We simply love finding reasons to feel bad about ourselves.
Budgets are sometimes just another way to “prove” that we’re messing up, that we’re bad at money — an old format for evergreen self-punishment.
What if you don’t actually need a budget? Take the temp:
Are you meeting your financial goals? If you are, you don’t need a budget. Spend your money and live your damn life. Buy the gifts and the console and the flights and the expensive glassware.
How do you know if you’re meeting your financial goals?
1. Do you have money set aside for a rainy day, aka “emergency savings account?” You want three to six months worth of essential expenses in an account that is earning decent interest. Yes? Proceed to step 2. No? It’s probably time for a budget.
2. Do you have high-interest debt? Debt over 7-8% needs to be taken care of. No? Proceed to step 3. Yes? It’s probably time for a budget.
3. Are you on track to your financial independence (FI) number, aka retirement? Yes? Proceed to step 4. No? It’s probably time for a budget.
• How do you know your FI number? Use the amount it takes to sustain your life for a year, then subtract Social Security benefits, if eligible, and multiply by 25. This is a super generalized rule of thumb that assumes you’ll invest this money and withdraw 4% each year while not impacting the principal. Take into consideration inheritance as well.
4. Are you financially prepared for upcoming life goals like vacation, a wedding, having kids, dental work, buying a house, paying for schooling, long-term care, etcetera? Yes? Proceed to step 5. No? It’s probably time for a budget.
5. Do you know what your legacy will be? Do you know what you want to leave behind and how? Yes? Huzzah! No? It’s probably time for a budget.
If you don’t need a budget, find something better to do with your time than telling yourself you “really should start budgeting.” Just live your life and stay on track with your goals.
If it turns out you do want a budget, clear your head and get ready for the “The Un-Budget.” Let’s do it in a way that feels like ice cream sandwiches and freedom rather than overcooked cauliflower.
1. Create a document with a name you like, such as “Headquarters” or “Design Studio” or “Control Center” (not budget!). We call it the Flight Deck at Money Juice. At the top, write “I am in control of everything that comes in and everything that goes out. I am the designer of my life.” Write it again, all caps: I AM THE DESIGNER OF MY LIFE.
2. Walk through a year of life and document expected transactions. This is a trip down memory lane. Pour a glass of rosé and get all weepy: mortgage (yay house!), groceries (delish food!), semi-annual car insurance (ghostride the whip!), vet visits (loving companion!), new glasses (sexy librarian!), a trip to the dentist (beautiful smile!). Find reverence for the things that make up the content of your life. If you truly hate this exercise, you can import banks and credit card statements from the last year into an AI platform and ask for a comprehensive and categorized list. But, as with all things AI, there will be errors and omissions.
3. Write down the monthly amount next to the expense. If you visit the dentist two times per year and it’s $300 total, your monthly expense will be $25. Use the average for things that vary.
4. Highlight your favorites. Gaming? Ski pass? Flowers? Weed? Note for later.
5. Subtract your expenses from your monthly income.
6. If this number is positive, skoo! If not, you’re currently not living within your means. NO PERMISSION TO SHAME SPIRAL. It’s a waste of your precious earthly time.
If you’re living within your means, go you! Proceed to Step 2 below. If you’re not living within your means (your monthly expenses are more than your monthly income), don’t fret!
Get clear on what the negative number is and use your Un-Budget to guide you toward correction. Remember, numbers are nonjudgemental. Turn the dials of income and expenses until you land somewhere you like:
• Trim, but keep the things
you highlighted.
• Negotiate: Get a lower rate on
a credit card or a different premium for your cell phone.
• Side hustle: What’s that galactic talent you have? Sell it! Rent a room, walk a dog, help a friend.
• Collaborate on a raise. As Tori Dunlap says, asking for a raise is an act of collaboration, not confrontation.
Step 2
The next step is to grow your money as much as you can. Pay off high interest debt (anything over 7-8%), set aside money for those unwanted expenses that arise and invest for your future.
You have successfully unbudgeted. Well done.
Megan Janssen is the founder of Money Juice (www.money-juice.com) and a financial advisor with Forum Financial Management, LP. The ideas and language written here are those of the author and do not necessarily reflect the views or opinions of Forum.