Budgets don't work

[Anonymous]

A friend of my husband's recently said the following about their money management style - we aren't good with money, we just have a lot of it.
It's easy to not budget when your HHI is 300k. You set aside 20-30% in savings and live off the rest because the "rest" is more than what most people are living off of total.
Budgeting is paramount for the poor and middle class. Anyone who says different is a charlatan.

[Anonymous]

Anonymous wrote:One size does not fit all. Budgets work really well for some people, and others don't need them. Experiment and figure out what works for you.

However, until you are saving 25-30%, well set for college and retirement, then you really need to understand/know where your money is going, IMO.

[Anonymous]

I save money on not drinking alcohol, smoking, no coffee and not inhaling other stuff.
Then, I drive an old car. When it breaks is when i will replace it. I don't have an i-phone. I could go without any Netflix/Disney subscriptions or just stick with one. I don't need a $100 shoes, not even for running. I don't wear fancy branch names and my clothes has lasted 5+ years. I don't shop at Whole Foods.

[Anonymous]

Anonymous wrote:David Bach, author of "The Automatic Millionaire" and "Smart Women Finish Rich," has a podcast I was listening to where he says budgets don't work. His contention is that you should automate your savings and then the rest is yours to do with as you please.

That's what we do, but I feel out of control with money. We save a little over 20% of our income each year (8% to retirement, 12% to after-tax savings) in an automated way, and then we blow the rest, and I really don't know where it all goes.

If you don't budget, why not? If you do, how has it helped you and what is your process?

This is kind of what I've always done, I "pay myself" first the amount that I determine I need to save and then feel free to spend whatever else I have left.

[Anonymous]

Anonymous wrote:A friend of my husband's recently said the following about their money management style - we aren't good with money, we just have a lot of it.
It's easy to not budget when your HHI is 300k. You set aside 20-30% in savings and live off the rest because the "rest" is more than what most people are living off of total.
Budgeting is paramount for the poor and middle class. Anyone who says different is a charlatan.

I think a lot of it, though, is also what other people here have already said: Dividing up where the money goes is budgeting, and automating the process doesn't make it not a budget. If you're poor or middle class, though, deviations from your forecast can really mess you up: unexpected medical bills or a change in the weather that leads to higher utility bills can destroy a budget that couldn't accommodate putting money in an emergency fund.

My spouse and I don't have money worries any longer, but when we were starting out and planning to buy a house, we figured out what our expenses were at that time and where we could cut, and we stuck to that for years. Eventually our income increased such that we could loosen up in certain categories (can stay in a somewhat nicer hotel, for example) or ignoring them entirely (we could probably eat out every night if we wanted to).

[Anonymous]

Anonymous wrote:A friend of my husband's recently said the following about their money management style - we aren't good with money, we just have a lot of it.
It's easy to not budget when your HHI is 300k. You set aside 20-30% in savings and live off the rest because the "rest" is more than what most people are living off of total.
Budgeting is paramount for the poor and middle class. Anyone who says different is a charlatan.

We are at a similar income level and this is true IF (and its a big IF) you don't overcommit yourself to large mortgage, car and private school payments. But yes, in our case our mortgage is very affordable and we pay cash for cars and send kids to public school. We save a large portion and don't bother budgeting the rest.

[Anonymous]

They do though

[Anonymous]

We have followed this for more than a decade

1. At the start of the year, we look at my anticipated earnings+ bonus+ RSU etc.

2. Decide what % of savings we want to save, for the last 10 years it has been atleast 30% of "gross" and now as income has gone up, between 35%-40%.

3. We save a % of "gross" income, savings for simplicity is a $ amount whether pre-tax, post tax.

4. Savings include 529, Roth, 401K, deferred comp plan, RSU vesting (whether or not we sell the stocks that year). It does not include any car funds, vacation funds, mortgage payments, company matching 401K etc.

5. So essentially, if we need to save 200K, I would plan for saving 60K each (for total of 120K) in backdoor Roth and 401K, assuming 6K company match. Perhaps 20K in 529 (set it to autodebit). Rest in brokerage when the bonus comes.

6. Free to spend whatever else we want to spend on, I don't budget, but do have anchor points in my mind

7. Monitor every month ( or atleast once in 2-3 months) to make sure we are on track, if the bonus is smaller, our target savings gets smaller, if it's a better than expected bonus then we need to set more aside.

8. Any big purchases or home renovation decisions are makde only after a back of the envelope calculation that we are on target savings this year.

9. This system works for us, but can be implimented in many flavors such as % of take home income, or including mortgage principle payments as savings, not counting college savings as it is actually an expense etc..

[Anonymous]

I budget with an app. Yes, it works.