We have a confession to make which goes against most conventional personal finance advice… we do not keep a budget and have never followed one. The entire time we’ve been together (10+ years), we have never once said, “This month we have $X, $Y, and $Z to spend on A, B, and C.” It’s just not something we’ve ever done. This doesn’t mean we spend money thoughtlessly. We’re actually extremely intentional about what we buy and have very few, if any, impulse purchases.
Now, we don’t think budgets are a bad thing. For many, they are extremely helpful tools to help rein in and control spending. They’re also great for those working their way out of debt. We’ve known people who plan out their monthly spending and track each purchase real time. Others set up virtual envelopes where a certain amount of money is allocated across multiple categories such as $1,000 for rent, $500 for groceries, $200 for entertainment, etc. Once all the funds in that bucket are spent, they’re done for the month. If these or similar systems work for you, great.
In our case, we tackle spending a little differently and only go shopping with a specific purpose in mind. Instead of allocating money to various buckets, we scrutinize each and every purchase real time. Nothing is bought unless it is something we really need and we’ve compared prices to ensure we’re getting a good deal. A couple weeks ago we went to Costco and several times Mrs. DTG made quick Amazon and other internet searches to see how their prices measured up. Oftentimes Costco won, sometimes by a large margin, and we scored a great deal on a few food and household items.
While there, a pair of sweatpants caught my eye and I debated with myself whether or not they were worth their $9.99 price tag. In the end, I decided that since I had been wanting some sweatpants to wear around the house in the winter for a couple years, they were worth the money. This is something we could easily afford, but I genuinely questioned myself before spending the money.
Like with the sweatpants, we occasionally buy something we didn’t intend to when we went to the store and that’s okay. It happens and we try to limit these types of purchases. The best way we’ve found to do this is to never go shopping for fun. Shopping is not entertainment so we don’t give ourselves extra chances for needless spending!
Although we do not budget, we do track expenses. This allows us to see if there are any areas we need to cut down. One recurring expense we’re looking to drastically reduce, if not eliminate, is television programming. We currently have DirecTV and it is getting harder and harder to justify paying $100+ a month for a service we hardly use. The main thing keeping us from cutting the cord has been live sports, particularly college football and basketball. This is all on me. We know that sports and the few shows we do watch can mostly be replaced by a combination of Sling TV ($20-25/mo), an over-the-air antenna, and online streaming. Once the current football season is over, we plan on finally ditching DirecTV for good. At the end of the day, we’d rather have an extra $1,000 each year than pay for a bunch of channels we rarely watch.
Since we enjoy traveling, one last example relates to vacations. Before we went on our road trip this past summer, we made a best guess of how much we thought the trip was going to cost. This was mostly done for fun and also as additional blog material. We knew most of the lodging and some of the entertainment costs ahead of time and estimated food and other costs. In the end, we ended up spending very close to the estimates; however, during our trip we were never constrained by the thought of going over budget.
In each case, our mindset is not necessarily to restrict spending like you would with a budget, but to instead be mindful and deliberate about our spending. We still have some expenses that could be optimized a bit more and we’re getting there. For some who have struggled with keeping a budget, maybe a change in outlook will be helpful. Instead of feeling like we’re missing out by limiting spending, tracking our expenses allows us to find areas we could easily cut out without sacrificing our quality of life.
How do you keep tabs on your spending? Do you have a budget or go freestyle?