I care about Net Worth but I dont budget...

This may sound counter-intuitive, but we don't budget. What we have found is that budgeting can cause needless pain and anxiety. In general, I just pay myself first -- I have set up automatic withdrawals from my checking account into my non-taxable accounts. Once these leave my checking account, they become our automatic savings beyond the 401k's. Then, we just keep spending on normal monthly expenses. I find that it all evens out - some months, grocery bills are high, but that month we don't have travel bills, and vice versa. Of course, this took some time and discipline but I usually get a strange feeling when our expenses are going above our "safe limit" - in those times, I take a quick look at personal capital cash flow statement and we make quick adjustments to our spending.

This doesn't work well for 2 cases - a) when home repairs or home appliances/furniture shopping comes around, and 2) travel expenses. For those expenses, I have a separate fund that is funded every month and is used as and when needed (a working capital account). It is similar to HSA account (except it is funded by me post-tax money so no tax breaks!)

Readers:  comments on why this is a good idea or not? What works for you?


Popular Posts