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The Best Budget for You Might Be No Budget at All. Here's Why

If you're struggling to start a budget, you can start with a low-key approach that stresses fundamentals over details.

A large stack of $100 bills inside of a pocket
Once you've set up the no-budget budget, you don't need to track anything.
Angela Lang/CNET

It's the most common advice that you'll get from almost every financial adviser: Start a budget. Tracking your income and spending is one of the first steps to getting your financial house in order.

Yet most people hate budgeting. Only about a third of American households maintain a monthly budget, according to CreditDonkey. Some people think that it's too time-consuming, while others don't think they make enough money to bother.

If you've tried and failed to stick to a monthly budget, you might consider an unusual system called the "no-budget budget." Instead of tracking every spending detail, this method of budgeting instead focuses on basic fundamentals of earning and spending. Here's how the no-budget budgeting system works and whether it might be right for you.

For more Money Tips, learn about major changes to retirement accounts like IRAs and 401(k)s and get five pieces of expert advice for beginning investors

What is the no-budget budget?

A no-budget budget might seem like an oxymoron, but it's a fairly accurate name. The no-budget budget requires some initial setup, but after that, you won't need to check your monthly budget again unless your financial situation changes. 

Instead of tracking categories of purchases and sticking to spending limits, the no-budget budget focuses on two numbers:

  • How much money you earn monthly
  • Your required monthly expenses

After you calculate your post-tax monthly income -- including all salary and wages plus income like government benefits or investments -- and then subtract your monthly expenses, the rest of your money is free to spend however you like each month. That's it.

Note: This budget only works if you're earning more money than your required expenses every month. 

How do I set up a no-budget budget?

To get a no-budget budget going, start by calculating your monthly income (from all sources) after taxes. This money could include:

  • Wages, salaries, commissions and bonuses
  • Income from side hustles
  • Rental income
  • Investment income
  • Alimony/child support
  • Government benefits like Social Security

Once you've got an accurate number for your monthly income, add up your fixed monthly expenses. The two most common costs will be housing (mortgage or rent payment) and utilities (like gas, electricity, water and internet), but expenses could also include:

  • Car payments
  • Payments toward debt, including student loans and credit cards
  • Monthly subscriptions, such as streaming TV services
  • Monthly membership fees like gyms, clubs or online communities
  • Childcare or tuition
  • Charitable donations
  • Alimony/child support payments
  • Contributions to savings accounts

After calculating the cost of your fixed expenses, take a few minutes to estimate your variable monthly expenses, such as groceries, clothing, restaurants, concerts, movies or sporting events. One easy way to estimate your variable expenses is to see how much you've spent on such items over the past six months and divide by six.

Once you've got your numbers for total income and both fixed and variable monthly expenses, subtract your total expenses from your total income and that's how much money you have to spend on whatever you want every month.

You're not quite finished, though. To make the most of the no-budget budget, you'll need to automate your spending and saving.

Pay yourself first (and your bills)

To make the most of the no-budget budget, it's best to automate all your income and payments as much as possible. Sign up for direct deposit, for example, and set up automatic payments for your monthly bills.

Those monthly "bills" should include things you might initially think of as expenses: for example, financial contributions to a retirement account like an IRA; funds for a savings goal like a house, car or vacation; or a basic savings account for emergencies. In other words, integrate your savings and long-term goals into your fixed expenses. 

All major banks, credit unions and neobanks will let you automatically direct money toward your bills or various savings accounts on a scheduled basis. At the start of every month, or at the best times of the month based on your pay cycle, transfer money from your checking account where you receive your direct deposit to your designated bills and savings accounts.

Once everything has been paid for, you can spend the rest of the money that's left for that month however you'd like and never think about your budget again. 

That doesn't mean you should spend recklessly. Once your monthly expendable income is gone, you'll have nothing left. Overspending is one of the biggest risks of the no-budget budget, so you'll likely want to keep an eye on your balance as the month progresses so you don't end up without pocket money for weeks.

If you don't spend all your discretionary money each month, that's great. Simply shift any extra money into a savings account or pay down additional debt. Then you can start over fresh in the next month or pay cycle.

Who's a good candidate for the no-budget budget?

The no-budget budget works best for people with steady incomes that don't change from month to month. If you're a freelancer or gig worker with income that varies considerably, it's probably not for you.

It's also good for people who spend on occasional expensive items like concert tickets or fine dining. As long as you're spending less than your monthly limit and you're willing to cut back for the rest of the month, you can splurge as much as you'd like. 

In short, the no-budget budget is a potentially good budgeting option for people with stable incomes who generally earn more money each month than they spend, don't want to spend a lot of time tracking their purchases, and feel comfortable setting up autopay and electronic transfers. If you're seriously in debt, apt to use credit cards when you can't afford purchases or intimidated by online banking, look for another budgeting option.

For more, see our picks for the best savings apps.