5 Reasons To Dump Your Strict Budget

You probably weren’t expecting to hear Frugal Dad advocating getting rid of a budget. Well, I’m not, entirely. What I am advocating is that you take a look at your monthly budget with a critical eye to determine if your budgeting process is negatively effecting your life.

Yes, budgets can set you up to succeed, or set you up to fail. Make them too strict, and you’ll never stay within a spending category’s limits. Have too many budget categories, and you’ll spend too much life energy hunting and recording receipts. Like everything in life, try to find some balance when setting up your budget, but err on the side of simplicity. Here are a few reasons why.

1. Strict budgets are as successful as strict diets, they aren’t. Ever tried to lose weight by drastically cutting calories or eliminating all foods you enjoy from your diet? Let me guess – you lost weight the first two weeks, had a slice of cake at a party, and derailed your entire progress.

Humans just don’t like big changes. We are more successful over a longer period of time when we implement small changes that continue to put us on the path towards reaching a larger goal. Like the old saying goes, you have to eat an elephant in small bites. But hold the butter, or you’ll have to go right back on that diet!

2. Strict budgets create money micro-managers. A couple years ago we took the kids to the Smoky Mountains, their first trip to see a hill over 300 feet high. My wife and I were enjoying the vistas along the Blue Ridge Parkway, but noticed our kids had their heads buried in a book, or their Nintendo DS, and were missing the scenic views. I spent a great deal of the time reminding the kids to look up at the overlooks. Sometimes they did, most times they didn’t.

That’s how adults who are consumed by managing their money appear. Our heads are buried in spreadsheets, or Quicken, and we forget to stop and look up at the overlooks. Pretty soon, we were off the Parkway and realize we missed an opportunity to see the sights; to stop and smell the roses.

3. Budgeting is boring. I confess; I just don’t like budgeting. I don’t like creating them or updating them. I realize they are necessary for proper money management, so I create one each month. However, I make it as simple and painless as possible. I haven’t always been this way.

When I was younger I had dozens of budget categories. Instead of a simple “Food” category, I had a category for meals out, snacks from the vending machine, groceries, etc. I meticulously tracked debit card (and at the time, credit card) purchases, and receipts to be sure I put the expenditure in the correct category. Oddly enough, this was also the time when I accumulated the most debt. In my attempt to be sophisticated, I failed to recognize and adhere to one of the simplest personal finance principles around: spend less than you earn.

4. Strict budgets limit opportunities. By opportunities, I mean opportunities to experience something or save money by buying something at a deep discount. How many times have you passed on something you’d really like to do, or really like to own, because it “wasn’t in the budget.”

It is almost as if the budget is controlling us, rather than the other way around. Then again, for the most impulsive shopper, that’s probably how it should be. But for those who have displayed discipline with their finances, a strict budget feels more like a tight-fitting jacket than a useful tool. It restricts us, and keeps us boxed in from the chance to live a little.

5. Budgets cause money fights in relationships. I saved the best for last. My wife and I don’t see eye to eye on the concept of budgeting. She is the free spender, and I’m the nerd, at least when it comes to finances (though she would probably say the nerd label extends further!). Early in our relationship I tried to force my elaborate budget system on her. It didn’t work. For a period we scrapped the idea of budgeting altogether.

These days, we have compromised and met in the middle when it comes to budget categories. Instead of including infinite layers of budget granularity, we now separate our money into larger piles of logically separated categories. Here’s a sampling from our monthly budget (I’m leaving out the amounts because I don’t want to get hung up on the numbers):

  • Mortgage
  • Utilities
  • Food
  • Auto
  • Household Supplies
  • Savings
  • Debt Repayment
  • Insurance
  • Clothing
  • Medical
  • Entertainment

Our goal was to keep the budget at ten categories or less, but we did add one for entertainment. It’s hard to think of an expense that doesn’t broadly fit into one of the categories. Last month, we thought we ran into one such example:  birthday presents for kids’ friends. We decided to just take it from “Entertainment” for now, rather than create a new category for infrequent purchases (although I made the argument that friends’ birthdays seemed to happen at least once a month!).

