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The No-Budget Budget might be the perfect way for you to budget if you have disposable income, but wish you saved or invested more money!
As someone who loves to talk about money, and personal finance, I do not like budgeting.
I don’t like the idea of budgeting nor do I like the thought of having to sit down and figure out my budget every month.
That was actually part of the inspiration behind this blog.
Most of the people I see online talking about personal finance, love to talk about budgeting or ways to save money. And there is absolutely nothing wrong with that! It’s what gives them a sense of joy.
I am the anti-accountant. I defy all those stereotypes about being a frugal accountant, focused on saving the pennies.
For me, the idea of budgeting seemed like a restrictive way of living. I know the importance of creating a financial nest egg, but I did not want that to come at the cost of enjoying my life.
I don’t like the idea of being restricted by a coffee budget, or how many trips to Sephora I’m allowed this month (the answer should be zero, always).
So I’m spilling my no-budget budget!
This my friends is the easiest budgeting method. Perfect for those who hate budgeting!
Disclaimer: only try this if you have disposable income, but wish you saved or invested more money every month!
What is the no-budget budget
The best part about this budget is that you literally are not creating a budget every month.
You still do need to know how much you make, how much you owe, and what is leftover.
But once you go through that one time, as long as those amounts don’t change, you don’t need to change your way!
The basic premise is to allocate your income to the things you have to pay for, your fixed expenses, as well as saving for the future.
Whatever is left over at the end, is fair game.
How to create a No-Budget Budget
#1: Write your income
Figure out how much cash you have coming in monthly from your paycheques, investments, or any other sources of income.
#2: List your fixed expenses
List out things that you HAVE to pay for. These should include payments for things like rent, mortgage, car payment, utilities, cell phone bill, internet.
If you signed a contract, then yes, you’re obligated to pay for it!
#3: Subtract how much you want to save/invest
How much you want do you want to save or invest?
Remember, this is the primary goal in this type of budgeting.
Whatever that amount is, be prepared to see it get deducted from your spending allowance every month!
#4: Figure out what’s left-over
The amount of money you have left will be what you can spend!
#5: Emergency Fund
Ask yourself, do you have an emergency fund? Will you be okay if the unexpected happens?
If not, I would recommend putting away something in an emergency fund first!
#5: Spend it however you like!
If you’ve made it past the first five steps, go ahead and click add to cart on that jacket you’ve been dreaming about!
Why the no-budget budget works
No Restrictions
I will acknowledge that I am privileged to only have mortgage debt, and we live a relatively comfortable lifestyle.
I don’t like to have to think about every dime I spend.
This is how I define feeling comfortable with money.
Psychologically, I feel better about having money to spend.
The no-budget budget method helps me feel less restricted with my money.
Who should NOT use the no-budget budget
This is definitely not a way for everyone to budget.
You’re always tight on cash
You need to be at a phase in life, where you’re relatively comfortable with your income covering all your expenses.
I would not suggest this method if you find yourself tight on cash, month after month.
You want to create better money habits
The downside of the no-budget budget is that you don’t necessarily create healthy money habits.
Because it is much less restrictive than other methods, so it’s unlike that you will create good discipline around money habits.
Tips to make your no-budget budget work
The Emergency Fund Comes First
You will be more successful if you have an emergency fund.
You have to make sure you have thought of having a fund available for emergencies!
Pay any fixed expenses automatically
If you can, automate your fixed payments. These could be payments for your mortgage, rent, car, or loan payments.
Automate your savings
Set up your account to automatically transfer a portion of your paycheque to your investing or savings account. Out of sight, out of mind!
Be Realistic
As much as I’d be okay with instant noodles for dinner every night, if this is what you’re eating for a week at the end of every month, MAYBE you’re too aggressive with your spending or investing.
Spending and investing is a great habit, but it should not come at a cost to other parts of your life.
Cash Buffer
Consider having a cash buffer. Chances are that you are charging everything on your credit card.
You likely won’t know the total damage until the end of the month. Unexpected social occasions or drinks with friends can add up, and go beyond the amount available to spend.
If you find yourself dipping into your cash buffer consistently, go back and tweak the numbers.
Your Turn
How do you budget? Let me know if you would consider budgeting this way!
Cheers.
