To budget or not to budget?

Pretty much every Freaky Frugal person on the planet tracks spending. Otherwise how can you measure how you’re doing or estimate how much you need to retire? And the Rule of 25 makes it painfully obvious why everyone should track and reduce spending. It’s a no-brainer. 

But not every Freaky Frugal person has a budget and of those that do some are detailed and some are just a single number. Mrs. FF and I’ve done all three at various points in our lives.

To budget, or not to budget – that is the question:
Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous expenses
Or to take arms against a sea of costs,
And by opposing end them.
– Billy Shakespeare

Approach #1 – No Budget

For most of our marriage Mrs. FF and I didn’t have a budget and only crudely tracked spending. We focused on living well below our means. Luckily we’re both naturally frugal so it worked out OK in the end.

If you’re married, this approach only has a chance of working if both you and your spouse happen to have the same level of frugality. Not all that likely. If you’re single, it’s obviously easier assuming you’re already naturally frugal. So this approach can work for some Freaky Frugal people in certain situations but it’s really risky.

The upside is the time you save that you would’ve spent discussing, creating, and tracking a budget. You can use that extra time to do other productive things – make more money, find new ways to save money, exercise, drink copiously, watch tv, whatever.

Approach #2 – Detailed Budget

I finally decided it was time to create a Detailed Budget a few years before I retired. Why? I was a Nervous Nellie about spending because we weren’t going to generate much work income after we retired.* All our income was going to come from our investments.

I created a spreadsheet that looked something like this:

Category Annual Expense Monthly Deposits
Bank Account Savings Checking
School Taxes $4,454 Savings – Home $371.17
Real Estate Taxes $1,659 Savings – Home $138.25
County Taxes $878 Savings – Home $73.17
Umbrella Insurance $353 Savings – Home $29.42
Homeowners Insurance $1,175 Savings – Home $97.92
Repairs $2,000 Savings – Home $166.67
Peco $2,800 Checking $233.33
Aqua $900 Checking $75.00
Total Home $14,219 $876.58 $308.33
Eating In $9,500 Checking $791.67
Eating Out $0 Checking $0.00
Total Food $9,500 Checking $791.67
Gas $1,200 Checking $100.00
Insurance $900 Savings – Auto $75.00
Repairs $1,000 Savings – Auto $83.33
Replacement $2,000 Savings – Auto $166.67
Total Automobile $5,100 $325.00 $100.00
Health Insurance
Premiums $60 Checking $5.00
Health Savings Expense $5,000 Savings – Health $416.67
Total Health Insurance $5,060 $416.67 $5.00
Travel $5,000 Savings – Travel $416.67
Cable TV/Internet $1,524 Checking $127.00
Cell Phones $780 Checking $65.00
Gifts $1,300 Savings – Gifts $108.33
Other (pets, tokens, etc.) $3,600 Checking $300.00
Mrs. FF’s Fun Money $3,840 Savings – Lisa Fun Money $320.00
Roger’s Fun Money $3,240 Savings – Roger Fun Money $270.00
Total Miscellaneous $19,284 $1,115.00 $492.00
Grand Totals $53,163 $2,733.25 $1,697.00

Yikes – that’s a lot of rows, columns and numbers! But please let me explain because it’s not as complicated as it looks.

The Annual Expense column represents the total yearly expense for a line item. For example we spend $900 per year on Auto Insurance.

The Bank Account column shows the name and type of bank account where money is deposited every month. I bank at Ally so I can easily open as many online savings accounts as I want. I use this capability to help me track buckets of saving and spending. For Auto Insurance, we put $75 every month into a separate Savings – Auto account.

The Savings and Checking columns show the monthly deposits made into each type of account. Why 2 columns instead of 1? To make it easier to see subtotals for each Bank Account so that know how much to deposit in each.

To summarize, here’s how much money is deposited each month into each type of account:

  • Savings – Home: $877
  • Savings – Auto: $325
  • Savings – Health: $417
  • Savings – Travel: $417
  • Savings – Gifts: $108
  • Savings – Lisa’s Fun Money: $320
  • Savings – Roger’s Fun Money: $270
  • Checking: $1,697

This created a total monthly budget of $4,430 and an annual budget of $53,160 (this is an old budget).

I accrue the non-monthly expenses in savings accounts until it’s time to pay that particular bill. For example if I needed to pay for a home repair to our furnace, I’d pay for it using the Savings – Home account. Truly monthly expenses like electric, gas, cell phone, and water are just deposited into checking and paid from checking.

So what is Fun Money?

