Adopting a ‘No-Budget’ Budget
Hello everyone! Happy new year (is it too late to say that?) When I was thinking of what blog post write this week, an idea that has been floating in my head for a while popped up. When I started my debt payoff and investing journey last year, I quickly recognized the importance of having a budget.
But now…I’ve paid off all of my high-interest consumer debt, I pay off my monthly credit card balance in full, I’ve saved an 8-month emergency fund, and I invest monthly into my Roth IRA and brokerage account. I’m in a different place now than I was one year ago. I have a more solid financial foundation that allows me to have some cushion and peace of mind that I had never had before achieving all of these goals. I feel like I’ve reached level one of having FU money (not full financial independence, but enough to cover my expenses for one year). I’ve reached a place where I don’t absolutely need to obsess and give too much thought to every cent that I spend. I can breathe a little bit, and here is why…
I Automate My Monthly Investments for My Short Term and Long Term Goals
The easiest way to build up savings and investing is to automate it. When you have to think about investing, oftentimes it won’t ever get done. I might see something I want to buy, decide to splurge on a nice trip with my partner (pre-COVID-19), or feel hesitant to see the money get moved out of my checking account. However, I don’t allow this to happen. I have to trick myself to invest without putting much thought into it. I set up automatic deposits from my savings account into my Vanguard Roth IRA Target Date 2050 fund and my Vanguard brokerage fund that I will be using to fund my early retirement. I know that at the end of each month, the money will magically disappear out of my Chase Savings and pop into my separate investing accounts and voila!….it helps me buy stocks and bonds. I make sure to automate the investing amounts so that it won’t cause me to not be able to comfortably pay my bills and always leave a cushion in my savings accounts.
I Have Fixed Expenses and My Spending Habits are Predictable
My monthly housing expenses, utilities, groceries, and student loan payments are either fixed or very predictable. I don’t tend to have different spending habits, I buy the same groceries month to month, and I rarely go shopping for anything that isn’t essential. I pretty much know how much I will be spending each month on my necessities and don’t want to give any extra mental energy to a grocery bill that may vary by $20. I’m in the position that I know I will always be able to cover my cost of living and I’m very thankful for that. I know that is not always possible for everyone who doesn’t earn a living wage. At this point, I know that I can cover any expense that comes my way and I don’t plan to make any large purchases any time soon.
I Have a Career That Has a Salary and Variable Commission
I’ve been working in software sales for almost two months now. One of the best aspects of working in sales is having a fixed salary and an uncapped commission. I always acted as if I am only receiving my monthly salary and don’t make any plans for my commission that I receive quarterly. That way, my spending habits won’t change when I receive a commission check and I won’t form a new ‘normal’ in my normal spending. I act as if my commission is just the cherry on top and often use that money to make lump sum deposits into the stock market, and fund large purchases. If I ever spend too much or have an unplanned emergency that requires me to tap into my emergency fund, I can always top it up with the commission money that I received.
In conclusion…
I make it a habit to have my investments automated, keep my spending behaviors leveled, and use my commission money to fund large purchases. I’m very grateful to be in a position where I no longer have to second guess buying a pint of Ben & Jerry’s ice cream instead of the cheap store brand. If I want to order take out, I don’t think too hard about it. Although I think of myself as being pretty frugal, I never want to get to the point where I obsess and stress over everything that I spend. As long as I take care of the big expenses and consistently invest, everything will be okay. I do keep track of my monthly spending just for fun and to be transparent with my readers, but now it’s not as necessary as it once was for me.
Do you stick to a strict budget? Or do you give yourself some breathing room? I’m curious to hear about what works for you and if you use a ‘no-budget’ budget as well.
