In High School, I was a C student. I didn’t work hard, I didn’t study, and quite frankly, I really just didn’t care. It wasn’t until I entered college that I made a conscious decision to “shape up” and get good grades. This was not easy! The process of converting myself from a C student to an A student required a lot of time and effort. In a sense, it was like trying to re-wire the brain.
Learning to Budget
Bad habits die hard. My first attempts at getting good grades were unsuccessful. Since I didn’t know what it took to be an A student, I had to learn through trial and error. During the first semester of college, I decided that I should try and use my time more wisely. To help enforce this idea, I budgeted out sections of my day to take on specific tasks. For example, 3:00 PM to 5:00 PM was when I would study for Pre-Calculus. After dinner, from 7:00 PM to 9:00 PM I would finish my reading assignments. This is how things went along, for awhile. The budgeting of my time helped me get acclimated to a new type of routine. Once the report cards came in, I used the results to fine-tune the feedback mechanism. If I got a B on a midterm, I would re-work my schedule to allocate more study time to that particular subject. Maybe instead of studying just once a day, I would break up the assignments into two separate partitions.
On and on this went. The first few corrections were major, since I had no precedent to fall back on. After a year, I was in the swing of things. I was now getting A’s in most of my classes, and had become pretty good with my study habits. By the third and fourth year, I simply stopped trying to follow a block schedule. This stuff was becoming second nature, and I no longer needed any guidance.
Long story short, the hard work paid off. I not only graduated college from a top university, I even went on to complete my graduate degree in an entirely different field of study. All of this was made possible thanks in large part to “learning how to budget” my time in Year 1. However, after Year 1, I never worked on this skill again. By Year 2 and onward, I already knew what to do. Budgeting was no longer necessary…
When It Comes to Finances…
Most personal finance gurus/bloggers will preach to you on why you need to budget your expenses. They will go on and on about the benefits of keeping track of every last expense. Budgeting will hold you accountable, they reason. Otherwise, you might fall off the horse and end up back in debt!
If you look around you (and across the internet), everyone is telling you to budget… so how can it possibly be unnecessary… or a waste of time? Perhaps, these experts are catering to the masses? Budgeting is most necessary and applicable for the following two types of people:
- Those carrying lots of debt who are trying to get out of it.
- Those who are finally debt free and want to start saving money.
Quite frankly, most people you run into will fall into of these two groups… But what if you don’t belong in either category?
After a Certain Point
If you’ve been saving your income, investing it, and re-investing it, I’m guessing you’ve gotten pretty comfortable (and good) with this routine. In fact, I would argue that it has become second nature to you. Sort of like brushing your teeth twice a day. Those who have been on the journey to early financial independence for some time do not lack discipline or motivation. You can’t get very far to financial freedom if you aren’t fully committed.
After a certain point, like with studying for school, budgeting just becomes unnecessary. This is Year 2 of the journey to early financial independence for me, and I believe I have reached this point. I’m right around the half-way point now, making my way up the mountain. This year, I’ve even stopped tracking my monthly expenses, since the results were starting to look the same each and every month! Whether I try or not, I’m saving 70% to 80% of my earned income each and every month. Not doing so would probably feel like going to sleep at night and not brushing my teeth. At this point in time, it would be a complete system shock, and totally unfathomable.
Point blank, falling off that horse is just not going to happen.
So, rather than having to exhaust myself, filling in each row of a spreadsheet with each transaction from each one of my ten credit cards… I simply stopped counting. What’s the point? I’m not new at this game… I know what I’m doing now.
How I Spend my Time
It’s not that I believe budgeting is a bad thing, it’s just no longer necessary for me. But keep in mind, I’m speaking from a perspective that’s far removed from someone just getting out of consumer debt. I’m an investor… and I do believe my time would be much better served focusing on more important things:
- Where’s the next good deal?
- How do I get through underwriting the next time around?
- How can I generate more passive income?
- How can I claim more deductions come tax season?
- Managing properties and property managers.
- This blog! 🙂
The reality is, going slightly over or under a budget each month will not make or break my financial goals. I’m focused on generating more offensive firepower, because that’s the most important thing to do right now. It’s all about the cash flow, and I’m working hard trying to get it over the $2000/month mark.
I’m well past the days of cutting out lattes… I could drink one everyday and it would make ZERO difference. When you’re talking about closing deals on real estate properties that cost hundreds of thousands of dollars (and require tens of thousands in downpayment funds), an extra $100 or $200 saved is just a drop in the bucket.
At this stage as an investor, when the snowball is starting to roll, you’re better served focusing on the big picture items. This past year, I closed on three properties. Each time, after closing was complete, I went out and celebrated! I indulged a little and ate out at nice restaurants. In 2014, my goal is to purchase an additional three rental properties. If I can accomplish this, it will be a most successful year of investing. Everything else will just get lost in the details…
Ultimately, if you are getting straight A’s each year (hitting your financial goals), then you’re obviously doing something right! Budget or no budget…
Do you still budget? Even if you like to budget, or do so only to have a reference, do you feel like you NEED to do it? Without a budget, would you fall off the horse? Would your spending habits drastically change?