Another way to combat budget fatigue is to create a number of sinking funds for irregular expenses. We’ve done this in our household. Notice in the budget above I’ve simply listed “Savings” as a top-level category. That represents a single transfer to our ING Savings account, but from there the money is split into several “buckets,” or sinking funds.

We have a sinking fund established for things like the annual renewal of our car tag, the semi-annual payment of our auto insurance, Christmas shopping, vacations, and a couple others. When these expenses come up, we transfer the money from the sinking fund and write a check. No impact on the monthly budget.

I have written this post with sort of a negative spin on budgeting. I hope that’s not what you will take away. Rather, I’d like for you to take away the idea that by making your budget too complex you are setting yourself up for failure. I urge you to consider consolidating categories, or setting up sinking funds, or allowing yourself more “fun” categories so that you can enjoy life. And please, remember to look up at the overlooks!


  1. Many people hate budgets. I think this is most unfortunate. Your budget is your friend. You should love your budget.

    The problem is that people think of budgets as nasty schoolmarms that they must obey. I try not to think of mine that way. I think of my budget as my best friend, a person who wants me to achieve more than I am achieving today, a person who wants to steer me in the right direction, a person who understands that I am a goof-up and loves me all the same.

    Sometimes my budget tells me something that I don’t want to hear. Do I obey? Would I obey a friend who told me to do something that I didn’t think was right? I would not. When it appears to me that the budget got it wrong, I just say that. I say “Sorry, Mr. Budget, I am grateful for your concern but I think you are off the mark on this one” and I do what I think best. And my budget understands.

    Sometimes it turns out that the budget was right and I was the wrong one. The budget doesn’t lord it over me. It says “there have been lots of times when you got it right and I was wrong.” Just like a friend would.

    I try not to have an antagonistic relationship with my budget. It’s not about obedience or disobedience. It’s not about right or wrong. It’s not about willpower or sloth. It’s about having a conversation. It’s about learning. It’s about caring to become something better than I am today.

    My budget loves me. And I love my budget. It’s a healthy and positive relationship with concern and intelligence and warmth going in both directions. It gets the job done (not all at once, but over time).


  2. My budget consists of a fixed set of payments for bills, groceries, mortgage, investments, etc. and then a fixed amount of discretionary funds to use as I see fit for fun (yes, it’s good to have a little fun every now and then). I don’t track spending to the penny, but stay within those preset limits each month.

  3. My budget is not strict anymore either. I have big categories that I monitor. As time goes on, I really have learned alot about myself. I initially thought that as a woman, my budget busters would be things like clothes, makeup, and hair salons. (I’m pretty low maintenance, but still.) When it got right down to it, on an annual basis, it was close to the bottom of the list of expenses.

    The thing is..I remembered a shopping spree I took to get clothes for a new job. I spent hundreds of dollars and it stuck in my head. Thinking back on why my memory didn’t match reality, I realized I hadn’t spent any real money on work clothes in 5 years.

    In reality, it was those weekly trips to Home Depot that were eating a hole in the wallet. Spending a little every weekend sneaks up on your alot faster than spending a chunk of change every once in a while. You’re more likely to think twice about putting something back if you’re spending over $100.

    I haven’t figured out how to do this with food yet, but it does seem like the key is to try to do as much shopping as possible and increase the time between trips.

    For example, I tried the “christmas shopping a little at a time all year long method”. Didn’t work for me. I forgot about stuff I bought for people, way overspent on some and underspent on others. Too many trips to stores made me lose track of the total amount I spent.

  4. I’ve used a budget system for the last 10 years or so which seems to work well. Perhaps readers would find it useful.

    I budget $110 per week for groceries, gas, cleaning, and small miscellaneous expenses. I maintain a set of note cards, organized by month, which details every bill, and I mean every bill, that I don’t pay on a monthly basis.

