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If a budget helps you manage money, provides a sense stability, etc., go for it, but…
recognize a budget doesn’t do any of the things often attributed to it, it doesn’t do anything. Doing or not doing something is up to the individual…including sticking to a budget🤑
Several times I have looked up the question, “why do I need a budget.” The answer always comes back implying the budget somehow actually does things without human involvement, that it magically changes individual behavior.
For example:
“A budget makes sure your money supports your goals instead of leaking away unnoticed.” With a budget “Credit card debt is easier to avoid.”
“A budget tells you where your money is actually going.” “It prevents financial surprises,” “It gives peace of mind.”
“You don’t need a budget in the sense that it’s a rule everyone must follow—but for most people, a budget is a tool that gives control and clarity.”
Here is a good one for the HD group. “A budget replaces anxiety with confidence because it will tell a person if they’re saving enough, If they can afford something, When they can retire.” How the heck does a budget do that?😱
Does a budget make sure of anything, tell you anything or prevent anything? Nope, that’s up to the individual and their self-discipline.
I never put pencil to paper or keyboard to spreadsheet to develop a budget. It was not because there was so much money that spending was of no consequence, but because our net income (after saving) told us how much we could spend and no matter how we spent it, the overall limit was still there. We just didn’t spend what we could not pay for immediately.
My concern about focusing on a budget as some kind of solution to financial problems is that it may make some people overconfident and may stress others.
Can a budget be so detailed that the larger goals are missed? Like seeing the trees, but missing the forest? 😢
Budgets were very useful to us, especially in our early married life. It helped us save appropriately and not to spend more than we had. I hate debt, and only allowed debt to buy a car so I could get to work, and then buy a house. I am Happy to say, after 57 years of marriage it worked out well for retirement too. And by the way, at married year 50, we discarded the budget. We went for it, and did not miss a thing.
What would you say was different managing your money the last seven years from the first 50?
I’m guessing your view of debt did not change.
“A Budget” is just a tool and worthless on its own. But most of the time when someone is “on a budget” or “budgeting” they are describing the budget as a tool AND all that goes with budgeting to make it useful. Just like when I say I use a financial calculator. The assumption is that I am both using the tool (calculator) along with the proper inputs and assumptions to make the tool useful. The two items, the tool itself and implementing the tool, go together. So stating a tool is useless on its own is correct, but somewhat pointless.
When people read the praises of budgets, their expectations may be too high, not everyone makes the connection between the tool and using it. I don’t think what i wrote was totally pointless. If that was actually the case many of the off the rails comments entirely missing the point would not be necessary.
Exactly! Like saying your car’s owner’s manual “does nothing”!
If you leave it in the glove compartment and never read it or follow its directions it does nothing.
There have been a few times on HD where I’ve agreed with Mr. Quinn. However, it is apparent from this comment thread and others that any discussion about the meaning of the word “budget”, or the perceived value of said “budget”, would not be productive.
I believe that Mr. Clements created Humble Dollar in part to provide a safe place to ask questions, share insights/knowledge, and participate in friendly and helpful discussions. In situations like these, I think the best way to show appreciation for his legacy is to continue to honor his values and founding principles with our posts and comments.
In other words, ask yourself, “WWJC do”?
Agree, kinda turning into cart gate again, which Mr. Q still somewhat refers to as being a fuss over nothing. Just one of those folks who demands to be right on all things he posts (and he is some of the time).
I would sincerely like to know what part of this post is wrong keeping in mind that what said was that a budget itself cannot do anything and that every part of a budget, the success of a budget is dependent on the actions of an individual.
Please, what did I say is wrong? Read the first and last two paragraphs.
Geez, the word, “budget”, and any references to such is hereby banned on HD, by order of The Mighty Quinn (song). Just kidding but man, pour out double of your favorite (not suggesting it has to have alcohol in it) and relax.
What a person should know is where their money is flowing to and in what volume. Categorize it any way and to the level of detail that makes sense to you. Or do nothing. It’s your money and your call. Tracking expenditures, while a very monotonous process, was the beginning of exiting credit card balances forever at a young enough age (thank you God, for a swift kick in the rear end) and building a good enough pile over the decades to retire at 59. Young, naive and a rising income can be a bad combo without guidance and learning.
Good news, bad news – I don’t drink, but I’ll have another cup of coffee.
Best To All.
