At some point you might wonder, “Do I need a budget? I mean, do I really? If I pay my bills and save some money, I’m doing fine, right?”
And, look—I get that you might be skeptical about getting objective advice on this topic from a guy who started a company that he named You Need a Budget. YNAB’s founder, Jesse Mecham, clearly has some strong ideas about budgeting and so much experience doing it that it’s probably second nature to him by now.
So what happened when he made a conscious decision not to budget for a year? Did he—a financially stable guy who had built solid spending habits after years of budgeting—really need a budget?
Let’s find out.
If you prefer to listen instead of read, check out “After Years of Experimenting, Jesse Does the Unthinkable” episode of the You Need a Budget podcast.
Do I Really Need a Budget?
We are now three years into an ongoing, massive budgeting experiment being carried out in the Mecham household for podcast listeners everywhere.
Year One: Plain Vanilla Budgeting (2018)
We linked our bank accounts to our YNAB budget, entering transactions on our phone, we had monthly budget meetings. We’re clicking along. It works.
Year Two: Hyper Awareness Budgeting (2019)
In 2019, I started thinking that I really wanted to test total hyper awareness of our money. So what do I do? I started a brand new budget, disconnected all bank accounts, created a budget, and we went full-on manual for all of 2019—full-on.
I updated every single transaction manually, every single morning. I reconciled, every single morning. I don’t know if I did that on Saturdays or not because it’s been awhile, but basically, I reconciled both accounts (we have two, checking and a credit card) every day. I knew everything about our budget…everything. I just had this feel for it then.
I noticed that because I was so hyper aware of our finances, our checking account never really dipped in 2019. Luckily, it never really goes too far down. You take a trip or something, you see some inflows, it all balances out. But we’re blessed. We make good money and have predictable expenses, for the most part, so it’s pretty boring and that’s how you want your finances. You want them to be boring. It was boring. All manual…very boring.
Year Three: The Year Without a Budget (2020)
At some point in early 2020 (I don’t know when—I think 2020 is a blur for most of us), I had an idea. What if we went in the totally opposite direction? What if instead of being hyper aware, we just did as the budget naysayers say: pay yourself first, stick some money in a savings account, and then the rest is yours to spend? There you go. Easy.
It doesn’t work because we’re ignoring the volatility of actual outflows in life, however, this is a common refrain in the personal finance space. I don’t need a budget because I pay myself first and don’t worry about the rest. Fine. Let’s test it.
How It Worked
I also wanted to test what it would be like to just budget very roughly. So, we had three categories: Tithing, Christmas, and Net Flows. All in one category group.
Why did I have Christmas in there? I wanted to make sure we were actually putting money aside for Christmas. That’s how important the holidays are here at the Mecham house.
So, how did this work? I would reconcile monthly. I’d click the Reconcile button at the top right-hand corner of the web app and YNAB would be like, “Is this your bank balance?”
No, that is not my bank balance because I have not entered one single transaction for this entire month. So I’d say, “No, it’s not.” Then YNAB, very helpfully, would say, “Do you want us to make an adjustment? Do an adjustment transaction?” and I’d say yes, I do, so it would do it.
That transaction would basically record the net flows, either an inflow or an outflow, for the month. That’s it. I didn’t have a credit card logged in there, just the checking account, because the checking account pays the credit card, so we’re good.
Now I know 2020 was weird, so you’re probably thinking this isn’t a very scientifically sound experiment. Okay, yes, you’re right, but I’ll tell you some things that I did learn.
Results: How Was Life Without a Budget?
First, we only had 11 transactions. We had a starting transaction and then one transaction for each month of 2020 where we did this. Now, for two or three years, our bank account balance has stayed roughly the same. If it does dip, it tends to climb back and then hits this peak, without going above. It just stays in this boring space.
For 2020, and remember that this was without any travel because it was 2020, our bank account started a gradual decline. So much so that one month, I’d be like, oh, it’s net negative. Okay, I guess that’s fine. This month is this way, next month will be positive. Oh look, we’re back to where we started! Oh, no, not quite. Then the next month, the bank account’s negative again, and maybe again the month after that but I would justify it. I would tell myself reasons, like, oh yeah, we had this or that.
