Does Budgeting Work for Saving Money?

For saving money

They have never really worked for me so I can only speak from my experience with them. Just like diets you eventually go off of them because they don’t work and have never helped me to save money. What I prefer to do is track my spending and be conscious of what I spend and why I need to spend it. I write down what I spend on a daily basis and you should too. That is if you really care about where the money goes and want to save money. Budgets get way too specific and restrict your spending to a certain amount every month and after awhile you’ll hate it.

I can hear all the groaning from the budget conscious crowd now. The thing is I’ve always found when trying to stick to a budget it becomes frustrating and then the guilt sets in when you can’t reach those self imposed targets you’ve set for yourself. Eventually you throw in the towel and spend what you want on whatever you want. This is what usually happens, but of course if you’re in the minority and are disciplined, then sticking to a budget will be worthwhile.

It has happened to us countless times during our financial lives. I never follow a budget and haven’t for over 30 years. I just don’t care to be told how much I can spend on entertainment or eating out. I know what I like to spend money on and this system will tell me if I can or can’t.

Do diets work? Of course they don’t. If they did there would only be one at the most two of them around and we’d all be on it all the time. You go off that diet and you go off that budget. That’s what happens. They don’t work so what’s a better way to get our financial house in order and save money?

Track your spending

I found over the course of time that the best way to know what I spend money on is to take a three month average of my expenses by writing down everything in a cheap ledger book. Do this daily and add it up at the end of the month.Spending Tracker

  • separate entry for each item
  • make categories at the end of the month based on recurring spending
  • date, month and how much is all that is needed
  • total it up at the end of month

Fixed payments vs Variable payments

  • at the end of the month add up all expenses that never change
  • this is your taxes, mortgage, car payments, insurance etc..
  • other bills like cable, internet, phone, gas, credit cards and food can change monthly
  • it’s always a struggle on what you pay vs what you should pay
  • you can’t do anything about fixed payments right now accept write them down

Automate everything that’s fixed

  • so you don’t pay needless late fees
  • on a calendar write down what day your fixed payments come out
  • go to your ledger and make those entries
  • keep in mind this is just a running total you are compilingMoney Coming In Tracker

How much income is there?

  • write down how much you got paid and when
  • any interest you earned
  • any and all monies that went into your account keep in a separate ledger

Keep living your life the same way

  • this is not about deprivation
  • don’t stop spending because you’re writing things down
  • this will paint an accurate picture of what your life costs


Invest the rest

  • subtract your expenses from your income
  • make sure you average out your expenses over a three month period
  • this takes some work but it will be accurate
  • what’s left over is what your life costs
  • if there is no money ever leftover then you’re broke
  • if you’re broke you need to long and hard at your variable expenses
  • change what you can change
  • invest the remainder

If you follow this method of tracking your spending there is no need to go on a budget. Why do I say this? Because when I ask any one of my four kids what their life costs, they all look at me like I have 3 heads. You have to know this number. What is the total amount of all your bills coming in every month? You have to know this (3 month average). What is the total income I bring in every month. Now just subtract the difference and that is what’s left over for you to enjoy your life.

Not enough? you only have 2 choices:

  1. Make more money, maybe get a second job. Bottom line find a way to bring in more income.
  2. Cut variable expenses. This you can control. Find out and determine what you can live without and get rid of it to save money. You know what they are, make the sacrifice.

Budgets don’t work

I can’t make them work maybe you can. Budgeting has never worked for me for saving money. Just stick to what works for you, this is just what we have done at our house.

Those are some real live crude worksheets we have used from the past. As you can see it’s nothing fancy and you don’t need to bother with fancy software but something like Quicken would work well too. We have found that as soon as you come home from the store, grabbing the scribbler and making an entry is quick and immediate. If you let the receipts pile up too much you will forget and probably lose track. This simple system has worked for us, I know it can for you too. I read a lot of books on personal finance and everything I’ve learned about implementing this system you can also read about for a fraction of the cost of expensive advice. Learn how to do this yourself and get personally involved in tracking your spending.

Do you stick to a budget? What methods do you use to save money and track what your life costs? I would love to hear your thoughts on this. Please leave me a comment below.

Recommended reading:

Your Money or Your Life

I Will Teach You to Be Rich

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20 thoughts on “Does Budgeting Work for Saving Money?

  1. This is great information. Being a single mom, budget work well for me. I write down my bills/income for each month in a notebook. I know exactly how much, if any, I have left over. This works for me. Gives me a picture of the month before I start it so I don’t spend money I don’t have.

  2. I’ve never done a budget before but I don’t think that I would be able to follow it. And it’s not that I spend a boat load of money so that sticking to a plan would be hard for me but it’s too much of a hassle to remember or record everything you’ve purchased or every cent you’ve spent! I also want to reach financial freedom so that I wouldn’t even have to think about budgeting my money or have a concern about where it’s going! So budgeting may work for some people but just like you, it does not work for me. But kudos to those who can follow one!

