I have not always been interested in finance, early retirement, or thinking about my money in a productive way. Previously I would think about how nice spending as much as I wanted without thinking of it would be. I never really wanted a fancy car, but some nice clothes, places to eat, and trips sounded good. I was still training and thought doctoring was a 30 to 40 year career.
Why would anyone quit early after all the sweat and hours that went into becoming a physician? I was so enamored by this idea of being a doctor that when I heard that my friend’s father was retiring from neurosurgery at 50 years old, I thought he was crazy. Maybe he was sued and could no longer practice. I definitely did not think he retired for retirement’s sake.
So, as I started my new job as an attending in July of 2012, that is exactly what we did. We enjoyed good food, bought some clothes, and definitely did not save much (other than maxing out the 401K). The idea of financial planning did not exist. We are doctors right; we will be fine to retire. Two years went on in this manner and I realized my debt was slowly decreasing each month. Miniscule amounts that made me cringe. That is when I decided to act. I began getting my financial house in order. I compiled all of my wife and my debts onto a spreadsheet to see exactly what was owed and the interest rates. Then I created a budget to see where our cash went.
So before I discuss stopping our budgeting, we first need to discuss why I budgeted to begin with. I really do believe that starting a budget and tracking our expenses in the September of 2012 was our first big step toward financial independence and quite frankly, getting our heads out of our A$$.
We needed to know what was coming in and where it was going out. As the saying goes, “many small holes can sink a ship” (at least I think that is a saying). So we had to find those small holes to plug them.
This meant that for the last 2.5 years I have sat down at the end of every month and gone over basic categories of expenses with my wife. This would include mortgage, home improvements, home furnishings, restaurants, groceries, gas, insurances, Amazon (yes there is an Amazon category as this is where a lot of people spend a lot of money), clothes, etc. (We used Mint.com which is free and a good service- we do not have any financial relationships with Mint). Some of these categories would be predictable (groceries and restaurants) while others would be variable (clothes for instance- we maybe shop once a year when there are sales).
By seeing what was going out we could pay closer attention to things. We would also go over our net worth, assets, and liabilities. Now we never actually budgeted in the sense that we would allocate $500 for groceries but we just paid attention to where all the money went. So maybe an expense review is a better term then a budget.
So we did this for the last few years and I loved it. I enjoyed watching the progress each month. Whether it is a few thousand dollars to big months where I could take a tax refund and pay off 20K in debt. I also liked seeing where we were spending money.
My wife on the other hand hated it. She never said she hated it but you could see each month that it was like pulling teeth. She loves me though and humored me monthly. We improved controlling our costs and in fact the best part of budgeting was that we made wiser purchases. Frivolous expenditures disappeared. We still enjoyed life and had some nice vacations (always staying at hostels) and ate at nice restaurants on occasion, but we would not buy a random tchotchke. We understood the value of the dollars we spent and why it was important to not spend them frivolously on non-happiness producing items.
Ok, so now to the point of the article. Why we stopped watching our budget. So as I said, my wife humored me in getting our financial lives in order. Now that we have our financial house in order, paid off most debts, and are contributing to our traditional 401Ks, IRAs, and 529s, my wife made the point that she does not need the monthly meeting. At first I was taken aback and wanted to know more as to why she did not find it valuable to discuss our expenses each month. Here is what we came up with:
We already are watching our spending.
We do spend money on things we enjoy (mainly restaurant meals, groceries, and wine). A chunk of our money is going to food and we are cognizant to try and get good deals. By shopping at Costco, Target, and Trader Joes along with our local grocery store throughout the month, we pick up items we know are cheaper at each place. We are not spending money frivolously and the big purchases that come up (travel plans and house upkeep mainly) are discussed beforehand and thus are not a surprise.
By reviewing our expenses we have not made any significant changes to spending over the last 6 months.
So therefore, if we are not impacting our habits, it is not as valuable of a tool.
It has decreased happiness for my wife (and thus by proxy for me).
This is the biggest point. While I enjoy talking about where our money goes, my wife is conscientious about her spending. Therefore talking about every dollar spent just stresses her out more. She knows our goal is to save and she is on board. Discussing our current spending habits (which are pretty good) each month does not add anything to the pot.
So what are we going to do? Well each individual/family is different and we all need to do what works for us. For us, we will continue to discuss our net worth monthly (mainly because it is exciting to see it go up). We discuss income in and overall expenses out, discuss the oddities (if there is a large expense for the month), but not discuss each subcategory such as groceries, restaurants, etc. Luckily we earn enough where we can meet our financial goals without all of the concern. We just have to watch the lifestyle inflation that occurs as earning goes up.
If budgeting brings stress to your life and you are on target to meet your financial goals, then stop budgeting. Let me know what your families are doing to budget? Envelopes with cash? More of an expense review?