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I mentioned in passing to Ben that I’ve never had a budget. Even when I was living month-to-month, I didn’t have a budget. Ben said he was taken by surprise because, “If anyone were to have a budget,” he certainly imagined that I would be one of those people.
Oddly enough though, I never have. We talk about how my no-debt mentality plays into this, as well as how I’m able to prevent unwanted spending and still maintain proper allocation of funds and expenses without using a budget.
It’s an exploratory episode wherein Ben and I discuss the different methodologies, habits, and mindsets around handling finances and ultimately arrive at a deeper issue of your core values and how they define the way you approach money.
- 01:55 Ben: “Wait a minute—at face value this sounds ridiculous. Knowing what you’re about, I would just assume that you’re the type of guy to have a budget.”
- 02:24 Let’s make sure we have the same definition of a “budget”: Some sort of spreadsheet with an array of expenses and allocated funds and when they’re due.
- 04:17 I do know what my recurring expenses are, but it’s not on a spreadsheet.
- 04:49 Personal budget vs. Business budget.
- 05:36 Let’s talk about the purpose of a budget.
- 05:46 “What made you decide not to keep a budget? You just never wanted to or never got into the habit or do you genuinely think them unnecessary?”
- 05:56 For me, it wasn’t this conscious decision of “I’m NOT going to have a budget.” It was just never a default option for me.
- 06:11 Early on in marriage, we weren’t making a lot of money—basically just enough to pay bills (not really put anything in savings). But we weren’t eating out, we didn’t make extraneous purchases or buy things we didn’t need. In my mind, a budget has two functions:
- Help you be able to pay expenses or bills that you aren’t effectively paying.
- Keep you from spending money on things you shouldn’t be spending money on.
- 07:02 But in both cases, I’ve never done either of the above two things.
- 08:32 Ben: “The purpose of a budget for me is getting what could be a complicated, jumbled, or messy thing that’s taking up bandwidth in my head out onto paper where I can make sense of it. I want to make sure my expenses don’t exceed my income, and also have a plan for what to do with extra money. My intentions for money and what I actually do when I don’t have a plan are different. I don’t act in my best interest unless I have something clearly defined that I can look at.”
- 09:40 Sean: Ok, I have some thoughts in response to the 2 reasons for budgets that you mentioned:
- Makes sure expenses don’t exceed income.
- I think my no-debt mentality comes into play here. We’ve never borrowed money, and always lived very simply—never beyond our means. Because of our simple life and our unwillingness to compromise on our personal values, we didn’t have the problem of our expenses exceeding our income.
- Allocates extra funds.
- Because I’ve centered my vocation around doing what I love to do, my motivation is to invest money right back into my business. Virtually all of the purchases I make (that I enjoy making!) are business expenses, because what I do for a living is what I’m passionate about.
- Makes sure expenses don’t exceed income.
- 11:43 Ben: “There’s a lot to unpack here. I think the accounting is happening in your head. Yes, if you’re only exercising your values and your values are on point, then you’ll be likely to keep yourself from overspending. But for a lot of people, this can be problematic. Some people need accounting as a safeguard.”
- 14:51 Sean: I do see a difference between “accounting” and “budgeting.” I keep very detailed accounts of all my expenses (automatically with software), I just don’t have a budget for it. I know that all of the purchases I’m making are necessities or investments. To be clear: I’m not advocating that people shouldn’t have budgets. We’re just unpacking this idea here for the educational value of the discussion.
- 16:05 Ben: “You can have the best budgeting system in the world and even be extremely disciplined about your accounting, but if you don’t exercise discipline with your values, then it doesn’t matter how good you are at budgeting.”
- 17:00 Sean: That’s a great revelation, because one of the questions we got was, “With no budget, how can you limit unwanted spending?” The problem with that question is that it puts the pressure on the budget to keep you from spending money that you shouldn’t be spending. Really, when you start with the values, the values keep you from extraneous spending.
- 17:26 So for instance, our values are:
- Live simply.
- Live within our means.
- Never borrow money.
