The importance of budgeting when it comes to personal finance cannot be overstated. Balancing your income and expenses will allow you to live within your means while planning for the future. For those who are not keen on building spreadsheets and reviewing all of their spending habits in minute detail, there is a low-maintenance option: “no-budget” budgeting.
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“No-budget” budgeting does not give you license to be reckless with your spending. Rather, it is a system meant to ensure that you take care of all your obligations and expenses first.
How Do You Budget Without a Budget?
“No-budget” budgeting can feel like a contradiction in terms. After all, the entire purpose of a budget is to monitor your finances while creating a roadmap to plan your current and future spending. “No-budget” budgeting does not grant you a free pass to ignore your finances. In fact, there is definitely a decent amount of prep work required to implement this system.
For starters, you need to understand your monthly after-tax income. You will also need to review your savings goals and current expenses, putting sufficient money aside to cover all of them. Everything left over can be considered discretionary spending.
In essence, a “no-budget” system is similar to a “pay-yourself-first” budget, where your savings and investment goals take precedence over everything else.
With a “no-budget” approach, you take care of all your obligations, both now and in the future. Only once these are covered can you begin to think about other non-essential items.
What are the Benefits of “No-Budget” Budgeting?
“No-budget” budgeting is fairly simple to implement. While there is some effort involved in establishing this system, once it is up and running, there is very little maintenance involved.
This contrasts mightily with some other budgeting options, such as zero-based budgeting and the envelope budgeting system. Both of these types of budgets require an extremely tight overview of your spending on a monthly basis. Not surprisingly, these budgets are geared more toward those who are concerned about breaking their monthly budgets, and who place a priority on reining in their spending.
“No-budget” budgeting is also a great candidate for automation, which can help prevent errors and oversights. Once you have decided how much you wish to allocate towards your investing decisions, you can have these funds automatically channeled into your designated accounts.
In that spirit, automatic bill pay (offered by most banks) can be used to take care of many of your obligations. You can even set up separate accounts for particular spending needs, such as grocery shopping or utilities.
As long as you do not overspend, a “no-budget” lifestyle allows you to make decisions on your extra, non-essential items without too much oversight.
Who Should Use “No-Budget” Budgeting?
Rather than mandate a careful review of every single spending choice, “no-budget” budgeting is a fairly loose system to monitor your finances. For this reason, it is not the best approach for someone on a tight budget.
Consequently, this approach is best suited for those whose income is situated comfortably above their expenses. In other words, only those who are not in danger of overspending.
In addition, this system depends upon a predictable income stream. If your monthly earnings fluctuate wildly, it will be difficult to implement the “no-budget” approach since you might not know if your income will be sufficient to match your expenses.
However, if your income stays fairly constant and you do not need to closely manage your finances, “no-budget” budgeting could be a good fit for you.
Conclusion: Picking the Best Budget For You
A budget is meant to help you live within your means while giving you the room to enjoy life. Beyond the simple mathematics of the finances, budgets can give you peace of mind knowing that you are being responsible with your money.
No matter which budgetary approach you decide to adopt, the most important consideration is whether it will help you manage your finances. The best-laid plans (or even intentions) will not be useful if they are too complex or difficult to implement.
“No-budget” budgeting can help you to reconcile your income, expenses, and saving goals. Sometimes, the most effective methods are the simplest ones to follow. It just may be that the best type of budget for you is to have “no budget” at all.
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