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Budgeting By Exception

March 28th, 2014 at 04:38 am

I have said that I have a budget. I have even set it out in detail on a blog post.* But the truth is I do not budget at all! What I do is to keep track of my spending and continuously optimize that spending. That is how I cut my baseline spending down by a third over a period of less than a year. And here is how that works.

Like everyone else, I have fixed expenses and variable expenses. Big expenses and small expenses. Planned expenses and unexpected expenses. And on a rolling basis, I keep reviewing each one of those costs and testing to see if I can reduce it without diminishing my life satisfaction or comfort level. It is what I call budgeting by exception. So to speak, I listen for the squeaky cost wheel and then apply some frugality grease to it. And by continuing to do this, I continue to trim down my spending run rate.

But I do not really have a budget. I think that in itself moderates my spending. I do not go to the grocery store with a limit on how much money I can spend there**. I do not go to the gas station thinking I can only put so much fuel in the tank, or set a limit on how much I can drive my truck***. What I do is to approach every spending decision with a firmly internalized mindset to optimize that spending. Not in order to get the biggest bang I can get for my buck -- but rather to get the bang I will be happy with for the fewest of my bucks.****

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*My $18K Annual Baseline Budget:
http://retired-to-win.savingadvice.com/2013/12/29/my-18k-ann...
**My $50-a-Week Food Expense:
http://retired-to-win.savingadvice.com/2014/03/23/my-50-a-we...
***The Frugal Game -- Errand Bundling:
http://retired-to-win.savingadvice.com/2013/12/26/the-frugal...
****My Financial Independence Key:
http://retired-to-win.savingadvice.com/2013/12/17/my-financi...

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