a small savings account at the same bank as our checking account in case our rogue manner of budgeting lands us in a bad spot. Ironically though, it usually doesn’t. Maybe 2-3 times a year do we have to pull from that account, and if we do it’s usually only a small amount.
We have found that our lazy budget causes us a lot less frustration. 🙂 I would say that it probably takes about the same amount of time to manage as a traditional budget, since now instead of taking the time to create the budget at the beginning of the pay period I instead spend a small amount of time reviewing our checking account on a frequent basis. The bottom line is that it works for us! We now save more money than ever before, which we feel really good about.
What do you think? Are there any other “lazy” or alternative budgeters out there?
Photo credit: Tax Credits @ http://www.flickr.com/photos/76657755@N04/