Creating a Budget in 2020: Not Having a Budget Could Be Best - WSJ Your Money Briefing

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[00:01]
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Deal replaces fragmented payroll vendors with one global system. No third parties. Hire, manage and pay teams in 150 countries. Operate like a local everywhere. Visit d e l.com WSJ.
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Here's your Money briefing. I'm J.R. whalen at the Wall Street Journal in New York. Who doesn't want to be smarter about money in the new year? Making a budget can be a good way to set financial goals. But how you manage your money doesn't necessarily start in your wallet. Some financial experts say it starts in your head.
[00:38]
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It all comes down to what motivates you. If you are motivated by watching where every single dollar goes and knowing how each paycheck is earmarked, then that'll work for you. If that's really intimidating to you or stresses you out or makes you feel stifled, then you're going to just recoil.
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That's personal finance reporter Julia Carpenter. She'll explain the psychological side of budgeting also what a revers budget is and why some people are better off not making a budget at all. That's coming up. Whether you're making New Year's resolutions or not, being wiser with money is a priority for everyone, and making a budget is a good place to start. Or is it? There's more debate than you'd think about how to draw up a budget or whether to have a budget at all. And Wall Street Journal personal finance reporter Julia Carpenter is here to discuss. So, Julia, a lot of people whose job it is to analyze the budget making process, they say that managing your money has more to do with your mind than your wallet.
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There's not a one size fits all budget. And I think that can be hard for some people to hear because they want to hear there's some sort of magic formula that they can plug their money into or some spreadsheet that can unlock all of these secrets. But so many different kinds of budgets work for you based on your habits, your goals and your personality.
[01:56]
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So you need to know your own life story, your own sense of self, instilled discipline before you can put all these numbers down on paper.
[02:04]
A
And what motivates you. I think again and again when I was talking with experts for this story, they said it all comes down to what motivates you. If you are motivated by watching where every single dollar goes and knowing how each paycheck is earmarked, then that'll work for you. If that's really intimidating to you or stresses you out or makes you feel stifled, then you're gonna just recoil.
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And in that case, maybe having no budget is the right way to go, but just don't go into that store and buy the $5 coffee when you could buy a $2 coffee, you know, 20 steps away.
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An expert I talked to made this point too. When you say, I don't have a budget, a lot of people, that is a budget. A budget is just a spending plan. It's just a savings plan. So a lot of no budget advocates say, you know, move your money to savings right away, and then the rest of the money that you have in your paycheck, the rest of the money you have in your debit card, use that at will. And that's, that's still a budget. You're still contributing to savings. You're still not overspending, you're still not going into debt. You're just approaching it in a different way than somebody who maybe earmarks or buckets their money.
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And people in the world of financial psychology say there are actually four typical methods for creating budgets, Right?
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You can either be somebody who associates money with status, or you can be somebody who associates money with something to avoid, something to kind of be scared of, somebody who is super disciplined, somebody who's super vigilant about their money, or somebody who sees money as kind of the goal in the whole process. Get more money, put more money.
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And then some financial advisors recommend a reverse budget. What is that?
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So when you're thinking about a budget the way we have traditionally thought about it, you put money toward bills, put money toward rent, put money toward this, put money toward that, and then whatever is left over, that's what goes into savings. But a reverse budget puts the money in savings right away, and you don't even look at it. And then the rest of the money that's in your account, that's money that you can spend however you see fit.
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All right, that's Wall Street Journal reporter Julia Carpenter with us here in our studio. Julia, thanks for coming on the show.
[04:00]
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Thanks for having me.
[04:01]
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And that's your money briefing. I'm J.R. whelan in New York for the Wall Street Journal.
[04:05]
A
Deal replaces fragmented payroll vendors with one Global system. No third parties, hire, manage and pay teams in 150 plus countries. Operate like a local everywhere. Visit d e-l.com WSJ.