I like what Dave Ramsey says about budgets. “You’re in charge until you make a budget. Once you’ve created a budget the budget is in charge.” If you don’t want to be financially responsible and live within your means, then don’t bother with a budget. And yes as it’s been said before the individual ultimately makes the final decision. I like living on a budget for many of the reasons stated previously. It gives me boundaries, peace of mind, helps me to achieve my financial goals, and for my wife and I, it’s allowed us to retire earlier than we had originally planned. Thanks for the discussion.
If you are asking what “a budget” can or can’t do, the question is nonsense. A budget is an inanimate object, it can’t do anything. What matters is the budgeting process, and what a person does as a result. If it tells you that you had better make your own lattes, you need to follow a fairly detailed budget. If it tells you that you can retire and spend x% of your portfolio, and you retire and spend half of that, you’re fine.
If you decided you were going to take out a second mortgage without going through some kind of budgeting process, you were irresponsible.
Asking? Did anyone read what I wrote.
”recognize a budget doesn’t do any of the things often attributed to it, it doesn’t do anything. Doing or not doing something is up to the individual…including sticking to a budget🤑”
For the umpteenth time you’ve written a screed that boils down your obsession with personal responsibility.How about a thread with a supportive tone that focuses on how to help people improve the ability to manage their finances?
Is that what you got from this post? I’ve explained the post twice. I’m amazed the comments went in all directions missing the primary point which I thought I clarified at the beginning and end.
I agree with R Quinn on most financial topics, but on this one he is looking a little like General Custer.
I don’t understand at all. Is anyone actually reading what I said?
Here is my reply to another comment. This is the essence of my original post.
Please tell me exactly where I am wrong. 🤷🏻♂️
A budget or tracking are tools many people find useful, but tools require someone to use them to be of value.
A budget won’t make decisions or determine how realistically it is constructed or force a person to stick with it. It won’t tell you how much you need to save for retirement. It won’t keep a person from using credit cards unwisely.
Budgeting, tracking or any other tool is totally dependent on the individual. If a budget is necessary or comforting in helping a person manage money, so be it. Do whatever is necessary, but the budget doesn’t do anything.
Prudent use of money, not over spending, saving are also possible without a budget because it’s the individual behavior that drives everything.
Okay, just to put you out of your misery, I agree with you: a budget is just a tool. Used properly, it’s genuinely useful for managing money. But like any tool—think of a hammer—if you use it wrong, it won’t work. You can’t inflate a tire with a hammer when you need a pump. Same principle applies here.
You seem to be impervious to alternative points of view. Re-read comments from others here and try this: start by accepting that what they are saying is true. You really can’t go wrong doing that because for them in fact, it is true.
Next I’d suggest trying to understand how they were able to arrive at the truth they shared in their comment. One approach might be to look back at your own financial life and imagine how it may have worked out for you had you applied what their comment is offering.
What views are they?
The post was not about to budget or not as I stated in the beginning.
The entire point is overlooked. That simply is, can having a budget accomplish all that is claimed for it? Will having a budget tell you when you can retire for example?
Did you read the last paragraphs of the post?
If I understand your argument correctly, it goes like this:
Yours is a facile argument. You could’ve chosen any one of myriad topics and written the exact same thing.
So no, having a budget won’t tell you when you can retire (although with AI integrations, that may not be true much longer). And having a financial plan will not ensure you don’t run out of money in your old age.
I think If someone today were to live according to your line of thought – never spending more than they earn and not bothering with a budget – they would either end up working until they die or they’d need to figure out how to live on social security alone, and do so without a budget. (“Gee, after working until 70 my income went from $123,000 a year to $40,000 a year. I never spent more than I earned, and my apartment costs $5000 a month in rent. Can I still afford that? If not, how much can I afford to spend on rent?” Beats me.).
It turns out you actually have to know how to use a budget, which includes understanding why you created it and what you hope to achieve from having done it. And then – most obviously – act accordingly.
Perhaps you would not have stirred up so many negative responses here if you’d simply written this as a My Point of View piece, sharing your financial history and current reality, and how, for you, a budget never figured in.
The way you wrote this piece, it appears you didn’t bother talking to anyone who actually uses a budget to some good effect; or if you did, your intent here was not to share what you learned, but to stir up controversy (cf, definition of facile).
In any case, may you have a budget-free and happy, healthy 2026.
You as many others apparently did not read the post in its entirety.
I never said having a budget is pointless. What I wrote about is simply the answers I received after a google search on the question
“why do you need a budget” where it lists as all the things a budget can do. That was not my point of view but the general consensus.
