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Budgeting Without a Budget

IMG_20160826_090153Accountants are reluctant to tell people what they do for a living. When I’m asked I sometimes say I’m a farmer. And whatever you do don’t say you are an accountant with plenty of free time on your hands; if you do, you are screwed. In a weak moment I mentioned my occupation at a writer’s conference and seven year of my life evaporated as the treasurer. In my younger days I ended up an elder in my church for the better part of two decades. Age has helped me weigh my words more carefully.

Working in a non-profit requires budgeting. It is the only budgeting I have ever done in my life. Budgets personally annoy me. Budgeted expenses are always spent while budgeted revenue is iffier. Hence, the organization is always broke and they look at the treasurer for answers. How do you tell the church council to stop spending so fucking much money? At the writer’s group I could say just that, but it never sunk in. Budgeting is a waste of time in its familiar format. I have a better idea.

Do as I Do and As I Say

Before we start I need to define the difference between goals and budgets. Generally goals are things you want to accomplish. You might have an income or a net worth goal, but I doubt anyone would have a spending goal, as in I want to spend at least this much this year. Budgets create a financial framework for a group to work within, including a family or even an individual.

My money management method is a blending of the two disciplines: goals and budgets. Even though I don’t have a budget, I track my income and expenses like a hawk. The accountant in me wants to record everything. Rather than a budget telling me what I can and can’t do, I am more interested in watching the trend of my income and spending.

I set goals sometimes when I want to accomplish a certain task. I am not as good at keeping a written list of goals at all times. Usually I become laser focused on a task when I am interested, like this blog. This month I published every day and twice two days. At some point I will burnout and reduce my publishing schedule, especially over tax season. But don’t worry. I love writing and write nearly every day ever since high school. I will be here spreading manure, I mean the Gospel of Keith for a very, very, very long time. As long as someone is listening, I’ll keep talking.

Recordkeeping of past performance is where I like to handle my financial planning. My goals (budget) are simple: beat last year or last week or last month, et cetera. For example, on this blog I watch traffic like a nice boy with OCD. I want to see an uptrend in traffic. The goal is to beat last week’s numbers. Revenue generated by the site is treated the same. I want to see a trend of increasing revenue. It is all a big game to me. Money and traffic is the scorecard and the only competition is me. Expenses are handled like revenue. How much did I spend this month compared to last year at this time? By comparing revenue and expenses year-to-date I have a moving budget as each day passes.

Of course I have only limited control over many issues. Sometimes revenue does not show up no matter what steps I take. Surprise expenses mess with the plan too, but I can back these numbers out to see if core spending is still on pace or in need of some cost-cutting.

My method is better for me and I bet you could benefit too. By competing against you there are no negative feelings attached or a sense of loss. Every year you improve yourself, even if only by a fraction of a percent. In the office I track revenue and expenses on a year-to-date basis and want to always be better than last year. I may be crazy, but I’m not insane. I understand with all the expense items in a business there will be a few with increasing numbers. Then I compare the expense increase to the revenue increase to see if the expense is still in line. Payroll is a biggie here. More revenue means more employees and for some darn reason they want a raise each year as if working for me isn’t enough, therefore, payroll expense trends higher.

Powerful NumbersThe numbers you record grow stronger with time. I can tell you more than daily revenue and expenses going back decades, I can tell you how many tax returns I e-filed on any particular day going back to my first professionally filed return. The whole thing is on an Excel worksheet now, but in the early days I used a spiral notebook to record where I was.

All this sounds like craziness to mere mortals. It isn’t. I enjoy messing with the minds of new employees by telling them how many people will walk through the door on any given day in the middle of tax season and will be within one or two. How can I know that? they ask, perplexed. With all the years of data I have I noticed trends on when people visit the tax office. More than a mind game, I now have a planning tool that helps me manage my company more efficiently and profitably. A simple algorithm lets me know how many clients will visit on any particular day.

I don’t need a budget to tell me to not spend over a certain amount on a certain type of item. If I budget a certain amount for utilities and we get a blockbuster cold winter, my budget is useless. The budget might also give me permission to keep the house warmer in winter if it is a more seasonable winter because the budget can handle it. No siree! I need no excuses to spend more. A warmer winter means I spend less on utilities. Period. I want to see my utility bill drop adjusted for weather.


Accountants and people with serious OCD (I am both) love watching their numbers. It is real easy to get carried away. A new idea might cut costs significantly, but once electric usage is under 10 kilowatts per day there is only so much more saving you can do. There is a fine line between the insane asylum and the game of “gotta beat last year’s numbers”. They have a special bed waiting for me when I finally crack and we all know how close I am to that line, don’t we?

As nuts as I am, I do have a method to keep things in perspective. Back in the mid-90s I moved from my home to an office building. My numbers exploded. In a few years I was cooking over 2,000 tax returns and driving myself insane, the real insane. I made a concerted effort to change the structure of my business. I reduced the headcount from over 2,000 tax returns to 700 while increasing the number of employees because I focused more on business clients who needed work all year rather than individuals, which were only seen once per year in spring. Soon my sanity returned. (Well, it’s considered sane for me!)

The same applies to you, kind reader. Financial independence means changes to your personal income and spending. Travel may grow as a part of your quasi-budget while vehicle expense may decline. Investments generally have predictable cash flows, but an economic downturn may cause dividends to decrease for a year or two before resuming an upward trend.

Budgets always seem to make people anxious as they approach spending limits or revenue/income appears to fall short. I hate it with a passion. Under my method I don’t feel anxiety. A miss this month compared to last year is nothing more than a game I get to play again next month. It turns a taskmaster into fun and playtime. And let’s face it; I am a big kid who never grew up.

Now, please, share this post because I noticed my numbers are down and it’s Friday.