Unbudgeting in 2016: reflections halfway through

It’s no secret that I spend a lot of time tracking my finances and I love that! I realized though as grad school kicked into gear that I have too many systems that require me to perform some actions on a specific date, which is problematic when grad school is more important than micromanaging my finances.

So I decided to unbudget in 2016.

What does this mean? I still tracked my spending via the normal ways, but it won’t be time sensitive anymore. I’ll be able to track my spending a month or two later with no effect on anything.

My spending has been relatively consistent since graduating from college. If I throw out the highest year (the year I bought my condo), my spending averages out to $44,000 per year. For 2016, instead of micromanaging how much money my checking account gets each month and it varying a ton, I just took my 2015 annual spending ($48,000), divided it by 12, and gave myself that amount each month. I generally know how much will debit from my checking account each month (credit card bills, mortgage payment, HOA dues, and property tax payments), so I’ll be able to do a quick check by looking at my balance and seeing if I need to add a bit extra.

Why did I do this? It seemed like an interesting experiment, especially since the system of detailed budgeting I used from 2010 through 2015 was largely unnecessary with the huge difference between my income and my spending. This is also essentially what my boyfriend does, so I wanted to experiment and see if it could work for me too. When I first told my boyfriend about my idea, he thought I was crazy and it would never work.

How is the experiment going?

It’s going great!

I started out the year with an auto-transfer from savings to checking of $4,000 on the last day of each month, but in late April (once I finished with 401(k) contributions for the year), I switched it up for my employer to direct deposit $2,000 each pay check to my checking account and the remainder to my savings account. I can split my direct deposit so many ways that I actually also set it up to put 1% of my gross income into my charitable donations savings account as well, which is awesome. The only thing I do manually now is I pay the balance of every credit card as of the last day of the month on the first of the next month, to start the month with a clean slate on the credit card balance, instead of paying attention to the due dates. I used to have my mortgage payment auto-pay on the last possible day it could, but I changed it to the third of the month so it came out earlier and then I knew how much was left in my checking account earlier. Any funds that are leftover in my checking account at the end of the month just stay there and roll over to the next month, which is how I deal with the irregular, but large-ish expenses like property taxes, insurance, and travel.

It’s kind of weird not knowing that I have set aside $X for property taxes so far, that I have $Y left in my clothing budget and $Z in my travel budget, but that’s surprisingly okay. If I spend more this year than I did on clothing last year, then I may consider a clothing budget to see if that helps with the spending. But for everything else, it has been fine. It’s nice getting invited to yet another wedding and not feeling like I need to add money to my presents budget because I don’t have a presents budget! It’s also nice getting the property tax bill and not being annoyed at needing to adjust my budget because it went up by more than what I had estimated. So far, I’ve stayed “under” budget, which is nice, but we also haven’t booked much travel yet this year.

The $48,000 figure was my total 2015 spending less grad school costs and charitable donations, rounded up to the next $1,000. I forgot to exclude medical expenses as I pay those out of my HSA, so really, I could have budgeted probably $47,000, but the buffer is nice to have. If I have funds left in my checking account at the end of the year (which I’m guessing I will), my plan is to just leave them there and then reduce the monthly deposits for 2017. So if I budget $48,000 again, but there is $4,000 left in my checking account, I’ll only transfer $3,666.67/month and not $4,000/month, which would leave a bit more room for savings next year.

So far, my spending seems reasonably in line with my 2015 spending, so I’m not particularly worried.

I have been tracking my spending reasonably close to when it happened, which isn’t strictly necessary, but it’s okay. The time saved not playing with the budget spreadsheet is huge.

This strange way of budgeting also means that it’s really hard to go over budget and irregular spending is accounted for since I never transfer money out of my checking account except to pay the mortgage/credit card bills.

Readers, how have your budgeting strategies evolved over time?

34 thoughts on “Unbudgeting in 2016: reflections halfway through

  1. I used to do the following:
    (1) Direct deposit all checks to checking
    (2) Automatic withdrawals from checking to savings / investment accounts
    (3) Use the balance in my checking account as a guideline for what I can spend the rest of the month

    When I first started working and used this method, I would constantly feel stressed out I would “run out of money” from my checking account. I’d end up getting so worked up I’d often spend MORE than I needed to, whittling it down to 1/4 of my monthly allocated amount remaining by halfway through.

    Nowadays I do direct deposit but I manually move money to other accounts and have a larger buffer in my checking. I stress less about it and end up spending less on monthly discretionary too (part of that, I’ll admit, is lifestyle change more than money management change).

    • I hate worrying about “running out of money”! I think running your account down to zero works better to help spenders curb their spending and it hinders savers from spending anything because they don’t want it to go to zero!