I questioned the validity of those assumptions and suggested only individuals, with or without a budget, could accomplish the claims for what a budget can do.
Your comment “I think If someone today were to live according to your line of thought – never spending more than they earn and not bothering with a budget – they would either end up working until they die or they’d need to figure out how to live on social security alone, and do so without a budget”
is very misleading because you ignored the key element of always saving first which applies budget or no budget and which I have stated numerous times.
Some experts claim you need a budget to know how much you can save. To me that is exactly the wrong advice because a budget designed to meet all spending needs and wants can easily leave too little to save.
You need to save first to determine what you can spend and you need to adjust as necessary.
Finally, you ignore the last two paragraphs of my post.
Now I think about it, Mr. Quinn has told us that he took out a second mortgage to pay his children’s college fees. Knowing he needed to do that, and knowing how much to borrow and how to repay the loan is budgeting, even if it was in his head and not on paper. He can choose to call it something else, so he can start an argument, but it is budgeting all the same. Using his examples, it supported his goals and gave him confidence he would meet them.
Hard to buy a claim that someone didn’t buy what he couldn’t pay for immediately when the person has two mortgages.
I thought I posted the definition of a budget.
This post is not about me or even to budget or not. It is about that claims made for what a budget can do.
If a person chooses to use a budget, the question is can it do what claims I quoted? That’s it.
The question was not to budget or not, good or bad.
The question was are the claims for what a budget can do valid? Can a budget accomplish anything simply be having one in place? Contrary to the claims I posted, it can’t IMO.
I think it’s helpful to first define what someone means by “budget.” And whatever definition is applied, its utility is determined by the individual user and shouldn’t need to be defended in order to convince the author of its value. To provoke a discussion on a subject that has been discussed here so many times and in so many ways solely so that the author can refute any differing opinion, seems self-serving at best. But I’ll play along nonetheless – which admittedly makes me part of the problem of this tiresome situation.
In our household, we employ something that we call a budget tracker. We capture all of our spends and income on a monthly basis. We record our credit card purchases by each credit card using the paid-in-full amount (no interest). Other example categories are HOA fees, real estate taxes, water, electric, cell phones, checks, ATM withdrawals. All income is also captured – net pensions and miscellaneous payments through checks or Venmo transfers. The formulas are copied from year to year and automatically tell us if we are spending at, below or above our incoming funds monthly and YTD. It only takes us about 10 minutes at the end of each month to enter the values. It’s fun for us and lets us know if we are on track or need to or can make changes. And we like looking back over the years easily as each year is one tab in the same Excel document.
That’s what we do and it’s great for us in retirement. I recognize that using a tracker may not be everyone’s cup of tea – but we’re coffee drinkers! 😊
Jan, we are doing this tracking like your household. Spouse loves it, but mostly b/c they were never involved in our finances. I was responsible for everything, good or bad. I never did tracking or spreadsheets. I did more of a save first/sinking fund/spend the rest kind of thing. I don’t understand what we do with the information from the tracking and wonder if you might speak to that? What I had been doing seemed to work ok for us. Thanks. Chris
Chris, let me start by saying that my husband prefers to be the one who pays the bills. Updating the tracker monthly provides us the opportunity to both be aware of spending trends and discuss the outflow of our money, mostly through the use of our several credit cards. If necessary, we could then decide to spend less moving forward as the credit cards are mostly discretionary spending and within our control. Both of us are fairly frugal, so we really haven’t had to do that. I also use the credit card entries to monitor our spends for each card to maximize the reward benefits associated with that specific card. For example, our Delta card gives us points and also a travel credit after reaching a certain threshold. Once we reach that, we switch to a different card to maximize that reward and so on. At a glance, we can see the fluctuations in our electric use, our water use, our community entertainment spends, etc., and that can lead to a discussion on changing our habits. I also use the data in the tracker to determine the cost of essentials that I would need to continue living here in this house should I be on my own and the discretionary expenditures which I could reduce if necessary. Another basic utility is to give us an accurate number to enter for “income needed” for any longevity Monte Carlo model. At age 65 with the potential to have many more years ahead of me, coupled with the possibility of being on my own without my husband’s pension, having real numbers makes projections more accurate. And all of the data I’ve described here is found in one place and accessed immediately. For us, the 10-15 minutes at the end of the month needed to do the monthly update is nothing compared to the value we receive in the end product.