- Don’t buy things we don’t need.
- Don’t buy things we can’t afford.
- 18:14 We’re centered around the question of “What do we need to live?” Beyond that we save, but we don’t worry about things. When I say “don’t worry” I mean that we don’t stress if we buy an iced coffee a couple times a month. Of course, this begs the question of “What allowances do you permit?” I think the best answer to this question is this: we’re so deeply rooted in and centered around our values, those allowances aren’t a threat. They’re by definition, exceptions. The goal is not to see how many allowances we can have before we “break a budget rule.” This is what gives us the freedom.
- 19:08 The danger of using budgeting as a tool to wrangle unhealthy spending habits (read: improperly set values), is that “allowances” aren’t truly allowances in this case—they’re potential leaks or threats that lead towards more unwise spending.
- 19:43 Ben: “As much as I would love to say, ‘Just have these values and it will fix your spending problem,’ you have to exercise your values and practice them. You’re not going to be there overnight, it’s going to take time. During that time, the budget can be a reflection of your values and help your behavior come into alignment with your values.”
- 21:29 Sean: It’s really hard to unpack the whole value-focused finance approach. People ask, “How do you know how often you can buy coffee every month?” The thing is, that’s focused on pushing the limits. I’m focused on maintaining the values.
- 23:53 The more your focus is on the very center of your positioning—what you’re about and your core values are—it doesn’t matter where the fence is.
- 24:59 Ben: “The budget can become this thing that’s about the letter of the law. Really, it should be a tool that supports your values. Think about how much freedom you have when your values are so strong and you can exercise them with such discipline that you don’t even have to worry about a budget.”
- 25:52 Sean: I feel like that’s exactly what I’m doing, but I also feel kind of weird—that other people might think I’m foolish because I don’t have a budget.
- 26:02 Ben: “It’s only ‘foolish’ if you lack discipline in your values.”
- 26:09 Sean: Can we say that? Should we say that? I feel like I’m being too #harshsean if I were to say that.
- 26:18 Ben: “No, I think you can say that. I say this as someone who has a budget and a lot to account for. I have 5 kids and a mortgage.”
- 26:51 Sean: We should make allowance for you, because your situation is complicated. It wouldn’t be fair to say that you should have all of that in your head.
- 27:03 Ben: “BUT… we also like going out and getting the frozen yogurt…”
- 27:06 Sean: Ok, Ben—I have to ask: As a person who has a budget, do you believe from a foundational standpoint that focusing on values—even in your complicated situation—can work?
- 27:28 Ben: “I’m going to go out on a limb and say, ‘Yes.’ Granted that I was consistently making enough money and that it exceeded our expenses, if we exercised our values with discipline, we wouldn’t have to have a budget.”
- 27:53 Sean: I couldn’t have predicted where this discussion would end up.
- 27:57 Ben: “But we would have to be disciplined. That’s kind of the hard part. It’s easier not to be disciplined. It’s easier to let a piece of paper tell you what you can and can’t spend.”
- 28:20 Sean: Man, Ben, every time I get really deep on a topic, it all comes back to responsibility to me. I talk about responsibility as it pertains to professionalism and our job, but I think even in life, I am actively trying to seek and take responsibility for my own life and the results of my choices rather than trying to shift that off to something else.
- 28:57 Ben: “I’m not saying that if you can’t account for everything, or don’t have the bandwidth to do that, or you’re not super-disciplined in your values that having a budget can’t be a useful tool—a budget absolutely can be a useful tool, but I have to agree that it’s possible that if you are disciplined in your values and your values are on point that you can manage your money without a budget.”
Budgeting is not the thing that keeps you from spending more or less money.
Your values are what define this.
Imagine that your core values are at the center of your property and that the budget is a fence at the extremities of your property.
You don’t ever have to worry about where the fence is when your focus is on staying as centered on your values as you possibly can.
When you’re obsessed with defining the boundaries and establishing how far you can go before you hit the fence, that’s where the problem lies.
“If we exercised our values with discipline, we wouldn’t have to have a budget.”