      I actually hate automatic withdrawals to savings/investment accounts! I’d rather do it with direct deposit or manually.

  2. I love this! I stopped formally budgeting in March 2015 and have found it totally freeing – but only because I trust myself and know I don’t want to make any stupid financial decisions that could set me back. My monthly spending is always within the same $300 range. I still check my accounts every week, but that’s because I earn irregular income and get paid random amounts constantly. But I typically only track my spending once or twice a month now, and am never surprised by the numbers. Welcome to the club! :)

    • I usually enter my receipts once a week, which is the pattern I got into a few years ago. It lets them not build up too much, but also not be too often. For the longest time, I entered them daily, but that was far too exhausting!

      In college, I didn’t budget. I would keep about $200 in my checking account for ATM withdrawals and then I would pay my credit card bill out of my savings account. I started budgeting post-college because my income shot up and I wanted to give myself permission to spend. It’s so nice to be in a groove now and trust myself with it :)

  3. As you probably remember, I don’t think this form of budgeting is strange at all as it’s how I’ve always done it. (Though I pay attention to the check register rather than the balance in checking these days, so although I deduct money at the beginning of the month, I allow bills to be paid shortly before they’re due. Mainly because as soon as I pay the mortgage they send another mortgage bill and once I got paid ahead a couple months and got confused. Back when there were fewer bills I had them all set to go right after the first of the month.)

    This year I haven’t even been doing that sort of budgeting. I’ve just been transferring from savings to checking whenever the money gets low. Next year when we’re back to normal expenses and full salaries, I’ll probably just allow us to spend whatever we want and transfer different amounts of money out of checking/savings. It’ll be the first year that we’re making way more money than we need and don’t have a targeted savings goal (no jobloss/year off in paradise/mortgage paydown/etc. on the horizon). Instead we made a list of things we might want to spend money on (but we’ll probably be too time-constrained to actually spend it.)

    • My only bills that can’t go on a credit card are: mortgage, property taxes (twice a year), and HOA dues. So I don’t worry about the checking account register too much.

      If I went over my “budget”, I’d probably just transfer some money from savings. I can realistically spend whatever I want. This is really just an approximation of how much I think I’ll spend. Though I would quite like to finish paying off the mortgage by the end of next year. That’s all dependent on how much time I take off when I change jobs later this year and what I do with that time.

      • Changing jobs again!

        Usually I do what you are currently doing keeping slush to a specific amount, but this year has been different and next year we may want to loosen up on spending. We’ll see.

        Right now we have DH’s salary direct deposit to checking and mine to savings. I think next year I’ll be skimming money out of checking in the middle of each month (DH gets paid 2x a month). Where it will go I haven’t decided yet.

        Monthly checks I pay: 2-4 credit card bills, mortgage, daycare, after school, piano lessons

        • It’s been a year and a half at this one! My plan this time is to quit without another job lined up actually. I’ve seen friends job hunt that way and it seems to go faster, you have more time to study, and also it doesn’t feel like you’re running from something and need to pick something. And I’ll have a large enough runway (should be two years by the time I quit) that I can take my time finding the right fit.

          I actually don’t keep slush to a specific amount – I have a specific amount I add each month and I leave any remainder there, no matter how high it gets.

        • Well, we’ve only had the one summer so far and we spent it in Paradise which required lots of hoarding cash during the year (and this year we spent more than we earned), so I’m not really sure.

          I think we’ll probably just keep a sizable emergency fund of 3-4 months expenses because there is a chance that DH could lose his job with 2 weeks notice at any time. Or that the roof could collapse. Etc.

          I also don’t know if I’ll just keep that emergency fund in savings or if I’ll fill it up throughout the 9 months or if I’ll fill it up the last few months of the paid year. Hard to say. Most likely I’ll just keep it in savings as our baseline because we don’t need the extra earnings on the market so much as we need peace of mind.

          And, of course, it matters what we do with any “extra” money in terms of how accessible that money is.

          Anyway, I am totally looking forward to the “problem” of having more money than we know what to do with. (Though that will be a temporary problem, since there’s always places to put more money, it’s just a matter of where.)

        • I’ve played around with a variety of cash reserves in general savings and $20,000 seems to be my happy number in so many situations. Anything over that and I start trying to do something with it (throw it at the mortgage, give it a goal, toss it into Vanguard, etc.) Right now, that is about five months of expenses, could buy a new car, or could replace all of my appliances and cover 2.5 months of expenses. It seems like a pretty reasonable number when I have no plan to quit my job, for example. I’m curious to see how your emergency fund shifts over the next few years :)

          I’ve found that it can always feel like you don’t have enough money for all the places that you want to put it! Lol. The Mega Backdoor Roth IRA has definitely been a bit more constricting than I prefer to be with my retirement savings.

