Saturday, 26 January 2013

Going Budget-less

I apologize to my regular readers (Hi Mom and Dad!) for the brief intermission from my emergency preparedness articles.  I promise you that the articles will be back and the series will be completed this week.

I really and truly appreciate the usefulness of a well made budget.  What financial fanatic wouldn't?  I do have to say, at the risk of a Virtual Gail Smack, that one can have enormous financial success with out one.  In fact, that is how I have operated most of my adult life.

When I started university at 18 I was committed to keeping a tight rein on my finances.  I was in the fortunate position of being able to work for the military while attending university.  As a result, my tuition and books were paid for, and I brought home a salary of $1,200 net a month.  This was quite a step up from the couple of hundred dollars a month I earned lifeguarding in high school, and I wished to use my new found wealth wisely.  I sat down to budget my first year at university and came to a shocking realization—I had no idea what it would cost living in dorms.  Determined to overcome this obstacle, I began a spreadsheet which tracked my every expense.  I was never quite sure if I had captured a "typical" month, so I continued to track instead of budget.

Eight months later every thing changed again.  I moved into an apartment with my sister and living expenses changed.  So I continued to track instead of budget.  Eventually I came to a shocking realization; even though I spent as much as I wanted I was still had 30-50% of my paycheck left over every month.  This ended up as savings and was either put in a high interest savings account or invested in mutual funds.  For the rest of my university career, I continued without a budget.

One summer, near the end of university, I ended up teaching one of my fellow students how to budget and manage her money.  She was confused and felt somewhat betrayed when she found out that I didn't budget.  I explained to her why I didn't have to.

At the time my life was a wreck.  I was on the verge of losing my job with the military due to a knee injury.  Even though I was about to complete my nursing degree, I was doubtful that I would find a job since I could not stand more than a couple hours at a time.  Despite that I was safe.  Even without a budget, I had accumulated over $40,000 in savings.  If I could not find a job I would be able to pay for a degree in Social Work and support myself with my savings without breaking a sweat.

Life was good to me, and I managed to find a job that my knee could handle.  At age 22 less than 6 months out of university, I used my savings to buy myself a home with 20% down.

Budgets are great.  I have been using one since I bought my house and generally encourage their use.  However, I believe that they are not nearly as important as knowing where very single cent of your money is going.  For the vast majority of my adult life simply tracking spending kept me in a very comfortable financial position.  For those who earn a decent salary (given their situation), are non-materialistic, and have low living expenses budgeting may not be a necessity.

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