Monday, July 25, 2005

David Bach & Budgeting

There are a few things that David Bach and I don't see eye-to-eye on, and one of them is budgeting. I intended to make a blog entry about this, but the darn thing just got longer and longer, so I thought it best to let it morph into an article in the main part of my site:

IYM: David Bach & Budgeting

I would like comments on this, though, so if anyone would care to serve up a verbal beating regarding my views, then feel free to do so here.

— Posted by Michael @ 7:16 AM


I'm with you here, the no budget thing always had me raising an eyebrow, since even paying yourself first still involves some form of budget.


People who are millionaires didn't get there by being haphazard. They are way more focussed on their money, leveraging their time and money than the average person. They've got much better control of their money than most people.

Personally, I don't have a budget. I am however very careful with what I spend. I do have a planned savings program. I do spend a great deal of time thinking about my financial future etc. I am very conscious about the future. I pay off my credit cards in full each month.

I also believe in the "No Cash, No buy" policy. ie... if I don't have the cash, I don't buy the item."

It comes down to control and being satisfied in life. As a person, I feel pretty satisfied with things. I am not out constantly buying stuff to fill some empty need. I don't get bugged by 3000 ads each day because I generally don't buy from ads.

I am a bit of a contrarian... I don't feel I need to "keep up with the Jones." In some cases, I am the Jones.

If a person is interested in controlling their finances they'll do better than the person who is careless.

In my experience, most people don't really want to be millionaires. It's way too much for most people.

Interesting post.

Financial Maturity Blog


I can't believe you write this stuff!!!! And you call yourself a personal finance blogger!!!??? My dog could write better!!!!

Just jokin'. I thought you'd be disappointed if someone didn't rant and rave. ;-)

Seriously, I generally like what Bach has to say. I have listened to several of his audiobooks and expected to hate them, but really did like what he had to say. Overall, I'd give him a pretty good grade.

But he does fall short in this area. I agree with you and your thoughts, though I do admit that budgeting doesn't have to be as strict as some people advocate. I do a budget at the beginning of the year, update it at the end of June, and in between just monitor it by feel through the use of Quicken. It's in my nature to be frugal, so I don't need as many controls as other might.


I suppose I should change my site's domain name to youdon' ? Dang, I totally messed this up.


I'm of two minds. I have to admit that I don't have a budget of the list type item1 = x$, item2 =y$, etc, giving me a monthly total of z$ which is always just a hair under the total of your paycheck... And yet I got out of debt and now save about 30% of my income. It could well be that with a true budget I could save 50%. I think about my spending as I spend, and think about the value of what I buy. I know that means that compared to the average American that I'm a black belt in saving.

But for the white belts out there - the ones at a stage where their economic life is slapping them silly...they need a true budget. Sad to say, the average white belt budget is a thrown together laundry list of stuff that they've tracked over the course of a couple of months and that they swear they need. They haven't questioned any of the items or looked deeply into themselves; they've codified the crappy economic choices they've made. Gotta have a car - night is scary and my crappy job is 50 miles away. Gotta have the family cell phone plan so I can control my 20 yr old daughter. (What did we do 15 yrs ago? - oh yes, let your adult daughter lead her own life) Gotta have cable and netflix and broadband, even though the public library has all of those things. No wonder these budgets fail.

A true budget has must-have items well thought out, wrung for their value, shopped around for best price. A true budget should be bare bones it should reflect how you will survive, if say, you lost your job. It should be radically lower than the monthly salary. A LBYMer should respect it.

You work your way up to okay budget. You add in the items that support the items on the true budget, thinking about them as you go (maybe with the car I should look for something closer to home; am I sure I need this amount of insurance?).

Finally, you think about nice budget, thinking about I really, really enjoy this activity; this other one, not so much. Maybe I can be clever and shave a few bucks off it.

In this case, you dont actually have one budget, you have several. You also have a plan for most of the situations that you find yourself in. Your true budget and your emergency savings should help you sleep like a baby; youve stared at the possibility of economic winter and this is what Im going to do. If youve had good months or months where nothing bad happened and you feel up to your indulgences, okay budget and pick and choose from nice budget.

To be fair on Bach, not many of the other personal finance writers have talked about budgeting in this way either. Apologies for the rant.

Anonymous baselle
, at 1:47 AM, July 26, 2005  

I recently found a file with my budget from 1990! Unbelievable. It was right there in black and white; my weekly pay and all the little breakdowns. The interesting thing was that my food budget was $20 a week (I was single) and I had been struggling, since 2003 to the present, to keep my food budget to $40 week for my fiance and I. Ha! In light of that info, I changed my current food budget to $50 week. I'm a true believer in budgets, budgeting, awareness of spending, awareness of wants/needs, etc. I converted to "Your Money or Your Life" way of thinking about 10 years ago, so budgeting and LBYM is fun for me.

I totally agree with your post; that people want mindless and easy ways to do things. But it's hard work getting your finances in order and sometimes, it's unpleasant and uncomfortable.

But you know, people have no idea of the wonderful and fantastic feelings people like us have - peace of mind, security, and awareness.


My wife and I do budget and find it helps us greatly. We take our budgeting one step further by using the 'Envelope System' a la Dave Ramsey. I think in the end, it comes down to what works for you. They key is to understand both sides of the arguement and decide from there. I will say this however, the easiest way to meet a goal (i.e. save money) is to proactively plan for it - I see the budget as part of this plan.


Thanks for all the great comments, guys!

I keep pushing this around in my head -- that yes, there are SOME people who can save big $$$ every month, tracking their spending and all, and do it without any sort of written plan. I used to think I could do that; I was flat-out wrong. Just happy I figured it out when I did.

When you look at the consumer culture we've created, I really think it's becoming more and more important for your average Joe and Jane Braincramp to do the work necessary and stick to a good spending plan. It's just too easy, as they say, to keep up with the Joneses ... whether you have the cash to do it or not.


I completely agree with your post. The idea that people will only spend what they earn if they "pay themselves first" is asinine. I contribute automatically to my 401(k), Roth IRA and Emigrant accounts, but I still have to SPEND LESS THAN I EARN to stay out of debt. It's a conscious decision every day to forgo eating out, shopping, etc., and no amount of automatic saving will change that. Ugh...there are no easy ways out. If there were, I would have found them!

Anonymous Anonymous
, at 8:51 PM, July 31, 2005  

I like David Bach's books, and I agree about what he says about budgets - most people don't stick to them. They're like diets - yet there's a lots of different diets for every personality and lifestyle. Financial consultants don't seem inspired by that model - it's budgets or nothing - and then they wonder why it isn't working for more people.


If you can live on less than you earn then why budget? If you make say $10k/month and pay your 401k, Roth IRA, investment account, short term savings, long term savings, car savings, etc, then put in set bills like mortgage, taxes, etc, then put in toys like cable, internet, cell phones, eating out, etc.

That's where the discipline comes in. Just knowing what your limits are. I know that I have approximately $1k disposable income a month for eating out, cable, internet, etc. I keep an eye on the CC bill and stop when I feel it's too high. Then I pay it and on we roll. I couldn't tell you what my food spending is, but I can guess. I dread budgeting, it's too tough and takes too much time.

** Comments Closed on this Post **

Thoughts on my personal finances, goals, experiences, motivations, and accomplishments (or lack thereof).

My financial life began turning around when I took responsibility for it.
— Dave Ramsey


Start (2005-12): ~$21,900
Currently: $0
[About Our Debt Paydown]


Savings Goal: $15,000
Currently: ~$15,115
[About Our Liquid Savings Goal]