The key is not how much you spend, but knowing how you spend your money.

Budget defined:

  • A budget is an estimation of revenue and expenses over a specified future period of time and is utilized by governments, businesses, and individuals.
  • A budget is basically a financial plan for a defined period, normally a year that is known to greatly enhance the success of any financial undertaking.

Source: Budget Definition: Corporate & Personal Budgets

Many people spend a lot of time constructing and monitoring their budget. One person told me she enters every penny she spends on a spreadsheet to monitor her budget. Actually some people find that an enjoyable activity, but to what purpose?

A budget is a projection of what you will spend during a future period. The longer the period, the less accurate the budget is likely to be. Because of that budgeting can be stressful, especially if one is trying to budget something like expenses in future retirement. It’s like a New Years resolution. We start with good intentions and then out of frustration, we forget about it.

Who wants to live with a ongoing worry about going over budget? The fact is, with two caveats our budget is always set for us.

🤑 Save first

🤑 Never have an unpaid credit card balance at the end of a month

If that “budget” isn’t working you either need more income or you need to cut your spending. It’s then you review how you spend your money. I’m betting that if you think about it you know what you spend on fixed basic expenses like rent, mortgage, utilities, car loans, etc. It’s the other spending – beyond expenses- you need to focus on.

Keep it simple: after tax take-home pay – savings = money available for spending.

Don’t spend more than that amount and there is no need for a budget. Your lifestyle is limited to the available money. A detailed budget is of no value because it always must fit into the above formula.

Dan Egan, director of behavioral finance and investing at Betterment rec­om­mends what he calls stress-free bud­get­ing. His method elim­i­nates con­stant mon­i­tor­ing of spending, which can be tedious. Mr. Egan and his wife send their pay-checks to a joint bank account from which they au­to­mat­i­cally pay re­cur­ring bills, in­cluding their mort­gage. The cou­ple also au­to­mate trans­fers to sub­accounts earmarked for items in­clud­ing emergen­cies, a new car and va­ca­tions. Then they di­vide what is left in half so each can spend the sur­plus as they see fit.

I follow a similar method which I outlined on HumbleDollar.


  1. Covid has saved me $200 per month, as I now eat every meal at home. I plan on purchasing more I-bonds, now paying 7.12 %. My credit union pays .05%, what a joke. I will have $10,000 in I-bonds by Jan 2023. I never made more than $35,000 per year during my 27 years of work. Average $11,500, so I never had any money in the budget to save. Raised 4 kids from 1980 to 2008 with my wife as homemaker. Now I watch spending like a hawk. I have an emergency fund now, something that I have never even thought about, because I have skills. Doing my own automotive, electrical, sheetrock and plumbing repairs has saved me thousands of dollars over the years. I still do oil changes on my car, I just replaced my kitchen faucet buying a new one on Ebay for $32 vs $88 at Walmart. I don’t know what a plumber would of charged and I am glad I did not have to find out. I am now able to save 33 percent of my monthly income. Credit card statement balances are paid in full each month. I love cash back credit cards and earned over $500 in 2021. Living large, almost stress free in Montana.


  2. You still have to track your spending somehow. If you don’t know how much you are spending then at the end of the month you are lost. What most people call a budget is really more of an expense report. They track there expenses and it can be micro-every purchase to every penny or macro. But at the end of the day you need to track it somehow so you know how much you spent compared to how much you had available.


  3. That is fine for people with enough income. I do agree the approach is fine if you are paying off your credit cards each month. But how do minimum wage workers figure out how to solve their overspending without a breakdown of what they are spending on to determine options to get spending under control? There is some level of minimum fixed expenses even if one zero out all discretionary spending. And it is necessary for the lower wage earner to learn to live below their means, just as the higher income households.


    1. Yes, as I said, if what I suggest does not work either the income must increase or the person needs to look closely at spending and see what must be trimmed.


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