    These include professional subscriptions to journals, professional dues (I teach at a university), insurance premiums, personal property taxes, magazine subscriptions, etc. I also set aside a single card each month to keep track of utilities (gas, water, electric) and another card to track savings each month. Having accumulated a record of expenses over the past 10 years, I can now predict pretty accurately what I’ll be required to spend each month.

    I find this system especially useful for remembering subscriptions to journals and magazines. Many of them starting sending you renewals several weeks in front of the actual renewal date. Now, I renew these about a month ahead of the expiration.

    The system was time-consuming to set up the first year I used it, but now it takes only a few minutes to update each month.

  5. My budget is VERY easy.
    This is what’s left of my paycheck after auto-deductions for retirement accounts and savings…
    and that’s what I have for the month. Period.

  6. Excellent article. Strict budgets are usually about trying to control someone else’s spending. But a budget is not the correct tool to for.

    A budget can only help you understand where your money is getting spent. It’s up to you and your family to decide how you are going to change your spending.

  7. I’ve gone down the strict budget way in the past and it becomes very tedious managing every dollar.

    Now we buy all food and petrol on visa so we can monitor how this goes each month. We work on $1,000 per month food.

    I have a car budget, $400 per pay for fuel, repair, etc and saving for replacement vehice

    I monitoring regular bills so as to establish what that should be each month

    Mortgage $400 per pay

    My wife and I are not gratutious spenders. From that point on we just keep an eye on the bank balance to make sure we are always in the black.

    Mortgage will be gone in 18 months we will then realign things.


  8. Frugal Dad,

    If you are sitting down….stand up…I’m saluting you!!!!

    That’s right.

    Everyone TALKS about the need to budget and track….and most of us fall short for the reasons you mention.

    Much better to track the 12 month moving average as we’ve discussed before. That takes about 5 minutes a month and it’s a way to make sure you’re not kidding yourself.

    At the end of the day, all the matters is how much you spend vs how much you earn. As long as you have sufficient savings…it’s all good. Spend away!

  9. I’m not a fan of budgets, but usually once a quarter I do try to figure out if I’m spending more that I’m earning, from the bank statments and withdrawal slips. Almost like a reconciliation, but without the detailed work…

    While I’m not pinpoint accurate, I’m close enough…


  10. We create budgets but only to get an approximate idea about where our money goes. We dont beleive in extreme frugality, if we arent in debt. So far we like to pay ourselves first. Half of our salaries are directed towards various savings account. Whatever remains,we spend on essentials and non essentials, without being overtly cautious about every single penny. Our agenda is that within moderation, everything is permissible , as long as we arent paying it through our credit cards:-)

  11. My budget categories are really just known expenditures like rent, electricity, groceries, gas, etc. and they are based on knowing how much I typically spend each month. When I subtract savings and budgeted amounts from income, I get “free spending” money. Free spending money is discretionary spending like clothes and food, and it is also variances from the budget categories. So in the summer when the electric bill goes up, that comes out of “free spending”. This way if we go “overbudget” in one category, we don’t end up going overbudget for the month. Plus it means I’m not spending all my time buried in Quicken and Excel being nitpicky.

  12. I couldn’t agree more. Like the old saying goes, “keep it simple”. When I first started trying to live by a budget, I had too many categories which caused me huge headaches. Eventually, I abandoned the budget all together. I’ve been back to using a budget over a year now and it’s a lot more flexible and has a lot less categories.

  13. After trying for a couple of years to follow a strict budget and blowing it big time, I simplified my budget right down.
    We now have

    Spending money (groceries, clothes, coffee, entertainment etc)


    Maintenance (car, house and health)

    Giving (tithe)

    Bills (phone, electricity, insurances etc)

    I take note of how much cash I get out each week, and count up how much I have left at the end of the week, and keep a tally of what has gone on the credit card.

    We’re now under budget. But it’s horses for courses. This style works for me, it wouldn’t work for someone else.

