You Don’t Need a Budget: How Paying Yourself First and Reviewing Your Spending Might Be Better Approaches

I felt like my wife and I weren’t doing something right because we weren’t budgeting.

For fans of the show Dexter, my being a non-budgeter felt like my “dark passenger,” an omnipresent alter ego urging me to give voice to the unspeakable. I had spent years helping parents raise money-smart kids, ironically advocating for open financial conversations. But when I interviewed money mavens on my Art of Allowance Podcast, I’d largely avoid the topic of budgeting. I could feel my/the “dark passenger” urging me to speak up. But I kept quiet. 

I felt I couldn’t be both an expert on kids and money and a person who doesn’t budget.

Budgeting is the bedrock of financial freedom. Right?

Maybe not, at least for my wife and me. Despite not being budgeters, we’re building up our retirement savings, traveling and doing our best to raise money-smart, money-empowered children.

In short, we’re doing all the things we’re told you need a budget to do.

And it turns out that we’re not alone. Estimates about how many Americans budget look like the scores of dart-throwing monkeys. A 2021 survey by debt.com says 80% of Americans budget (up from 68% in 2019). However, this Penny Hoarder survey puts the number at 45%, and “Mr. Debt-Free” himself, Dave Ramsey, pegs the number at 40%.

The 80% number is surprising and certainly doesn’t align with this CNN Money survey that estimates 70% of us have less than $1,000 in the bank. It also doesn’t jive with the fact that most regular folks I talk to don’t budget.

So I’m going to let you in on a secret.

You don’t need a budget.

(Ok, I guess that wasn’t much of a secret considering the title of this essay.)

My wife and I tried budgeting. We found it difficult and dispiriting, perhaps because our revenues fluctuate. My wife is a realtor, and I run a small, growing business. We’d set our gas and fuel budget one month and blow through it the next, as one of us suddenly needed to put in more work miles. And as any non-budgeter knows, that pesky entertainment line item just mocks you.

“Yeah, suuuure, you’re not going to order in for the family after the exhausting week you just had.”

—Entertainment Budget Line Item

So consider this a call to arms. 

It’s time for the non-budgeters of the world to unite and to tell the Budget Mafia to put down their guns.

And it turns out we non-budgeters are in good company. None other than David Bach, author of The Automatic Millionaire, tells us, “What budgeting boils down to is depriving yourself for the sake of your future well-being…[Budgeting] is certainly a responsible idea, but as a strategy, it goes against human nature.” He continues:

“Telling yourself you’re not allowed to spend any more money on clothes or eating out feels a whole lot like trying to give up bagels or ice cream. Just like people get sick of counting calories, they get sick of depriving themselves financially, too.”

But like virtually every good financial professional, Bach advises, “Pay yourself first.”  If we develop the habit of paying ourselves first, then we reduce or eliminate the allure of spending money. Saving and investing the money we pay ourselves help us take advantage of our greatest ally, time. 

Shuttling gains from additional income (for example, raises) out of our pockets and into savings and investment accounts is essential to developing a core smart money habit — living beneath our means. Not coincidentally, this is the subject of one of our Adolescent$ “Good Money Habits” videos for tweens and teens. Yes, learning this concept can begin early.

In this “How to Budget” article, authors Bev O’Shea and Lauren Schwahn tell you to put away 20% of your money. If you’re putting away 20% of your money, then are you really someone who needs a budget? You’re almost certainly going to be in solid financial shape by simply paying yourself first.

James Clear, author of Atomic Habits, says you want to set yourself up for success if you’re going to build a new habit successfully. For example, if you’d like to develop an exercise habit, then just lace up your shoes for a run around the block. Make a small commitment you’re likely to keep, and build from there. Eventually, you’ll say to yourself, “I’m already out here sweating like a hog. I might as well run around the block again.” And so it goes.

Investing or saving 20% of your income certainly sounds like a lot. You can always start with a smaller percentage. Hey, even 1% works. Again, following Clear’s advice, you want to become the kind of person that saves money. Once you’ve established a foundational habit, you can challenge yourself to build on that foundation gradually.

You can even help instill this habit in your kids from a young age. Our five-year-old daughter’s original allowance of five dollars per week was divvied up as follows: one dollar (20%) into the Save jar, one dollar (20%) into the Share jar (for charitable giving) and three dollars into the Spend Smart jar (60%). If you’re new to allowance, then this essay can help you get started.

You can even remind your kids about this Save jar “nudge” as they begin to make more money. 

Now that we have the whole family covered, we can move from budgeting to reviewing.

Reviewing Versus Budgeting

Instead of budgeting, my wife and I retroactively review our spending each month. Doing so helps us get a sense of subscriptions we can dump, line items we feel might be getting out of control and, ideally, areas where we could siphon more money to the amount we automatically save. 

Reviewing sets you up for success. We’re not predicting expenses and facing the failure we used to feel when we missed those marks. Once you’ve set up systems to pay yourself first and live beneath your means, reviewing makes sense. It can even be fun!

Budgeting is often used to fix a why issue (You’re spending too much money on stuff you don’t need.) with a what (setting arbitrary amounts you’re unlikely to hit) or a how solution (creating the budget). It’s a little like treating a serious mental illness with a toxically positive attitude.

You might ask yourself this question: If budgeting is the answer, then why isn’t everyone money-smart? There’s no shortage of information, posts and plans available all over the internet, and there have been for years.

Oh, and guess what? You can’t build a budget without first reviewing where you’re spending your money.

Budgeting Certainly Works, But…

If you’re a budgeter reading this, then please don’t get me wrong. Budgeting certainly can work. The point of this post is not to convince people not to budget, but rather for budgeters to give us non-budgeters a break. I simply want the Budget Mafia to acknowledge that there are alternatives. 

Paying yourself first as a route to living beneath your means is a financial literacy fundamental. Budgeting is an option you can use to get there.

CPA (and first-class budgeter) Robin Taub and I discussed budgeting on my podcast. If you listen in, you may notice my sheepishness in addressing this topic with her. I was concerned about being outed as a “non-budgeter,” and I think you can hear the uneasiness in my voice.

Despite my budget anxiety, Robin agreed that what matters most is to know your gazintas and gazoutas (terms that originated on The Beverly Hillbillies TV show).

Budgeting works for Robin and for many others. 

And there’s no shame if reviewing works better for you.

John