Perhaps due to my fortunate position in life, I’ve never had a budget, and by budget here I mean specifically “In this month, you are allowed to spend $x on category a, and $y on category b, etc.” I don’t like budgets for a few reasons. Due to (warning: overused phrase) thinking like an economist I like to believe that I allocate each dollar to where it gets the most marginal benefit, roughly speaking. I don’t see any sense in labelling particular dollars as ‘grocery dollars’ or ‘restaurant dining dollars’. Each dollar is the same as the last, and each should be spent where it gets the most benefit, right? And that will change month-to-month! Money is fungible and I often physically recoil when people introduce ideas that implicitly suggest it is not: it is one of those ideas that I feel like I internalized perhaps too thoroughly during my education.
Also, as mentioned, I’ve been very fortunate. I don’t struggle to find the funds to pay my monthly bills, and the substantial amount that doesn’t get spent goes into the investment/retirement bucket.
What it is that I actually do, though, is track my expenditures. Every dollar that gets spent gets put into a spreadsheet so I know where my money is going. To some people, this counts as a budget, so I made sure to define that word up top. Where I really fall down, however, is doing any kind of ex-post analysis of this data. Sure, I look at the total monthly spend – and usually groan that I didn’t quite make my target again – but beyond that headline figure, I don’t really spend any time looking deep into this wonderful information I collect.
This lack of attention results in nasty surprises when I do, on occasion, out of curiosity, look at a particular category. Most recently exemplified when I calculated my average spend on dining out and see that that is where approximately 170 francs a month is disappearing.
So perhaps I do need a budget. This is where that old saying is useful: “take care of the pennies and the pounds will take care of themselves.” If I pay greater attention to the categories within my expenditure, then that’ll filter upwards to the headline expenditure.
I’m not going to try to come up with a comprehensive budget and enforce it draconically straight up. I know what I’ve been accustomed to spending month-to-month, so I will use this information for a few categories and see if I can hold myself to account. I won’t look at things like travel for now, which involve sporadic expenditure, but I will look at the grocery spend, the restaurant dining spend, and the booze spend. I will take the mean monthly spend over the last year, knock perhaps 20 per cent off, and try to keep myself within this limit to save a few extra dollars* in this manner.