Summary4 min read

WSJ Your Money Briefing: "Creating a Budget in 2020: Not Having a Budget Could Be Best"

Date: January 2, 2020
Host: J.R. Whalen
Guest: Julia Carpenter, WSJ Personal Finance Reporter

Episode Overview

This episode delves into the psychology behind budget-making and challenges traditional notions of personal finance. Rather than prescribing a one-size-fits-all solution, WSJ reporter Julia Carpenter discusses why "not having a budget" can be effective for some, the importance of personality in budget strategies, and introduces alternative approaches like the "reverse budget."

Key Discussion Points and Insights

1. The Psychological Side of Budgeting

Main Idea: Managing money begins in the mind, not just in the wallet.
Quote:
- Julia Carpenter: "There’s not a one size fits all budget. And I think that can be hard for some people to hear because they want to hear there’s some sort of magic formula … But so many different kinds of budgets work for you based on your habits, your goals and your personality." [01:39]
Discussion:
- People often desire a "magic" formula, but successful budgeting is driven by self-knowledge and motivation, not rigid templates.
- Discipline, life context, and personal money attitudes are foundational.

2. Tailoring Budgets to Personality and Motivation

Key Point:
- Knowing what motivates you is as important as tracking dollars.
Quote:
- Julia Carpenter: "If you are motivated by watching where every single dollar goes ... then that’ll work for you. If that’s really intimidating to you or stresses you out or makes you feel stifled, then you’re going to just recoil." [00:37, 02:03]
Insight:
- Budgeting works best when matched to individual tendencies. For some, rigorous tracking is encouraging; for others, it is discouraging.
- Host J.R. Whalen summarizes: "So you need to know your own life story, your own sense of self, instilled discipline before you can put all these numbers down on paper." [01:56]

3. The "No Budget" Approach

Key Concept: Sometimes, not having a formal budget is itself a budget.
Quote:
- Julia Carpenter: "When you say, I don’t have a budget, a lot of people, that is a budget. A budget is just a spending plan ... a lot of no budget advocates say, you know, move your money to savings right away, and then the rest ... use that at will. And that’s, that’s still a budget." [02:34]
Explanation:
- Some experts recommend automatic savings and then spending freely from the remainder—a tacit budget for those who find strict plans stifling.

4. Financial Psychology: Four Budgeting Types

Summary: Psychological associations with money affect budgeting styles:
- Money as status.
- Money as something to avoid or fear.
- Money as a matter of discipline/vigilance.
- Money as the ultimate goal (accumulation for its own sake).
Quote:
- Julia Carpenter: "You can either be somebody who associates money with status ... with something to avoid ... somebody who is super disciplined ... or somebody who sees money as kind of the goal in the whole process." [03:11]

5. Reverse Budgeting

Explanation: Savings is prioritized first; spending comes after.
Quote:
- Julia Carpenter: "A reverse budget puts the money in savings right away, and you don’t even look at it. And then the rest of the money that’s in your account, that’s money that you can spend however you see fit." [03:33]
Key Insight:
- Contrasts with traditional budgeting, where savings is often what's left over.

Memorable Moments & Quotes

Budgeting doesn't require perfection, but self-awareness:
"So many different kinds of budgets work for you based on your habits, your goals and your personality." — Julia Carpenter [01:39]
Redefining "no budget":
"A budget is just a spending plan. It’s just a savings plan." — Julia Carpenter [02:34]
Reverse budgeting as an alternative:
"Put the money in savings right away, and you don’t even look at it. And then the rest ... is money that you can spend however you see fit." — Julia Carpenter [03:33]

Timestamps for Important Segments

[00:20] — J.R. Whalen introduces budgeting as a New Year's priority and sets up the episode’s theme.
[01:39] — Julia Carpenter on the myth of one-size-fits-all budgets.
[02:03] — The importance of motivation and personality in budgeting.
[02:34] — The "no budget" philosophy explained.
[03:11] — Four psychological archetypes of budgeters.
[03:33] — Introduction and explanation of the reverse budget approach.

Tone and Style

The conversation is approachable, conversational, and grounded in real-life financial behaviors.
Julia Carpenter offers pragmatic, non-judgmental advice, stressing self-awareness and flexible thinking.
No financial jargon—plain language geared for listeners at any financial literacy level.