I hope I answered your question, Chris. Thank you for asking.
Regarding your “reverse budget” reply to Mark, we are no longer in the accumulation phase in our retirement. The only “saving” we do is from interest income on our CDs and savings accounts and in not withdrawing from our investment portfolios. So staying within our budget for a net neutral annual outcome is very important to us. That may change as my husband will begin RMDs this year.
Jan, thank you so much for taking the time to answer my question. What you do makes sense to me. We are a few years older than you and younger than your husband. So still getting our feet under us with this retirement stuff. Chris
What you describe is not budgeting. Budgeting is a process planning future spending and sticking to that based on each category. Tracking expenses is different as you described. What do you do with all the information your track?
Please see my response to Chris. The tracker leads to the “process planning future spending” that you use as your definition of budget. It’s a tool like the tape measure is a tool. It gives data that can be used in different ways, which is why I find your original statement that a budget “doesn’t do anything. Doing or not doing something is up to the individual” as a dismissal of the use of a budget to be puzzling.
A budget or tracking are tools many people find useful, but tools require someone to use them to be of value.
A budget won’t make decisions or determine how realistically it is constructed or force a person to stick with it. It won’t tell you how much you need to save for retirement. It won’t keep a person from using credit cards unwisely.
Budgeting, tracking or any other tool is totally dependent on the individual. If a budget is necessary or comforting in helping a person manage money, so be it. Do whatever is necessary, but the budget doesn’t do anything.
Prudent use of money, not over spending, saving are also possible without a budget because it’s the individual behavior that drives everything.
So you’re saying that having a lawn mower won’t keep my yard trimmed? That’s it?
In the accumulation stage, we never technically budgeted either. We set savings goals (401(k), IRA, 529, etc.) and whatever was left was available to spend. Having said that, I think the budgeting process can be effective for couples if it serves as a discussion tool to ensure their goals are aligned and both are rowing in the same direction.
Mark, We did the same except when raises came most of the time they went into our 401Ks. Our thinking being that we were getting along fine with the net for expenses. This eliminated lifestyle creep. But again our philosophy was pay ourselves first by 401K deductions and the rest we could spend, no budget necessary, just live on the money left over after retirement savings.
This is good. Reminds me of Jonathan’s reverse budget. That is what we do too. Chris
I think budgeting, especially as it relates to keeping track of one’s spending, is similar to tracking one’s calories. And in both instances, it’s a useful tool if one needs it, but not everyone always does.
I’m a big picture person and don’t want to obsess over every dime I spend. Or as my husband would put it back when money was much tighter: “I’d like to be able to order a pizza on a Friday night without worrying if we can afford it.” My view is that if my bills are paid and my saving and charitable giving goals are met, I don’t need to worry about the rest in granular detail. Now, if the plan, such as it is, stops working, I might need to take steps to figure out what I can do about it, and a budget or spreadsheet might be a helpful tool.
Same thing with calories. If I’m feeling good about my eating habits and I feel healthy and my clothes are not getting tighter, maybe I don’t need to get granular about what I’m eating. (January 2 is a bad time to assess this, though—give me a week.) It’s pretty easy to go through a day/week/month and either lie to myself about how much I’m eating and/or not be attentive enough about what I’m eating—too much junk, not enough protein, fiber, or complex carbs. So logging food can be a useful tool to visualize that and be more accountable to myself.
My husband has set a tentative retirement date of October 1, so part of this year ahead will include some mindful attention to our spending so that we have a better handle on it once our income is substantially reduced. That will help us understand what, if anything, we need to do about it. If we see that our spending will outpace our income once he’s retired, what do we want to do?—reduce spending, plan to withdraw regularly from savings, have one of us file for Social Security at 67? There’s not necessarily one right answer to those questions, but sometimes one should ask them, and a budget/spending record can help with that.
Makes sense, but in reality you surely know your current level of spending. You may not know where every dollar goes, but you know the total being spent. Why not just use that for retirement planning?
If that number is a mismatch with retirement income, then you may need added detail on what you want to reduce or a plan to increase retirement income.
I’m pretty sure our current level of spending will exceed our pension income—not by a lot, but some. So the questions we need to ask ourselves are:
(1) Do we want/need to reduce any spending? (Categories to target for this might include higher-end travel, assistance to our adult daughter, or personal care [my expensive Pilates studio membership and my monthly massages, for example], tightening up our spending at the grocery store or restaurants.)
