{"id":530,"date":"2020-04-14T11:53:46","date_gmt":"2020-04-14T11:53:46","guid":{"rendered":"https:\/\/robdix.com\/?p=530"},"modified":"2020-04-21T15:27:23","modified_gmt":"2020-04-21T15:27:23","slug":"no-budget","status":"publish","type":"post","link":"https:\/\/robdix.com\/no-budget\/","title":{"rendered":"A new type of personal budget: The “no budget” budget"},"content":{"rendered":"\n

Pick up any personal finance book of your choice.<\/p>\n\n\n\n

After the author has spent a few pages assuring you that they were once just like you and NOW look at how wonderful their life is, you’ll be onto Chapter 1.<\/p>\n\n\n\n

And what will that chapter be about? Making a budget<\/strong>. I guarantee it.<\/p>\n\n\n\n

This is far from terrible advice. It’s a staple of all personal finance advice because it’s logical, it’s easy to do, and it works for most people.<\/p>\n\n\n\n

But as Google Analytics painfully reminds me every day, “most people” don’t visit my website. So by finding your way here, you’ve proved yourself to be an independent thinker who’s up for tackling problems a bit differently \u2013 and I do think there’s a better way.<\/p>\n\n\n\n

Why wouldn’t you make a budget?<\/h2>\n\n\n\n

So we’re agreed that we want more money left over at the end of each month. Why might making a budget not be the best way to make this happen?<\/p>\n\n\n\n

Your biggest expenses are fixed<\/h3>\n\n\n\n

Housing, essential groceries, childcare, transport. Add them all up, and what percentage of your total spending do they make up?<\/p>\n\n\n\n

The answer will be at least 50%, but I reckon it’ll be north of 70% for most people. So you can dither around wondering if you should allow yourself a \u00a310 or \u00a315 per week coffee budget, but this is only a fraction of your overall spending so you’re only fiddling around the edges.<\/p>\n\n\n\n

It’s a waste of brainpower<\/h3>\n\n\n\n

You only have limited time and energy to devote to your finances. Putting together the budget in the first place isn’t difficult, but monitoring your adherence to it will constantly suck up willpower and brainpower.<\/p>\n\n\n\n

Your precious mental capacity is better spent on activities that will give you more bang for your cognitive buck \u2013 and I’ll tell you what those are shortly.<\/p>\n\n\n\n

You’ll resent the whole endeavour<\/h3>\n\n\n\n

“Do I have permission to buy this book?”<\/p>\n\n\n\n

“I fancy a kebab \u2013 is there enough left in the “eating out” budget?”<\/p>\n\n\n\n

“Oh no \u2013 I’ve overspent on clothes this month.”<\/p>\n\n\n\n

Miserable. A budget turns you into your own lecturing, hectoring schoolteacher every time you have to make a decision.<\/p>\n\n\n\n

There’s a real risk that the whole experience will be such a grind, you’ll give up on improving your personal finances at all. Which is a shame, because there are activities that are far more enjoyable and<\/em> effective.<\/p>\n\n\n\n

What to do instead<\/h2>\n\n\n\n

Have a one-off “bullshit spending” audit<\/h3>\n\n\n\n

Slash and burn, baby! This is actually fun.<\/p>\n\n\n\n

Go through your bank statements for the last couple of months and identify any expenses that can be reduced or eliminated.<\/p>\n\n\n\n

Anything recurring \u2013 like subscription services \u2013 are perfect for cutting because you’ll get the benefit every month from now onwards. One-offs are fine too, though: you might be stunned by the cost of going to that concert last month (\u00a3120 for tickets, \u00a350 for dinner beforehand, \u00a350 for the babysitter) and decide to do fewer outings like that in future.<\/p>\n\n\n\n

Here’s the key though: only eliminate spending that doesn’t make a significant difference to your enjoyment of life<\/strong>. This is about trimming the fat \u2013 not denying yourself all earthly pleasures.<\/p>\n\n\n\n

If you absolutely loved<\/em> that concert and you spent weeks anticipating it in the run-up, keep doing things like that! But we all have habitual spending which \u2013 when we sit down to consider it \u2013 doesn’t move the hedonic needle.<\/p>\n\n\n\n

Conservatively, I reckon you’ll be able to take 10% off your spending while barely noticing it<\/strong>. You can even set yourself a target to cut by a certain amount, if that makes the exercise a fun challenge for you.<\/p>\n\n\n\n

I said “one-off”, but bullshit spending always sneaks back in \u2013 so this is an exercise worth conducting once a year. Maybe on your birthday so it’s easy to remember. (Joking \u2013 even I’m not that weird.)<\/p>\n\n\n\n

Slash your biggest costs<\/h3>\n\n\n\n

Housing costs take up 30% of the average household’s income. That means if you can find a way to reduce your housing costs by a third, you’ve just reduced your overall expenditure by 10% in one go.<\/p>\n\n\n\n

The same logic applies to childcare costs, transport, and any other big fixed costs applicable to your situation. None of these costs is easy to reduce, but the ROI is huge.<\/p>\n\n\n\n

So what could you do?<\/p>\n\n\n\n