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Whenever I see or hear someone mention the importance of a budget, I’d feel a sense of shame running through my whole body and straight to my brain.
I feel as if someone has pointed out something I should be doing that I’m not.
Mr. FAF and I don’t have a budget. We have never had one.
At one point, I felt such an insurmountable sense of shame that I told Mr. FAF we needed to have an itemized budget in an Excel spreadsheet to detail all of our spending categories for the next month.
But Mr. FAF wasn’t too enthusiastic about it.
He said that we were already frugal and barely spent money on anything other than the necessities (i.e. housing, food, utilities).
Disappointed at his lack of cooperation, I set out to do a budget by myself.
I quickly lost momentum. Mr. FAF was right. We always live at the bare minimum.
Frugality has become part of our habit and lifestyle that we just know we need to save and not splurge.
We live frugally without even noticing it or thinking about it most of the time.
We borrowed some money from family for the purchase of our house. But we have never borrowed money from friends or the bank to cover our expenses.
I realized that we have been fortunate enough to not have had any emergencies that can deal a blow to our budget like it has done to many families.
And we have an emergency fund that can cover 4-5 months of our expenses for us to figure out the next step.
Below are the 10 things we do to save more and live better without a budget.
1. We use our credit cards to track our expenses for the previous month.
Mr. FAF and I each have our own credit cards which we use to pay for our daily purchases.
We always pay it off at the end of the month and have never paid even 1 cent for credit card interest.
We both have a self-imposed maximum limit we don’t want to go over each month. It’s $2,000 for Mr. FAF and $500 for me.
Those amounts cover all of our daily expenses such as groceries, phone bills, floss, and toilet paper.
My credit card covers our internet bill, Amazon purchases, clothes for Baby FAF and me, house maintenance and repairs, blog expenses, and my random brief grocery trips to Shoppers or eating out with my colleagues.
Water and electricity payments come out of our joint checking account to avoid credit card fees). Mr. FAF uses his credit card to pay for pretty much anything else.
Sometimes my payment is only $200, and sometimes it’s $600 depending whether we purchase a big ticket item from Amazon (i.e. electronic gadgets).
Over all, if our expenses stay below $2,000, it’s normal for us. We will just take a quick look at all the purchases on his card to see if there’s any unusual activity on our cards.
When our payment is more than $2,000, it’s a cause for concern. We will go back to each item and see what causes the amount to exceed our limit. But it doesn’t happen often.
Related: 10 Simple Things We Do To Save Money
2. We have an emergency fund we don’t touch.
Mr. FAF and I have an emergency fund that covers at least 3 months of our mortgage, daycare, and daily expenses.
It gives us peace of mind knowing that even if we don’t have an income coming in for a couple of months, our family will still have a roof over our head and enough food on the table.
If either or both of us lose our jobs, we might have to take Baby FAF out of daycare to cut costs, but overall, we will try our best to find other jobs and get back on our feet.
A roof replacement will put us in a precarious position since it will be a $7,000-10,000 expense that we will need to pay out of pocket. We definitely don’t want to use our credit cards for that.
The combination of two lost jobs, a leaking roof, and unexpected expenses will definitely be tragic. I have to admit that I’m still struggling with the idea of being on the safe side (i..e. for an unexpected tragedy) and making our money work for us (i.e. investing in retirement).
3. We max out our 401(k) and 403(b).
In order to save money, we just get it out of sight even before we see it. After Mr. FAF started his new job, we have decided to max out his 401(k) by contributing $18,500 of his pretax paycheck a year.
I followed suit by maxing out my 403(b) a month later. As a next step, we will save for at least a 20% down payment on our new home/first rental.
4. We pay extra towards our mortgage.
Anything money left over after our 401(k) contribution and payment of credit card balances is put towards our mortgage.
We won’t be able to touch our 401(k) and 403(b) until 59½, but we can turn our primary residence into a rental or sell it at any point in time.
In other words, I see a paid off house as a more flexible investment than retirement accounts.
I know we all have different reasons as to why we want to or don’t want to pay off our mortgage.
I think it depends on our priorities and risk tolerance. For us, we know we want to own our house free and clear to hedge against market volatility just as Dave Ramsey points out.
5. We only buy something if it’s truly necessary.
There was a time when Mr. FAF and I wanted to get a $20 mango mousse cake from Whole Foods. We drove 10 minutes to Whole Foods, take a look at the cake, thought for 2 minutes, decided not to buy it, and then drove home.
