How I (Don’t) Budget — All About My Spending Plan

I'm asked constantly about how I budget. I kinda don't. This gal is all about the spending plan.

A long time ago, I decided that I didn't like to budget. There's a lot to unpack with the word budget and it's never done it for me. However, one of the most common questions I get from readers and podcasters and just about everyone I run into is about my budget.

Honestly, I think a lot of the curiosity has to do with the fact that I travel fairly regularly, and some folks are interested in how I make it happen.

“What kind of budget gets you there?”

Well, the big secret is this — I don't budget. I have a spending plan.

My monthly spending plan can be summarized thus: I know how much needs to go to my priorities and then I spend until it's gone!

Budget vs. Spending Plan

Ok, it seems like a major quibble. Budget? Spending plan? Isn't it all the same?

Well, kinda.

To me, a budget evokes all sorts of negative emotions and connotations:

• Restrictions
• Penny-pinching
• Trying to fit everything into pre-defined categories
• A certain rigidity

Not everyone feels this way, and that's just fine. I know a lot of people who like their budget and stick with it and meet their goals and everything is great.

But I hate the idea of allocating some money to “entertainment” and some to “groceries” and some to other categories. Then when the money is gone from that category, it's over for the month. Unless, of course, you tweak the budget and move money from another category.

It's all so exhausting.

With a spending plan, though, I feel like I'm in charge. I've got a plan for the major points and goals. And the rest doesn't seem to matter. As long as the big stuff is covered, who cares whether I spend it at the spa or make an extra contribution to the emergency fund? (Let's be honest — I spend it all. There is no extra contribution to the emergency fund.)

A spending plan seems more freeing to me. So even if you think what I do is a form of budgeting, I don't want to hear it. I'm happy with my spending plan, thankyouverymuch.

How I Created My Spending Plan

I've written about how to create a financial plan for the new year in the past. And, really, that is similar to how I put together my spending plan in general.

Start with your priorities

First, I figure out what my priorities should be. Those can change over time, but right now, my current priorities include:

• Necessary bills (rent, utilities, insurance, grocery)
• Retirement
• 529
• Charity/causes
• Travel fund
• HSA
• Emergency fund
• Taxes

I had to add taxes to the list because, to be honest, I've been pretty awful about managing them as a freelancer since I stopped working for Student Loan Hero.

Anyway, those are the big priorities. To refer to that over-used illustration of rocks in a jar and sand and whatever, those are my “big rocks.” Those are the things I'm most interested in taking care of right now.

With the help of an online calculator, I can figure out how much money should be going to retirement each month so I can have roughly $1 million in my IRA by the time I'm 60. At least I think that's what I picked. I don't know. Betterment takes care of that.

Everything else gets apportioned out as I feel necessary. I've pulled back a little on the emergency fund, mainly because it's pretty solid and growing in a taxable investment account, and I can bulk up other goals.

Automate your priorities

Once I know my priorities, I automate them. Everything on that list (except the groceries) is automated. Charitable contributions? Automated. Travel fund? Automatic transfer twice a month. Taxes? Now that I have an S Corp election with the IRS, I've set up to have that automated with the help of Gusto.

Basically, everything that's most important to me is automated. My rent is set up on bill pay, my insurance companies take the premiums each month, I donate to charities and causes automatically with my trusty credit card. All of my investing is done through automatic transfer, including the micro-investing I do through Acorns.

When you automate your priorities, you know they'll be taken care of, without the need to remember to make transfers or jump through a bunch of hoops.

With this spending plan in place and the knowledge that the most important items on my list are being taken care of, I can basically spend until the rest of the money is gone each month.

Spend until it's gone

I know roughly how much everything takes out of my account. Let's be real. The only two variable expenses on that priority list are the groceries and the power bill. Everything else is set. Insurance premiums. Automatic transfers. All that is consistent and I know what it adds up to.

Even though technically, I have a variable income, I do know that my big things are covered by what comes in. Barring some huge change and massive problem, the reality is that my cash flow can handle my priorities and then some.

So, even though I might not spend exactly the same amount on groceries or electricity each month, it's close enough for me to have a good idea.

My regular spending all goes on a rewards credit card. I know pretty much what is available for me each month, and I just use the credit card to earn rewards and keep track of my spending. Then, once a month, I pay off the credit card. I have my cards set to — you guessed it — autopay.

I rarely need to carry a balance. And if it looks like, for some reason, I won't be able to pay off the entire card one month, I simply go in and adjust the autopay amount so that it's not paying off the entire balance. It's been a couple of years since I've carried a balance for more than one month at a time.

With this system, I don't have to worry if my “dining out” envelope is empty or if I need to move some money from the “buying books on Kindle” category to the “getting my nails done” category. Because those categories don't exist. I just get the things done when I want them done.

The Privilege in This Non-Budget System

Of course, I have to acknowledge that there's a certain amount of privilege in my spending plan. I'm to the point in my freelance career and money situation where my income is enough to allow this. My work is also extremely flexible in that, for the most part, if I need more money I can just write another article.

There was a time when I did have to live by a budget. I had to budget $35 for groceries each week. Putting money toward reducing debt was a priority. There was no travel fund. In truth, going through that time of having to watch all my spending and create a budget is probably a big reason I hate the word so much now.

So, I didn't get here overnight, but at the same time, my current position carries with it a lot of financial privilege. I don't have to worry that buying an extra treat is going to put me over my grocery budget. If I decide I want a steamer three times this week, it isn't going to be the end of the world. Hell, I'm fortunate enough to be in a position where I can drop money to get my son a much-needed new mattress (we're trying the couch bed because, well, he's a teenager who lives in his room).

Additionally, using my spending plan system requires a certain amount of financial awareness and stability. My cash flow is relatively stable, even though I'm a freelancer. Plus, I live in an area with a low cost of living — and my income is well above the median for this town.

Bottom Line

How you manage your money is, of course, up to you. Everyone has a different approach that works for them. If a cash envelope system keeps you on track, go for it. Do you think budgeting is fun? Cool.

But if you have some stability and find that you have a decent amount at the end of the month, you might switch it up. Maybe you discover that a non-budget spending plan could work for you.