        • p.s. I didn’t mean I kept the same amount in checking as slush, but that I transferred the same amount in (if things are direct deposited to savings) or out each month (if too much was direct deposited to checking).

        • Ahhhh okay. My boyfriend keeps $10,000 in his checking account as his form of an emergency fund and doesn’t like it when it dips below that amount, so that’s what I thought you meant.

  4. The only thing I’ve changed over time is the amounts. All paychecks deposit to checking account, then automatic investments are made weekly, leaving us, ideally, with just enough to pay the bills. Then I increase the automatic investments every few months, hopefully enabled by higher paychecks or else cuts to expenses. If we end up with surpluses, I invest that, but if there’s shortfalls, I keep $3,000 in a savings account to cover that temporarily, which must be reimbursed later.

    • I’ve found that lifestyle deflation is mostly impossible, but at least I don’t really inflate my lifestyle either. Having a fixed mortgage payment is pretty helpful with that. Sounds like you have a good system going!

  5. it seems like subconsciously it should still be pretty similar since you are have been in the habit of strict budgeting for so long. Are you still tracking individual receipts to store the data? tf so, it will be interesting after you look at the data when the year is up, and like you said, you can budget clothing or some other category that looks out of whack vs. your historical spend without going overboard with the detailed budget. I would guess the saved time is going to be especially useful with all your graduate studying.

    • Yup, I’m still tracking in the exact way as before. I’m just not policing my spending at all. I did a quick comparison before writing this post of the monthly average so far in 2016 vs 2015 and things aren’t really that off for the most part. I’ve been really lazy at hanging out with friends and going to the gym though, neither of which are good habits even if it does save money!

        • The summer one, no. It wasn’t super fun. I’d rather go hiking. The winter one, I took a bit of a step back from this year because of school. I found a barre studio near my house that I like, so I’ve been doing that and going for long walks.

  6. I tracked my spending, and then direct deposited enough into checking for 1 paycheck to go towards rent & the other towards credit card bill (pretty much everything except power & rent). The rest goes directly to savings. I can transfer from savings to checking for an overly spendy month (Christmas shopping for example ), but am not tempted because I don’t see the savings money. I am goal oriented and my savings account has a goal program which also helps. If I do have extra in checking once all bills are paid, I’ll manually move that to savings. Congrats on your successful unbudgeting!

    • Sounds like you have a pretty similar system to what I’ve been trying out! Glad to hear it’s working for you as well :)

  7. Basically I had no budgeting strategy at all until this year. It has worked since I’m not really a spender at heart. But this year I made a plan to spend no more than $30k. I also started tracking my expenses more precisely in an excel document. So far I’m tracking below budget, so no need to spend more time diving into every line item. I think your plan is a great one.

    • That’s awesome! I had no budgeting strategy until after college. Then I developed one to allow myself to spend money ;) I’ve always tracked my spending though.

  8. I’ve hardly been one to waste time tracking and tallying a budget… let alone sticking to it.. I’ve always come up with reasonable figures based on my spending needs and then adding a little extra to spend on things I want. My needs got a monthly transfer to checking for that amount and my wants into a separate account. If I over spent somewhere I’d have to dip into my Wants money budget to cover the expense.. It has worked very well.. I’ve always saved money since I started working 20 years ago.. Yeah there are years I could of done better and there are years I’ve done really well.. It is a great balance and hassle free.. Saves more time than dealing with budgets and expenses every month.. yuck..

    • Sounds like you have a great system that works for you :) I feel like tracking is important whether you “budget” or not – then you have the data to adjust your patterns later. Or the knowledge of what your expenses are when you want to take a pay cut.

  9. Glad I found your blog! I am in the “one pot” camp even when I significantly out earn my fiancé. I think each couple needs to do what works for them though. Keep doing what you’re doing. You guys are killing it!

    • Thanks Julie! I think “one pot” works great when you meet and get married when you have few assets. It sure would make things simpler if that was our case!

  10. This is a fascinating approach. Most people do have a consistent spending level so this makes a lot of sense.

  11. We have always been unbudgeters, or — as I call it — “money hiders.” We pay ourselves first and make it look like we don’t have much leftover to spend. That’s all great for now, while we’re saving, but I’m definitely anxious about how we’ll handle *having* to live on a budget in retirement. I think I’m going to do multiple accounts for fixed costs like property taxes and utilities, but it is definitely going to be a trial and error process for a while to figure out how to manage the rest!

    • I’m curious to see how you end up adjusting your account usage once you’re living off of savings! Especially once your brain figures out that you have far more money available than you had originally told it. I originally (post-college) did one checking account for fixed costs and another for discretionary spending, but I found I hated drawing either down to zero, so some buffer was useful.

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