Yes, you heard that right. Ditch your budget, and potentially save more money.
Over the past few years, we have saved or put towards student loan debt nearly 30% of our income. While this may not seem like an astronomical number, with our expensive daycare bills, we consider this a pretty big win. (Read more about this in my interview with PFI). We did this without a budget and without any strict rules. We simply became much more mindful of each and every purchase we made. One of the best decisions we made was to ditch our budget.
Envelopes of Cash
For years, we saved money by keeping an envelope, or multiple envelopes of cash. Each month, I would head to the bank and withdraw our monthly allowance. Don’t get me wrong, this method did work. We managed to save a decent bit of money and that helped significantly with the down payment on our house.
But what about when we went over? One month, we had a $1000 bill from the mechanic for one of our cars. Boom, budget busted. We, of course, were forced to extend beyond our monthly cash allowance for that month. Even though I knew that this was not our fault and that this was not a purchase we had any control over, I found myself feeling guilty. I felt upset and disappointed in myself that we were over budget for the month despite the fact that it was out of our control.
On the other end, when we had extra money toward the end of the month, we felt proud of ourselves and often treated ourselves to dinner at a restaurant or some other additional purchase. We congratulated ourselves for saving money by spending money. It sounds so dumb writing it now, but neither of us really thought of it at the time.
For us, a budget led us to spend a bit more when we were under budget and to feel guilty when we were over budget, regardless of the causes.
Becoming Mindful Consumers
About three years ago, Ashley and I made the decision to ditch our budget. Instead, we made a commitment to mindful consumerism. Basically, we analyze each purchase we are about to make and decide if it is worth it. Does this mean we say no to everything? Of course not. We still go out to dinner from time to time, we will occasionally go to a concert or other event, and we buy things for the house that we feel are necessary. But every purchase is a calculated one. And here is the real beauty of the whole thing: we are spending less money overall and we don’t regret the purchases that we do end up making. The guilt is gone because we have thought about each and every purchase. No more mindless consumerism. Goodbye, impulse purchases. See you later, buyer’s remorse.
Buy Now, Sale Ends Tomorrow!
One of the greatest parts of our new spending mindset is that we avoid impulse purchases. Think about how many times every day we have advertisements and sales thrown at us.
40% off everything in the store!
Buy one, get one free for a limited time only! (And as I have written before, “free” can be very misleading sometimes.)
Clearance! Everything must go!
There are people whose daily job it is to get you to buy products. They study consumer psychology and coerce and trick people into buying products. Ever notice how many advertisements show up on the internet after you originally searched for an item? Or the number of different ways advertisements
Big and Small Purchases Matter
For us, becoming more mindful of our purchases, regardless of how big is small has had a major impact on our savings. We analyze the purchase of a major appliance or whether an upgrade to the house is really what we want and need to spend our money on, but we also question the cup of coffee at Dunkin’ Donuts or the bag of chips at the convenience store. We have also gained more of an understanding of our spending habits throughout this process. Even though we don’t have a budget anymore, and even though we are much more mindful of our purchases now, we still look over our spending on Mint and through credit card statements to look for areas where we can improve.
Not for Everyone
Personal finance is exactly that: Personal. A more mindful approach to our spending has worked for us, but it may not work for you. Budgets can be a great way to get your finances in order. A great place to start is You Need a Budget or YNAB. They have a tin of resources and planners to help keep your budget in order. A popular rule when budgeting is the 50-20-30 rule. While it’s controversial in the personal finance community, it may work for you, or at least be a solid launching point.
What about you? Have you tried to ditch your budget? What other methods do you use to try to save money?
4 thoughts on “Ditch Your Budget…and Save Money?”
One area I really struggled with when we didn’t have a budget was knowing exactly how much we had remaining at the end of the month to send to savings. How do you typically handle that?
I am a huge believer in the “pay yourself first” mentality. So, we always allocate money for savings and to pay off debt at the beginning of each month. Then, I do a monthly assessment at the end of each month to see how we did and if we have anything left over to allocate somewhere else.
That’s great you found a solution that works great for you. We are “religious” YNAB followers. Mainly because if we don’t have an idea in generally how much we are looking to spend, we will usually overspend in groceries and dining out. This kind of gives us defined limits that we shoot for. We also have a “rainy” day fund which is separate from our emergency fund, that allows us to handle small overages.
This method has allowed us to cut our grocery spending from $800 to $500/mo for a family of four (which includes toiletries).
One question I have: I understand that you don’t have a budget, but do you generally track how much you spend in different categories?
That’s awesome that it works so well for you. I have heard great things about YNAB. I track each month, but not until after the month. I will go back and look at our numbers and compare them to previous months. I have tried to consciously wait until the end of the month so I can see the bigger picture and not overreact (or under-react) to minor splurges or exceptionally good weeks.