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There are a lot of personal finance sites on the Internet. Although there are really only a handful of real topics out there (i.e. spending, saving, investing, taxes, etc.), what helps attract readers is the author’s take on the various subjects.
One thing I noticed on most of my cohort sites out there is the focus on budgeting. So here’s a unique perspective…
I’ve never budgeted.
That’s right. I’m probably in the minority, but I’ve never set a budget for any of my finances. I’ve never set aside money for groceries or even really looked at how much we spend on them. Are we blowing too much on entertainment every year? Don’t know.
And I’m so meticulous about entering every single transaction into Quicken religiously. I categorize each and every entry. It would take me 2 seconds to pull a report on where our money’s going or how much we should allocate to every category… but I don’t.
I’ve just never had a need to do it, so I don’t.
Is that a stupid way to manage your finances? Maybe, but it’s never been a problem for me and I’m planning on reaching financial independence in a handful of years, so maybe I’m doing something right.
So what do I do differently?
I’m not making a fortune at work, but I do make a pretty good living. Mrs. R2R is working part-time at a non-profit so her income is actually pretty negligible. And we have a school-age daughter, which usually means an uptick in expenses. So again, what am I doing differently from the majority of people who budget everything?
I think the answer is two-fold…
Paying Yourself First
First, I make sure that we’re always following the adage of paying yourself first. We save a lot of money. Some sites look at what percentage of your income your saving, but I think that’s not always a fair way to look at things.
If you’re making a ton of dough, it should be easier to save a much higher percentage of your income. On the flip-side, if you’re barely making enough to survive, every penny you can put away is a tremendous feat.
We save about 35% of our income, but again, Mrs. R2R’s pay is barely anything, so we’re living mostly on my pay. And my pay, although pretty good, still isn’t something that would make your jaw drop. Regardless, we always save and invest as much as we can.
In fact, I keep things so tight that my checking account gets overdrawn almost once every couple of weeks. We use a credit union and they just pull the money from our savings without charging us any fees which I “pay back” to our savings, but that’s just how close I keep things. In other words, if the money’s sitting in my checking account, it’s not doing anything worthwhile.
I would like to save more, but right now, that’s pretty difficult. To save more, you either need to make more money or cut your expenses. Making more money is a little tough right now (for the time being), so I’m focused on cutting expenses wherever I can. Every little bit counts and, slowly but surely, I’m getting rid of the needless expenses for the sole intent of socking more away to quit my job sooner.
Controlling Your Spending
Second, Mrs. R2R and I are not big spenders by any means. We still buy things we want/need, but our needs are low and we don’t spend frivolously.
Yes, there’s always crap out there they we think we “need”, but we resist that urge and realize pretty quickly that we don’t. We tend to focus on experiences over material things and our vacations and other fun things we do are how we enjoy life… making memories for ourselves with our daughter.
We’re also naturally conservative with where we spend our money. I mentioned the idea of budgeting for groceries at the beginning of this post, but we now spend most of our money for groceries at Aldi. I’ll be honest, it’s almost impossible to overspend at this place!
We’re in a house that might be a little too big for the three of us, but we’re happy where we live, and at $235,000, it’s not anything too off the charts. Other than that, our cars are 5-7 years old and we’re going to run ’em till they die. We don’t dine out too often and we spend very little on entertainment. We trim the fat wherever we can and we’re well on our way to financial freedom.
Lack of budgeting has never stopped us from reaching our financial goals and although we never budget, by making sure we are following the smart idea of paying yourself first and by controlling our spending, the whole idea of budgeting seems nonessential.
I’m curious to know how most of you run with budgeting. Some people spend a ton of focus in that area, while others don’t think twice about it. But more importantly, is budgeting what helps keep you on the route to financial independence?
Do you budget? If so, does it seem to help you save better? Or do you put more emphasis on paying yourself first and controlling your spending?
Thanks for reading!!