    • Hi Lindsey, yes just like you I eventually get off the budget train. It’s not a long term solution to money woes and saving. Thanks for your comment.

  3. Hi There,

    I partly agree with you and partly disagree. I do think that keeping track of your income and expenses is very important if you are short on money or if you want to save some, but do not know how. Also I think that budgetting on the fixed expenses does not work, because its just essential and we cannot live without them.

    I find that budgeting in the variable expenses does really work. I do not do this on a monthly basis, but rather on a half a year to year basis. This way the expenses are different every month depending on how much I can afford, but there is a longer term budget that I keep control of. For example, I have a yearly budget to spend on day-and weekend trips. This way I can still go away and have fun. I do think beforehand on the costs and consider the different options with a more mindful eye.

    What is your opinion about this?

    • Hi Marianne It’s really tough to follow a budget, that you only revisit every 6 months. In my opinion that’s not practical. This is why I say they don’t work. After expenses and income are taken into account at the end of the month you simply take the surplus and decide what you are going to do with it. This is done every month. You should have a good idea on what your spending every month. Doing this only every 6-12 months again, only proves to me that this doesn’t work. You need a spending plan and not a budget. Have you read Your Money or Your Life? You really should as I think it would help you. Thanks for stopping by.

  4. I’ve always been a saver and very good at keeping my finances in order, but I’m always amazed to see how difficult it is for some people to do this. Somehow they weren’t taught, or were taught the wrong way. I have a friend who lives paycheck to paycheck and I see her buying expensive, designer products as if her money is burning a hole in her pocket. She’s reaching retirement age with NOTHING to fall back on except social security, which we all know may not be enough to live comfortably on. Thanks for the post. If parents aren’t teaching their children these things, someone has to.

  5. Hi Peter,
    I love what you’re sharing here and wish someone had walked me through this when I was young. I remember my Dad making general statements like “save your money” or “don’t pile up credit card debt” but no one ever taught me how money “worked,” so to speak. I learned it quite by accident once I got into the business world, and have done a MUCH better job since then, with much more progress yet to make.
    I’ll continue to watch your site with interest and appreciation. Keep it up!

  6. Hello Peter, thanks for the post.
    Budgeting for me was knowing how much money I had coming in and how much was going out, including food. Whatever was left, I could spend some on me and there was some left over to put away, (but not every month). Winter bills would be higher, so then often saving was swallowed up mostly during those times. And because life happens, there were other things that could come up unexpectedly and financially it had to be dealt with.

    Overall, I would say budgeting worked well for me as I was never ever in debt when I was working. I lived within my means, not the best way to live I would agree. I am in the process of changing it all though. We were never schooled in financial management. My desire is to be able to spend when I desire to without thinking of ‘my budget’ and not having to think of writing down all of the money I spent either. Different things work for different people.

    Because I have never done it, I would say I could not see myself writing down every penny I spent every day. Maybe it could become a habit like anything else.

    • Hi EJ, The main point I’m trying to make IS to initially write things down to see what your life costs. From there you have an idea what you have left. Without doing this exercise you’re just guessing at how much money you have left at the end of every month. This process forces you to confront with what you do spend unlike a budget which forces you into self imposed spending limits. Thanks for dropping by:)

  7. Hi Peter, so I was reading through your post, mentally ticking off the bits we do that agree with what you’ve written down and then I came to the “invest the rest” part. Whoah! Hold on a second! What? How do I invest the rest? I’ll be honest, living in Ireland, if you don’t have a truck load of money then you never have a chance to make your money work for you in a way that is profitable. Do you have any suggestions on how to invest and where to do it? I’m a total newbie when it comes to this stuff.

    The reason I ask is that it appears in my household we are beginning to come out of the dreaded recession and have a bit of disposable income. I would hope that this is a continuous process and would like to see what we can do with anything we have left over at the end of the month.

    Let me know and thank you so much for a great article!

  8. Hello Peter,

    I have always wondered how to save my money, limit how much I spend and how to invest my hard earned money. Your examples taught me a lot about that. Definitely going to follow them. Thank You very much.

  9. Hi Peter,
    This is great advice! I work with a lot of people who are looking to buy their first home and I am always surprised when they have no idea how much they spend each month! They are working towards saving a deposit for their first home but they have no idea what their living expenses are each month. I give them a worksheet to complete so they can work out roughly what their expenses are, but it would be so much better for them to do as you suggest and record all expenditure for 3 months, then take an average to see what living actually costs them.

    I also find that some people have very little idea of what their variable expenses are and that many of them are completely within their control. Expenses like eating out, mobile phone charges and shopping can be reduced if needed. I find that if you have a big enough goal (such as saving for a home deposit, a car or your next investment property) it makes you think twice about whether you really need to spend that money in the variable part of the living expenses.

    Now we just have to get this taught in schools and we’ll really be getting somewhere!

    • So true Rachel and thank you for your kind words. I have found this system really helps out to get a grip on spending. From there it’s much easier to plan for purchases once you know what your life costs. Unfortunately as you say most people have no idea and are scared to write it down.

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