To Budget or Not to Budget? The Argument for Why Not Having One Might Be Best

Some people need the boundaries budgets set, but others thrive with more freedom. The best method for you own financial success is the one that you can live with for the long term.

(Image credit: BrianAJackson)

If I told you that you needed to budget in order to be successful, would you agree?

Now, imagine I said the opposite: that having a budget didn’t matter at all, and it wouldn’t be the thing that would make or break your ability to reach your financial goals.

What if I told you that both statements could be true?

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That’s exactly what Wall Street Journal personal finance reporter Julia Carpenter argues in this episode of the Your Money Briefing podcast. Carpenter explains that creating a budget and not having a budget at all can both be equally effective ways to manage your money.

The podcast goes into detail to explain how both ideas about budgeting can be true at the same time. I highly recommend giving it a listen, as it’s full of interesting thoughts about budgets.

But the bottom line is this: There is no one magic way to do things so that you improve your money management. It’s all about finding what works for you. Here’s what that actually means.

Not Budgeting Doesn’t Mean Ignoring Your Cash Flow

No matter what kind of system you use, you need to have some awareness of your cash flow. Your cash flow is money coming in (which, for most people, means money earned through a job via a paycheck) and money going out (your expenses, like bills, as well as things you choose to spend on, like meals out or entertainment).

When it comes to financial success, everything starts with cash flow. There are only three types of cash flow:

  • Net positive, meaning you have a surplus; you make more money than you spend.
  • Net negative, meaning you spend more than you earn.
  • Break even, meaning the money coming in equals the amount going out.

You must understand where you are with your cash flow right now — and, based on that reality, what changes you might need to make. If a budget doesn’t help you go from a deficit to a surplus, then it’s not an effective tool for you. You need to find something that helps you reduce spending or earn more.

There’s No One Magic Formula to Money Management

While I have a cash management system that I recommend to my clients, and that my wife and I use personally, that doesn’t mean my way is the only way. It’s just one way.

I often advise my clients against using a credit card for their normal weekly spending (for things like groceries, eating out, social events and transportation). Generally, I feel this is a bad idea for most people because it leads to overspending. Instead, I suggest using a debit card with a limited weekly dollar amount.

But you know what? Plenty of people find they can manage their spending on a credit card just fine; they pay off the balance monthly and don’t accrue interest. These clients don’t get in trouble because they are highly disciplined and self-motivated.

If it works for them, that’s fine and there’s no reason to change. For clients who don’t have such high amounts of discipline or willpower, another system can be more effective.

The point isn’t that one method is better than the other — it’s that there are many methods you can use to get to the same place: in control of your cash flow. How you get there doesn’t matter so much as that you do get there.

Know How You Feel About Money

We’re used to associating money with math and spreadsheets — not with such intangible, messy things as our feelings. But money is emotional, and understanding your own “money scripts” can help you better handle your finances.

Money scripts are mindsets or beliefs around money that we form at an early age. Without us knowing it, these feelings about finances can drive us to make good (or bad) money decisions.

Here are some of the fundamental money scripts that we most often see in people:

  • A need for status: Do you see wealth as an indicator of social status? That belief could cause you to spend so you can look rich, but that doesn’t leave much in the bank for actual wealth.
  • A desire to avoid: Money might make you feel uncomfortable, anxious or stressed … so you cope by ignoring it completely. If you prefer not to think about your debt or bad financial habits, this could be one of your scripts.
  • A focus on being disciplined: This might sound like a good money script, and it can be, as long as it doesn’t go to the extreme. People who are extremely disciplined can do a good job of reaching goals on their own … but they can also lack balance and be overly cautious when it comes to spending, or have a scarcity mindset that causes them to miss out on great experiences because they fear what will happen if they don’t stick to a tight spending plan.

None of these things is inherently bad, and identifying with a script on the list above doesn’t mean you’re somehow wrong. It’s just important that we acknowledge where we might have some underlying beliefs (or even fears) about money that can get in the way of finding and using the system that actually works for us.

Find What Motivates You!

Finding the right system for you will largely depend on how well you know yourself. You need to understand what will work for you. Try starting with being honest about your motivations around money and personal finance.

If left to your own devices, would you be motivated to save because you actually wanted to and it made you happy? Or would you tend to spend more because that’s where your interest and focus lies?

My clients who are intrinsically motivated may not need much in the way of strict rules and systems to reach their goals. They’re internally driven to take certain actions, like cutting costs and controlling spending, because they genuinely want to take those actions.

If you don’t find that enjoyable, then you may need a different method for sticking to long-term goals and actions needed for financial stability and security. Maybe that’s setting up a tight budget. Maybe that’s using a cash envelope system. Maybe that’s getting accountability from a third party, like a financial planner, who can support you when your own motivation flags.

On the other hand, maybe tracking every dollar makes you feel extremely restricted. Maybe it will encourage you to rebel, or perhaps counting every dollar spent and noting exactly where it went is more stressful than looser guidelines that you’ll actually stick to.

Again, the right money management system is largely a matter of personal choice. The best one is whichever you can work with over time.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Paul V. Sydlansky, CFP
Founder, Lake Road Advisors, LLC

Paul Sydlansky, founder of Lake Road Advisors LLC, has worked in the financial services industry for over 20 years. Prior to founding Lake Road Advisors, Paul worked as relationship manager for a Registered Investment Adviser. Previously, Paul worked at Morgan Stanley in New York City for 13 years. Paul is a CERTIFIED FINANCIAL PLANNER™ and a member of the National Association of Personal Financial Advisors (NAPFA) and the XY Planning Network (XYPN). In 2018 he was named to Investopedia's Top 100 Financial Advisors list.