My no-budget money strategy

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Personal finance blogger confession right here: I’m a budget failure.

It’s not that I haven’t tried! I’ve got a super kick@$$ spreadsheet that I’m rather proud of that I use to track what I spend each month, but I’m admittedly BAD at telling my money where to go.

You can hear the same spiel from just about every financial pundit:

  • Make a new budget every month!
  • Tell your money where to go!
  • Once your money is gone for that category, that means you’re done!

I get the concept, and I actually really admire it, but it just didn’t work for me.

I’ve tried all the budgeting systems

I tried the envelope system where you take out cash for each of your categories and use that to limit yourself. However, I was afraid of losing my envelope and lamented missing out on rewards points.

I tried the app strategy by tracking my spending using Personal Capital, but couldn’t mentally stick to my category limits.

In a similar vein, but less technically astute way, I tried using my spreadsheet and updating my spending every week, but invariably we would blow some category by the end of the month.

I tried the proportional budgeting or the 50/30/20 strategy. This system is advocated for by Elizabeth Warren in her book All Your Worth: The Ultimate Lifetime Money Plan. It’s actually a very good book, and the system makes you think critically about the many things in your life that are wants versus needs. My issue with it came that they recommend saving 20% of your income. I think that should be a goal for everyone but I felt like that recommendation limited me, because I actually want to save more than that!

After going through all these different methods, I began to feel like a personal finance failure until I had an epiphany:

Budgeting doesn’t need to be limited to a prescribed method

This was a realization that I came to after chatting with a good friend of mine. She told me that she doesn’t budget.

We talk money pretty often and I know she makes fairly wise financial decisions, so it surprised me when she said that.

She said that she doesn’t need to. After probing her a little further we realized that she probably does a budget in an overarching global manner, but she didn’t feel the need to micromanage it.

That conversation sparked a light bulb in me. She doesn’t listen to the financial pundits and she’s winning with money. Maybe I don’t need to either!

I had listened to all these personal finance “experts” telling me I needed to handle my money in one certain way, but in looking back at what I was doing while “failing” I realized that perhaps I had just developed my own system for budgeting.

How I budget without budgeting

My husband and I both get paid once a month, on the last day of the month. I know how much it will be every time in advance.

1. Automate all bills

The first thing we did was to set every bill I could to auto-pay. I don’t know how my parents and grandparents survived the days without automatic payments. It’s a  wonderful tool.

If there is something that I have to pay every month, but that doesn’t have an online portal (i.e. daycare), I set up automatic payments directly from my bank. Any extra principal debt payments are also automated.

*Note: We make regular charitable contributions and I automate them in this step as well.

2. Automate savings

We are ramping up our savings next year, and are doing so through payroll deductions. The money will be going into savings before I can even see it!

3. Sit down and look at abnormal expenses for the upcoming month

Before moving on to step 4, I always try to make sure I’m prepared for any unusual expenses that are coming in the next month. Is my car registration due? Does my dog need to go to the vet? Those become the next spending priorities.

4. What is left is what I have to spend!

I try to get as many bills as I can to be taken out on the first day of the month so that I know whatever is left is what’s available for us to spend.

After the paying our bills, contributing to savings, and the monthly spending priorities that I identified in step 3, the rest is used for groceries and anything else!

This is where I kept getting tripped up with all the other strategies. I felt like they were telling me that I needed to be more specific with this leftover money, but it was revelatory for me to realize that it’s my money and I can do whatever I want!

It seems stupid and so simple now that I stressed so much about it.

It’s ok that I can’t scuba dive, I’ve got mountains.

If I want to spend it all on groceries, I can. If I want to spend it all on scuba lessons and diving gear, even if the trade-off would be to literally eat rice and beans all month, I can! I don’t know why I said scuba diving… I live in a land-locked state, almost as far from an ocean as you can get. If I want to save it all and spend nothing, I can do that too.

At the beginning of the month, Mr. FC and I do sit down together and map out what we would like to spend this month. We make sure there is enough for what we want to do and limit what we have to, but if something goes awry, we simply adjust and keep going.

The are only two keys to making this strategy work

The first is to be aware of what you are spending. We put everything on our credit cards and track it through Personal Capital, but you have to know when you’ve reached your limit for the month.

The second is to consciously decide that credit card debt is not an option. I may have messed up financially once or twice, but I have never carried credit card debt and never intend to. If credit card debt is a temptation for you, I would not recommend this method.

Stepping back from micromanaging my finances gave me the freedom to focus on my bigger picture goals

Once I gave myself the freedom to stop beating myself up over spending too much on certain “categories” I realized that my perspective changed.

Instead of focusing on the pennies, I focused on the dollars. I turned my attention to our savings and developing strategies to meet our long-term goals. It didn’t matter if I wanted to splurge on a latte now and then because I know our bills and savings priorities are taken care of.

I’m going to focus on building our net worth and not on sweating the small stuff.

As has been said time and time again, personal finance is personal and budgeting is no exception to that mantra.

What’s your budgeting strategy?

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  1. We automate too with our IRA contributions, investments and most of our bills except for credit card because we like to see what we spend on during the past month. Automation is great, takes away the stress of remember what to pay for every month and it gives us the amount remaining either spend or save it.

  2. Me and you are twinsies!

    I don’t budget either. I just take away the money I can save after each pay cheque and then I don’t worry about budgeting.

    I do try and budget for bigger things, e.g. spend only $4000 on vacations per year but that’s about it.

  3. I like it! I dont follow a budget either and get along just fine. I agree with using autopay for every bill, and prepare ahead for unusually expensive months. For me that’s April (annual auto, homeowners & umbrella insurance premiums are due) and December (annual property taxes, which in TX are extremely expensive).

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