What was I doing? I was trying to keep it all in my head. What the budget couldn’t tell me, I would try to explain to myself with all of these numbers in my head, like spinning plates of numbers, just trying to keep it all in balance. It didn’t work very well and you can justify almost anything. “Well, that month was an exception. Well, this month is an exception.”
At the end of the day, our bank account balance got lower in 2020 and I can’t really tell you why, other than a lack of awareness. Did we eat out more? No. Travel more? No, absolutely not. So, what happened? I don’t know. I can’t put my finger on it. I can’t open a closet, or a garage, or a lake house door and point to anything in there as the cause. I’ve got nothing. I can’t give you one legitimate event that I could point to and say, “Oh yeah, that was the reason we had net flows out that never recovered, ever, in 2020.”
We just got loose. The budget got loose, and we got loose. And I don’t mean that the budget is loose in a way that means you’re constricted on a budget; that you can’t spend. I just mean we didn’t have any clarity. The budget wasn’t giving us clarity, and so here I sit before you today, dear invisible friend, I sit here before you lacking clarity for what was already a confusing year. I cannot tell you why we ended up with a big, combined net outflow for the year. I can’t figure it out.
Now, was it nice to have only one transaction per month? Yeah. Did I have to scroll in my account register? No, I never had to scroll. It’ll easily fit 10 or 11 transactions, absolutely.
Did I do much budgeting? No. When net flows needed to be shored up, I would pull from Christmas. I’d make sure that I’d always put the money in Tithing, and then I never had to go negative there. I’d make sure we were covered. But that was it. Those were the only two spots where I made sure not to lose clarity: Tithing and Christmas.
I know that at the end of the day, the bank account balance went down in 2020 and did not recover.
It feels good when the money that you work so hard for lines up with what you really care about. That’s the clarity that budgeting brings.
What Did We Learn Without a Budget?
Why did I do this experiment? Curiosity, really. As a couple, we’ve budgeted together religiously for 17 years. We’ve built up financial habits and spending patterns. We know how much we spend. Our finances are boring. In this dynamic world, we’re about as static as it comes—we have nothing to worry about. We can have a squishy budget. We can make sure we’re just saving off the top. We don’t have any debt to pay down. It seemed like a fairly risk-free experiment…except money disappeared and I don’t have a boat to show you. Heck, I don’t even have a nice tool for the wood shop to show you. I’ve got nothing to show you, just less money and that really bugs this recovering accountant.
So, what did we learn?
That your budgeting muscles atrophy quickly. That yeah, it might be nice not having to track your spending—it was great not classifying Amazon transactions correctly or recording transactions at Costco or wherever—but at what cost?
What if the results were different? What if our bank balance had stayed the same and the lack of clarity hadn’t affected us? Would we need a budget then?
Well, if you have kids in your household, there’s value in modeling the habits of budgeting for them. One day, they’ll need a budget. So for us, the answer is yes—we need a budget. For many different reasons.
But our biggest reason? Clarity.
We Missed the Clarity
We spent more—and on things that I can’t even point to. Whether you’re spending one dollar or a $1,000, there’s value there…it’s all meaningful. It feels good when the money that you work so hard for lines up with what you really care about. That’s the clarity that budgeting brings. (pull quote)
When we lacked the clarity, it felt like we were squandering a blessing, or not being good stewards. I’m not saying you have to be perfect, or that you have to maximize. I definitely don’t mean that you have to, at all costs, just squeeze every dollar out of every opportunity. That’s not my favorite way to live. But I do think it’s worthwhile to recognize that there’s some blessing that’s there, and budgeting is a way to acknowledge that. Between that and modelling that for our kids, those two reasons are enough for us.
I know I said those experiments were for you, but they were really for me.
After a year without a budget, I am more convinced than ever that the world needs a budget.
Ready to get on board with creating your own budget? Check out YNAB for free for 34 days.