The “No” Budget
How to budget without one?
So far, we’ve talked about the various types of blogs, which are: Zero-Based, 50/30/20, Envelope System, and Pay Yourself First. However, there’s one more we haven’t talked about yet, the “No” Budget.
What is it?
As you may already assume, the “No” Budget is a different type of budget when compared to all of the other ones previously mentioned. You can think of it as the odd one out. It’s not exactly the same style, but it’s still considered to be a budgeting method nonetheless. It’s a method that allows you to still manage and move your money around without having to sit down and go over your budget every month.
There’s no need to track your spending, have spending categories, or even keep track of every detail about your money.
Quick Assessment
Before I start describing how this works, you’ll need to do a personal assessment. This assessment will allow you to know how to move your money around each month without budgeting! Without doing this portion, it will become very difficult to know for sure if this strategy will be right for you or not.
Here are the steps:
- Determine your income
This will include all of your active and passive income for each month. It’s important to know all of your sources and the timing that each one pays, weekly vs bi-weekly etc. You’ll want to focus on your net pay, or the money that actually hits your bank account after taxes.
2. Determine your total amount of bills each month
Let’s start by talking about the big gills first. When do you pay your utility bills and rent? How much are they each month? Next, you’ll want to factor in all of the other regular bills you get, such as any loan payments, memberships, or services. Finally, you’ll need to total up all of these expenses together for one month and see what they add up to.
3. Estimate your other spending costs
Now, we’ll calculate our other spending costs. This includes things such as haircuts, groceries, and other miscellaneous items that are considered more of variable expenses. You should be able to figure out your total variable expenses by looking back over the last 4 months and taking the average of those expenses. That number will be your total variable expenses.
3. Find out how much extra money you need for debt/savings/investing each month
Next, you’ll take your income and minus out the cost of your bills plus the cost of your variable expenses, which will give you a remaining value. This number is now your remaining balance for the month. This “leftover” money can then be used for multiple things like paying down debt, saving for retirement, or saving for a rainy day.
4. Use these baseline numbers going forward
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Once you’ve done all 4 steps, you should be able to always refer to these unless something changes like where you live, how much you make from your job, or if you add a family member.
So, how does it work?
So, you want to know how this budget type works? Good questions! Let’s talk more about it.
The following are steps to help you implement the “No” budget.
- At the beginning of each pay period or month, pay all of your bills first.
By focusing on paying your bills first, you are ensuring yourself that your needs will always be met each month. It stinks when you spend almost all of your money during the month, only to remember that you have a $200 electricity bill due while your bank account has less than $100 left.
One way to avoid this problem is to try and pay your bills at the beginning of each month or close to whenever you get paid. By paying close to when you last got paid, you’re helping yourself to have enough cash to make the important payments each month. To help make this easier on yourself, you may want to consider the auto bill pay option. A lot of utility services offer this feature now, which helps make bills less of a nuance.
2. Save money or pay off debt in the amount that you’ve determined you can afford each month
Once you have all of your basic needs met, you’ll want to look into paying off your debts or saving your money. By now, you should know what your leftover amount is after your income, bills, and expenses have been assessed.
You may choose to use all of your leftover money for this category or just the minimum amount. It’s best to focus on this category once your bills have been paid for. This will ensure that you’ll have some money to pay off credit card debt or save for an emergency fund before you forget and spend your money on other things.
3. Whatever is leftover is yours to spend on your variable expenses until you get paid again
Now, you have paid your bills and put some money aside for debt and savings. At this point, you may use the leftover money to spend on variable expenses. These expenses include things such as clothing, entertainment, going out to eat, etc. Doing this will make it easier not to overspend on variable expenses.
By following these steps, you’ll have a higher chance of staying within your budget. You’re less likely to get into more debt when you follow these steps and not overspend on anything. Once your money in your budget is gone, you make it a rule to not spend anymore money until the next cycle in your “no” budget.
Pros vs. Cons
Pros
There are a couple of different pros that are very appealing when using this method. Once the beginning assessment is complete, this is a very basic budget to follow that requires minimum effort which makes it appealing to anyone who doesn’t like to budget to begin with. Also, it does a great job at focusing on saving and paying off debt after needs are met. So, it’s a great fit for people who have a fair amount of debt to pay off.
Another pro is that it’s very easy to make this method a habit. If you’re in desperate need to take control of your money, you may want to start with this method first.
Cons
Since this method is very basic, it doesn’t focus so much on the small details. If you’re a detail-oriented person, this budget may not be a good fit for you.You’ll constantly want to make sure you know exactly where every dollar is going, which this method isn’t built for. At that point, you may consider the Zero-Based (link) method.
While this budgeting method relies on calculations, there may be times when you come up short on money due to the fact you are using estimates and not exact numbers each month. If this thought scares you, you may want to consider other budgeting alternatives.
Conclusion
Overall, this is an awesome budgeting method for anyone just starting their journey on budgeting. It’s easy to create and start, which makes it easier to make as a habit. However, it’s not as exact as one might think. So, you’ll want to use caution when determining if this is the right fit for you. Make sure to think and take your time before you decide to use this method.