  14. i see the sense in what you are trying to bring out. what i do is that after i get some cash, i normally take a small percentage to spend as i feel like and budget the rest. I mean lets be real, we spend so much time making the millions so that we can spend them later. There is absolutely no need of taking with little joyous activity away. but everything should be done within set limits

  15. Budgeting definitely won’t work for someone who is used to a (relatively) extravagant lifestyle. Frugality really needs to be internalized so that every time you open your wallet or use your credit card, you know that what you spend on is something worth your money. It’s quite useless to budget if the things you spend on doesn’t satisfy you. I made a cash advance some time ago so I could buy a decent notebook. I’m completely satisfied with my decision as my purchase helped me to earn much more that what I owed. Had I decided then to stick to my budget and opted for a notebook of inferior quality, I could’ve spent more on repairs while dealing with the dissatisfaction of a bad purchase.

  16. Love this article. It’s so hard to articulate this to budget nerds that you can still accomplish financial goals without being psycho about it. My wife and I found the same thing, that when we obsessed over the budget and had like 15 categories, it caused too many fights. It’s not worth it. Don’t throw out the budget, but simplify it, and make decisions based on what’s best for you and your family, not the budget.

  17. Too many people focus on the spending side of the budget and that’s a recipe for disaster. You can only pare down spending so much before you are miserable. And random expenses always come out of the woodwork.

    Focus on on earning more; a second job, paid hobby, whatever. Much more rewarding.

  18. I couldn’t agree more! Whenever I try to break down my spending into more categories, I end up further from my targets. At this point, I basically shoot to spend a certain amount per period and end it there. I pay some attention to where the money’s going to keep an eye on problem areas (like dining out – that one always gets me!) but mostly look to the bottom line as a measure of how I’m doing. It allows me to be flexible while also staying on point with my goals.

  19. I think that there are a couple of problems with “Budgets”

    Most are too strict as you mentioned…

    But most people can’t stand budgets because IT MAKES THEM FEEL BROKE. When ever you do a budget it is based on “lack” And when you focus on lack you only get more of it.

    I suggest doing a “wealth plan”. Focus on “freeing” up money to build wealth.

  20. For some people more intricate budgets work, for others, breaking up your pay into chunks for different things works. I like my budget, it’s simple (only 5 categories) because I only track my discretionary spending – food, entertainment, clothing & gifts, transportation, everything else. The rest is just accounted for and is based on monthly spending averages over a year. So it takes me 5 minutes a day to enter my expenses (sometimes not even if I didn’t spend that day), and the spreadsheet calculates at the end of the week, and at the end of the month what’s left over – that goes off to a place where I track spending that will occur in the near future(like car maintenance). I don’t get bent out of shape that I’ve gone over budget in a category one week – like the massive overrun I did on food thanksgiving week – because it balances out over the month. If I notice a long term trend of overspending in a category I try to figure out why, and if I can’t then I adjust the budget accordingly. But it all boils down to this: don’t spend what you don’t got…

  21. Budgeting seems to place too much of an emphasis on the avoidance of all pleasure in life. Take for example the “David Bach,” school of budgeting and planning; the savings from a $5 latte every day could add up to $XX in 30 years when you retire. How depressing! Who wants to be on the 30 year, no latte plan.

    I think real financial advice is to tell someone to drink the latte, enjoy it and make more money. Turn off the TV and start a home based biz in your spare time. Or do a little better at work and get a raise. If you can show someone how to have more disposable income thats real advice.

    I’m out like skipping starbucks…

  22. Our budget is simple, too. We make every expenditure “the same” every month. Rent is the same, gasoline is about the same, food is about the same, utilities are on balanced billing. For items that aren’t “the same” — like twice a year dental checkups — we added them all up and divided them by 12 months, making our outlay “the same” every month. We have an allowance for spending money. We don’t keep track of anything. Automatic bill pay pays everything on the 1st, and our food and spending money has to last the month or we do without/eat beans and rice. AFter bills and allowance, whatever is left over goes to emergencies first and debt second. Easy. it’s nice not keeping track of anything.

  23. Thanks for sharing, I enjoyed reading this post! Budgeting is very much like dieting and you need to be careful not to set yourself up for failure. I think having an “entertainment” allowance each month is necessary. This is money for splurges (like allowing yourself a cookie or a piece of cake every so often!).