Did you notice the strange line items called Mrs. FF’s Fun Money and Roger’s Fun Money? No? Don’t worry, I wouldn’t have noticed either.

When I created the budget Mrs. FF felt she had little spending autonomy. She wanted some spending money for fun things without accounting for every penny and reporting it back to me, the Budget Bookkeeper. Or as she referred to me – the Spending Police. I’ve been called worse.

Anyway we came up with the concept of Fun Money for both of us. We’d each spend our Fun Money however and whenever we wanted without discussing it with the other. This money was primarily used for entertainment, restaurants, sports, tech gear, and clothing. For fun stuff!

This Fun Money idea sort of worked. She spent it mostly on her favorite hobby – running races – and eating out with friends and family. I spent very little of my Fun Money because most of the things I enjoy are free. My money just kept piling up and I began to feel bad about how much Fun Money I had versus what she had. We eventually dropped the idea when we switched to a Single Number Budget described below.

I found Detailed Budgeting has a bunch of pros and cons:

Detailed Budgeting Pros

  1. Accurate: You have an accurate plan for spending money.
  2. Smooth: The multiple savings accounts smooth out the monthly spending.
  3. Controlled: It feels good to have money set aside for known or quasi-predictable expenses. A real sense of control.
  4. Obvious: You can tell roughly if you’re staying on budget as long as all bank accounts stay above zero.

Detailed Budgeting Cons

  1. Tedious: It’s tedious keeping track of spending categories and how much money to move between accounts.
  2. Delusional: It creates the illusion that money is different depending on the category it’s in. You’ll see what I mean below but I realized money is still money regardless of how it’s used!

Approach #3 – Single Number Budget

Some of you know I’m a big fan of the great Mr. Money Mustache. He’s awesome! Anyway he’s written several articles** where he philosophized about how money is just money. Deep, eh? His point was that it doesn’t matter how or what the money is used for – a dollar is still a dollar.

According to Mr. Money Mustache, the problem with putting money into savings buckets, cash envelopes, budget line items, or whatever is you begin to think it’s OK to spend all the money allocated even when you don’t need to. You no longer think of a dollar as just a dollar, but as a dollar allocated to something specific. You can trick or delude yourself into suboptimal spending.

I noticed I stopped caring about how much we spent on vacation because that’s what the Savings – Travel account is for. For example I’d spend more money at restaurants (more dessert, anyone?) during vacation than I normally would because, hey, there’s plenty of money in the Savings – Travel account. But a dollar is still a dollar whether it’s allocated for Travel or Real Estate Taxes. My attitude wasn’t very Freaky Frugal! 😯

I finally started seeing things Mr. Money Mustache’s way. I created a single annual budget number to shoot for – $58K including rent. I also got rid of all the bank accounts for different spending categories described in Approach 2. Mrs. FF and I dropped the whole Fun Money idea. This is working well so far.

Mrs. FF and I also started using Mint to track spending instead of a clunky spreadsheet. I love Mint, Mrs. FF not so much. She just doesn’t care for that level of detail while I REVEL in the flows of our expenses, income, and net worth. I guess that makes me a Nerd or Geek – take your pick.

These days everyone should use Mint or similar software if you really want to understand where your money is going. Kind of obvious, right?

Really Stupid Comic #7


We started out with No Budget approach which I probably wouldn’t do again. It really only works in rare circumstances. We luckily had those rare circumstances.

The Detailed Budget approach served it’s purpose and I don’t regret using it. Mrs. FF and I followed a natural evolutionary process for budgeting and spending. I initially needed a Detailed Budget because I really didn’t trust myself or Mrs. FF to lower our spending without it. You can see precisely where spending goes over or under and make small adjustments as you go along. It’s comforting. The Detailed Budget is a necessity if you’re not certain your Freaky Frugal or you’re in the midst of a Retirement Emergency.

Once I started trusting that we’re both Freaky Frugal, there was really no need for a Detailed Budget and we switched to a Single Number Budget. I knew that we would consider each expense and do whatever we had to to minimize it and maintain a solid Happiness ROI.

Thanks for reading! Do you have a budget?

* Mrs. FF still works a few hours per week as a Yoga Teacher and Personal Trainer. She just does it because she likes doing it.

** I can’t find any specific Mr. Money Mustache articles that describe this but I know I read the idea on his blog. If you know of any, please let me know and I’ll happily credit you with the link.

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  1. Hi Mr. FF, I think we are in the same boat. I never really created a budget (or rough guidelines) until a few months before I left my job. It helped to know we were going to make ends meet. Now, we are monitoring closely and making adjustments where needed.