(2) If the answer to (1) is “no,” then we need to decide if we want to file for Social Security and/or supplement our pensions out of savings. We have a robust cash cushion and a big stash in our retirement accounts.
I suspect my husband is going to lean toward option (2). I’m the more conservative one who’d rather not touch our savings until we have to. The compromise position may be for me to file for Social Security at 67 (our FRA), while he waits until 70. That would bridge the income/spending gap nicely.
Margie,
I think you have an excellent plan, primarily because it reflects mine. One thing to think about. We have delayed claiming Social Security by paying ourselves living expenses out of our retirement accounts. We retired in 2020 at ages 62 and 63. Since that time the market has performed so well that our savings have remained about the same, obviously with some expected fluctuations, but never more than $100K. I have a set minimum amount we our comfortable with, and if or savings drop below that number it will trigger her (the lower wage earner) to claim in order to decrease our withdrawl from savings. We feel that this is allowing us to essentially buy a higher inflation adjusted annuity which is wha Social Security is. Might be worth a trial.
Also, if you haven’t I’d recommend you go to Mike Piper’s Open Social Security website. It is a gold standard free SS claiming calculator. You put in your current retirement savings, and your expected full retirement income from SS and it gives you what your income would be if you and your spouse claim at different ages.
I’m not really a budget person. I know what I have, so I know what I can spend. That said, I do think big-picture budgeting for tax implications is worth my time and effort.
My wife used to manage mortgage arrears at her local branch, and she was brilliant at getting people to create realistic budgets and spot the leakage that could go toward clearing their debts. She had a very high success rate helping clients avoid foreclosure, so I’d say budgeting was a powerful tool in that context.
What you describe is an evaluation of actual spending and when income doesn’t match spending and paying bills that certainly needs to be done.
Sometimes if it walks like a duck and quacks like a duck, it probably is some sort of duck. Although I guess it could just be a really good spreadsheet pretending to be a duck 🦆
How is “an evaluation of actual spending” not a budget? When I was deciding whether I could afford a major change, that is what I did. You had better explain exactly what you mean by “budget”.
It’s after the fact for one and it’s gaining information for a possible change.
A budget is a detailed plan that estimates and allocates your income (money coming in) to cover your expenses (money going out) over a specific time period. Essentially, it’s a forward-looking statement of your intended spending.
What I was doing was both backward and forward looking. What would a change to what I had been doing look like going forward? Why would anyone make a change without doing that?
But this equine died some time back. No need to revisit the remains. You aren’t going to change your mind.
Here’s my deep thoughts on the subject, and the post. One is that you truly are a glutton for punishment, Dick. Two is that all those listed reasons to have a budget are useless if the budget is not implemented, but quite useful if they are followed. Three, and to me this question gets at the heart of the topic; looking at people who have saved sufficiently for retirement, I wonder what percentage made use of a budget?
I think that you possess a great deal of common sense and self discipline. I also think that you have a partner who has always been on the same page. Both are necessary ingredients for financial success. In every case of failure I can think of, one, or both of those ingredients were missing. (Budget or no budget I might add).
I agree on all counts especially the mismatch in spending priorities and financial prudence between couples. I see that all the time. But as you say, a budget won’t correct that unless people are willing to change.
If you save first and end the month with money in the bank and no credit card debt left, you are doing okay.
If you determine you need to save more and that changes the end of the month status, then you need to look closer at how money is spent and make adjustments.
But the priority and control is saving from net income first, not budgeting to see how much can be saved.
My dad taught me to always pay myself first. So yes, when doing a budget, put saving on line one.
“If you don’t have a plan, any road will eventually lead us to a destination.”
A budget is not a solution. It is a part of a plan. The solution lies in implementing a comprehensive lifestyle plan, of which a budget is merely one tool.
Everything I’ve accomplished has been a consequence of a lifetime of planning, recognizong alternative outcomes and contingencies.
The act of building a budget, as I see it, is important in reinforcing and/or revising one’s life goals. When I worked, I loved that I had to demonstrably link line items to institutional goals. It was a great planning tool. Now I like to see similar budget mapping by the non-profit for which I am treasurer. Do I do the same in my own life? To some extent, yes. My personal goals fit into the categories of “healthy, happy, responsible, prudent” and my budgets are guides to achieve the goals. The budgets themselves are less important for their dollar amounts than for how they fit the bigger — and longer term — picture.
I really struggle to see how a budget relates to life goals. Could you give an example?