A question was posted over at the Save Money and Budgeting Forums asking whether people actually budget or not.
Both camps piped up: those that have a formal budget and those that budget by using The Force:
- Formal budgeting involves allocating expenses beforehand, tracking items with some degree of care, and making adjustments on overages and underages
- Budgeting using The Force is more organic in that saving is taken out up front (usually automatically), most bill payments are made automatically, there's a decent cushion in the checking account, and the rest is spent or not based on what comes down the pike
The first method is likely more effective than the second method since formal budgeting involves more monitoring and analysis. The second method can work, however, as an 80% budgeting solution if some of the following are true:
- You're frugal to begin with. Spending less than you bring in is easy to put on auto-pilot if it's already part of your being.
- You bring in a lot of money. You have more slack with a $5,000 weekly paycheck than with a $300 one or even a $1,000 one.
- You have a lot of money. The details matter less and less if you're worth a bundle.
- You are on your own or are dual-income, no kids. Fewer expenses relative to the income give more slack.
Before my wife and I got married, we budgeted differently than we do now. She budgeted very carefully and I budgeted using The Force. I was able to get away with it because I was pretty frugal, on my own without kids or pets, and brought in a decent paycheck for one person. After we got married we continued using The Force with our budgeting but the money wasn't being saved quite as fast.
Now that we have a daughter, though, we're starting to discuss tweaks to our spending habits to stay on the offensive financially, because our expenses are larger now and we're experiencing a disturbance in The Force. The big expense for us is eating out. It's challenging to put meals together with a two-year-old demanding attention, and about all I can put together is pasta, so this is an area we'll work on. In addition, we'll revisit the idea of a formal budget.
Are you doing all right with your budgeting? Can you use The Force with your budgeting?
My husband is a budgeting wizard! Magic? He has done a spreadsheet on our expenses for the rest of his life!
The truth is we pay our credit cards in full every month, will own our home in about 10 years, are able to build a second home on 5 acres in another 1-2 years, have bought a new pickup and paid it off within 36 months, bought a tractor (to help build the second home) with cash…need I go on?
We don't spend more than we make. The budget is DETAILED. There are virtually no surprises. We both love the THRILL of the bargain. It doesn't hurt that he has a cheapskate wife (he is the spender!) who loves to cook and bought her wedding dress at the thrift store! (It was gorgeous)
We use "the force" I suppose. We certainly don't have a lot of money, and I suppose we are somewhat frugal to begin with. I think the main reason it works for me is because it's simple and it can vary depending on what needs arise. Other budgets tend to get complicated.
I use the force in my budgeting. I do budget my savings for retirement, for intermittent expenses such as insurance premiums and tax payments, and more in between goals such as savings for my next vehicle. The rest of it sorts itself out.
But when I was younger and my expenses were a larger portion of my income, I did budget more intensely.
Sorry, the handle on the last post was a typo. Not trying to steal FMF's handle.
I am a "force" kind of guy and it has worked well for our family to date. Automatically paying ourselves first and automating our bill payments means we have time to spend on things other than budgeting.
As you mention, it works well because we are frugal in nature and earn a decent income.
However, the addition of a new baby and the impending drop to a single income means we'll have to be a little more formal about budgeting in the near future, yuck!
As a little wise old green man once said, "Size matters not, except in bottom line spending of yours."
We went to one income when having our kids (now 6 and 8) and it was not as hard as we worried. I was well into a decent paid technical career. Much of the expenses can be reduced greatly. Lots of tips for SAHMs for the asking.
EMF: No problem. I don't know who would want to steal that guy's handle anyway. 😉
Thanks for the comments! It probably couldn't hurt to budget a little more.
We're "force" budgeters; we save all of my wife's income, and about half of mine (after taxes). We are quite frugal, and are DINKs with relatively high income. I think the "DINKs point" is that there are fewer transactions. If you have a lot of transactions, you may need to budget more carefully. If you only spend money a couple days every week, you can probably get away with "using the force".
Anyone using the "force" method should really try keep a detailed list of their spending for a few months. It just takes a bit of time and a notebook or spreadsheet. You might be surprised at the savings you can make with a bit of planning. And when you look at putting those savings into an investment or your mortgage it can be really worthwhile.
We use the force method of budgeting. We are relatively young with no kids and just try to be reasonalbe with our spending—eating out and technology purchases are our biggest weaknesses. We have started tracking our purchases, but have not instituted a formal budget. The force appears to be a more fun way to spend life, but you probably can not save as much by budgeting by the force.
Can I be a 1/2 budget, 1/2 Force person?
I tried doing the detailed-neatly-typed-spreadsheet- with-macros thing but it didn't really fit me. If I leave it to the Force things can slip by me, and I do follow Dave Ramsey's approach where my money goes down to the WIRE — right now for example I have exactly $148 in my checking to cover the next two weeks. I'll make it but it'll be lean.
So I have my budget pretty simplified, and what I do is a back-of-the-napkin budget for every paycheck — I know what exactly is coming in and what needs to come out over that two week period in my head, so I scratch it all out and figure out the remainder for debt.
Two things:
–Every paycheck includes a set sum of money that I tuck aside for irregular expenses like car rent, etc. It's easy to figure out what these are and estimate what to withhold over the course of the year so that when you need to pay the money is there.
–I routinely budget a fixed amount for FOOD for OTHER — anything that isn't a bill or a debt comes out of these two pools. (I can have a latte every day and eat out if I don't want to go to the grocery store — I CANNOT exceed my budget for these items. — I simply can't because it's already been paid to a bill.)
Is that a budget or the Force?
db
http://www.debtblitzkrieg.com
A disturbance in 'the Force'. Love it. 🙂
a Jedi I am…use the Force in budgeting I do.
sorry, couldn't resist the temptation; i'm a die-hard star wars fan. and yes i prove the rule, since i am single and in a high paying job so the Force works for me.
may the Force be with you!
The second method is almost by 'force'. As long as you have the self control not to re-transfer those savings then you have no option other than to stick to the predefined budget. A nice concept!