    1. Yep, we did exactly the same thing. I guess great minds think alike! 😀

      I noticed you said “we” so I assume you’re married. Do you and your spouse have the same level of frugality?

  2. I agree. I hear of a lot of people taking the “un-budget” approach, which makes me raise an eyebrow. I only think it’s doable if you’re already FIRE or have some sort of psychic understanding with your spouse (I could also seeing it work if you’re single and live very simply). I believe that the majority of us (myself included) really do need a budget, despite how good we think we are at money!

    1. There is definitely a time when a budget makes total sense. And depending on your circumstances it make ALWAYS make sense to even have a Detailed Budget.

      Unfortunately, people sometimes use the “un-budget” approach because they don’t really want to know how much their current lifestyle costs. It’s an avoidance mechanism.

  3. I agree with your Approach #3. It’s much simpler and ends up with the same effect. You don’t have to create all kinds of savings accounts, set up deposits in the accounts, and track every expense individually. Using Mint is very easy to determine how much you are spending.

    1. I obviously prefer Approach #3 as well.

      If I was going to do Approach #2 (Detailed Budget) today, I’d probably use Mint’s Budgeting feature for the actual budgeting. I’ve never tried the feature, but I assume it’s easier than a spreadsheet with multiple bank accounts.

  4. My wife and I have moved to a loose budget where everything is basically fixed. Since we don’t have any debt we have relaxed things a bit. We don’t go too far outside of our monthly number so there’s not reason to really track things too closely at this point, unless it goes way up, which is pretty rare 🙂

    1. Interesting. So I assume your fixed budget is annual and has various line items even though. And then you divide the annual budget by 12 and as long as most months stay within that number, you don’t worry about details. Do I have that right?

      I average our monthly spending as the year rolls on and then multiply to estimate the total for the year. As long as that total stays near or under budget, I don’t dig any deeper.

      Thanks for sharing!

  5. I totally hear you on all of these points. I use a “single” number budget, but for our highest expense: our monthly credit card. Honestly you can waste so much time getting too into the details and learning nothing that will help you in the long run. Sometimes just having a singular goal works better.

    1. Thank you for sharing! I agree with you that you can waste a lot of time on too much detail. It’s certainly true for Mrs. FF and me.

      But different approaches work for different people.

  6. Ohh I never heard of single number budget before! I think you probably discussed the router Jared and I will go down one day. We’re doing the detailed budget but maybe down the road move to the single number. But I’m a firm believer everyone should have a budget! 🙂

    1. Hi Lily! There’s nothin’ like a good budget to help you feel good about your financial life! 😆

      Seriously, based on my limited knowledge of you and Jared, I think you will end up with a single number budget in the end. Only time will tell for certain.

  7. I’m an unbudgeter 🙂 I don’t like using budgets but I do pay myself first. I do have a travel budget though annually and try to adhere to that, otherwise I feel that the idea of budgeting gives one a scarcity mindset and this leads to ‘cheating’– you know kind of like dieting. I have tried to do an annual calculation of a budget and it’s quite interesting- surprising how much can be spent on certain things over the year!

    1. Thanks for sharing!

      Unbudgeter – I like that description. It reminds me of an old commercial about an Uncola. 🙂

      Interesting that you don’t budget at all. And I guess that having a budget means you believe you would spend more? I can see how too tight or too detailed a budget would lead to frugality fatigue and cheating. Maybe it would help to make the budget a little looser? Another idea is to create a spending range for some budget categories. Of course, if it ain’t broke…

      But I definitely encourage you to automatically track spending. Mint makes it super easy if you’re not already using it or something like it.

  8. Never budgeted. Or itemized. Instead tried to pay myself first as much as possible. With the exception of an expensive hobby (personal computers in early days), lived very modestly everywhere else. Which worked well enough to permit (a sort of) early retirement by mid 50’s. Yet never felt deprived. Finally tracked spending last few years after wondering if I could retire. Pleased to find it was suitably low, and not far from my prior guesstimate.

    For me saving was never a problem, but not investing more aggressively. How much more I would have if I hadn’t been such a coward. (Wah!)

    1. Stevie – Congrats on your early retirement! In my book, any retirement that happens before 62 is early, so you can drop the “a sort of”. 🙂

      You’re obviously one of the few that is naturally Freaky Frugal, so no budget needed. That’s awesome!

      I wouldn’t beat yourself up to much about investing more aggressively. If the Financial Crisis had become the Great Depression, you would’ve looked like a financial genius. I’m also invested moderately and that’s what allows me to sleep at night.

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