Summary Takeaway

The episode invites listeners to rethink traditional budgeting. Whether you track every penny, save first and spend later, or avoid formal budgets altogether, your success depends on aligning your plan with your personal motivations and psychological tendencies. There is no universal template—just the approach that works for you.

Loading summary

Transcript17 lines

[00:01]
A
Deal replaces fragmented payroll vendors with one global system. No third parties. Hire, manage and pay teams in 150 countries. Operate like a local everywhere. Visit d e l.com WSJ.
[00:20]
B
Here's your Money briefing. I'm J.R. whalen at the Wall Street Journal in New York. Who doesn't want to be smarter about money in the new year? Making a budget can be a good way to set financial goals. But how you manage your money doesn't necessarily start in your wallet. Some financial experts say it starts in your head.
[00:38]
A
It all comes down to what motivates you. If you are motivated by watching where every single dollar goes and knowing how each paycheck is earmarked, then that'll work for you. If that's really intimidating to you or stresses you out or makes you feel stifled, then you're going to just recoil.
[00:53]
B
That's personal finance reporter Julia Carpenter. She'll explain the psychological side of budgeting also what a revers budget is and why some people are better off not making a budget at all. That's coming up. Whether you're making New Year's resolutions or not, being wiser with money is a priority for everyone, and making a budget is a good place to start. Or is it? There's more debate than you'd think about how to draw up a budget or whether to have a budget at all. And Wall Street Journal personal finance reporter Julia Carpenter is here to discuss. So, Julia, a lot of people whose job it is to analyze the budget making process, they say that managing your money has more to do with your mind than your wallet.
[01:39]
A
There's not a one size fits all budget. And I think that can be hard for some people to hear because they want to hear there's some sort of magic formula that they can plug their money into or some spreadsheet that can unlock all of these secrets. But so many different kinds of budgets work for you based on your habits, your goals and your personality.
[01:56]
B
So you need to know your own life story, your own sense of self, instilled discipline before you can put all these numbers down on paper.
[02:04]
A
And what motivates you. I think again and again when I was talking with experts for this story, they said it all comes down to what motivates you. If you are motivated by watching where every single dollar goes and knowing how each paycheck is earmarked, then that'll work for you. If that's really intimidating to you or stresses you out or makes you feel stifled, then you're gonna just recoil.
[02:24]
B
And in that case, maybe having no budget is the right way to go, but just don't go into that store and buy the $5 coffee when you could buy a $2 coffee, you know, 20 steps away.
[02:35]
A
An expert I talked to made this point too. When you say, I don't have a budget, a lot of people, that is a budget. A budget is just a spending plan. It's just a savings plan. So a lot of no budget advocates say, you know, move your money to savings right away, and then the rest of the money that you have in your paycheck, the rest of the money you have in your debit card, use that at will. And that's, that's still a budget. You're still contributing to savings. You're still not overspending, you're still not going into debt. You're just approaching it in a different way than somebody who maybe earmarks or buckets their money.
[03:04]
B
And people in the world of financial psychology say there are actually four typical methods for creating budgets, Right?
[03:11]
A
You can either be somebody who associates money with status, or you can be somebody who associates money with something to avoid, something to kind of be scared of, somebody who is super disciplined, somebody who's super vigilant about their money, or somebody who sees money as kind of the goal in the whole process. Get more money, put more money.
[03:30]
B
And then some financial advisors recommend a reverse budget. What is that?
[03:34]
A
So when you're thinking about a budget the way we have traditionally thought about it, you put money toward bills, put money toward rent, put money toward this, put money toward that, and then whatever is left over, that's what goes into savings. But a reverse budget puts the money in savings right away, and you don't even look at it. And then the rest of the money that's in your account, that's money that you can spend however you see fit.
[03:55]
B
All right, that's Wall Street Journal reporter Julia Carpenter with us here in our studio. Julia, thanks for coming on the show.
[04:00]
A
Thanks for having me.
[04:01]
B
And that's your money briefing. I'm J.R. whelan in New York for the Wall Street Journal.
[04:05]
A
Deal replaces fragmented payroll vendors with one Global system. No third parties, hire, manage and pay teams in 150 plus countries. Operate like a local everywhere. Visit d e-l.com WSJ.