One might think it’s such a waste of time and gas. And I agree. Why fret over a $20 cake when we can pay for it with cash? We couldn’t answer that question either.
We left Whole Foods that day asking ourselves “Why are we trying to save money now that we’re making more than double what we used to make?”
We just shook our heads, smiled at each other, and drove home. Part of me was happy about not spending the $20 on a sugar-loaded cake that would have me watch my weight for at least a week.
The mango mousse cake story demonstrates our mentality about making purchases in our lives. If we don’t need a $20 mango mousse cake, we won’t buy it. If we don’t need a fancy car, we won’t buy it. If we don’t need a vacation to the Bahamas, we won’t take it.
Sometimes we do give into temptations (i.e. $5 bubble tea, eating out, $100 dresses). But we generally live under our means and are on the right track to paying off our mortgage and investing in our retirement.
Related: 3 Things We Fail To Do To Save Money
6. We find inexpensive substitutes for the expensive things that we want or need.
There are things that are nice and expensive. And there are things that are almost as nice and inexpensive. We usually opt for the latter.
One time Mr. FAF’s glasses broke because Baby FAF just grabbed them off of Mr. FAF’s face and dropped them on the floor.
After finding out that a new pair of eye glasses are $250 ($150 of which is covered by insurance), Mr. FAF came home and told me he wanted to check out cheaper glasses at Costco.
I asked him we can afford a good pair of eyeglasses for him now that he has a full-time job. But Mr. FAF turned down that idea and insisted that it is unnecessary.
As for me, I have been trying to find substitutes for years in order to save money whether it’s ice-cream, sushi, or noodles.
Finding substitutes has also taught me the importance of self-control, patience, and creativity to get what I need at a cheaper price without feeling deprived.
7. We buy non-organic grocery items that are not processed.
There are a couple of organic grocery stores near our house like Wagman’s and Whole Foods, but we rarely buy anything from those stores. Their prices are usually much higher than a regular grocery stores.
We rarely buy processed food. We tend to choose food items that are fresh (i.e. veggies and fruit) and not processed (i.e. raw pork and seafood).
Our food budget is not necessarily frugal. It used to around $800/mo when my mother-in-law lived with us and currently around $600/mo.
Some readers have pointed out that we save on our grocery bills even more. That’s something we’re still working on. We cook at home most of the time and pack our work lunches almost every day.
Mr. FAF eats out with his friend once a week (usually $20/each time). He also likes to buy wine and beer from Costco. As long as something is edible or drinkable, it’s counted as groceries. I now eat out maybe once a month.
Related: Why We Eat Out While In Debt
8. We find happiness in free activities.
We find happiness in the simple things that we do (i.e. going to a community picnic, having a hotpot with our friends at home).
Before Mr. FAF started working, I thought we would be much happier with a big jump in our income. But I was wrong.
We might not have to stress out about money as much, but money to us is just a number sitting in a bank account.
As long as that number doesn’t go below an alarming level and is invested wisely, we’re just simply happy with what we have.
Some of the activities that we enjoy the most as a family are actually free. Below are some examples:
— Mr. FAF and my mother-in-law usually go for a walk after dinner while I try to finish feeding Baby FAF and do the dishes. That’s the good time of the day when Mr. FAF and his mother catch up on Mr. FAF’s work and how his family in China is doing.
— Before my MIL and Baby FAF came back to DC, Mr. FAF and I would go for a walk after dinner. Sometimes we go to the mall nearby and just walk around on a frugal date. We talk about our current lives, plans for the future, and where we want to be in 5, 10, and 20 years. It draws us closer together as a couple and a family.
— I particularly enjoy our family time at the end of the day when Mr. FAF and I are done with all of our duties for the day (i.e. work, doing the dishes, showers) and just watch Baby FAF playing with his toys and jumping on the beds.
We’re not in Europe or at an exotic resort. We just enjoy each other’s company in the comfort of our own home. Mr. FAF and I usually look at Baby FAF and ask each other, “Can you believe he’s our son? He’s so cute!”
We also wonder if we’re the only people who think Baby FAF is super adorable. We do think we’re biased, but it doesn’t matter because we’re just two happy parents.
Related: 7 Fun & Frugal Family Activities
9. We don’t travel often.
I know some people might argue that we should experience the wonder of life and shouldn’t skimp on traveling to save money. Mr. FAF and I have a different take on that for four reasons.
First, I grew up in a low-income family in Vietnam. The only trip I knew I would have each year was a trip to the countryside to visit my mom’s side of the family. The idea of not going on a grand vacation every year doesn’t bother me a bit. I know Mr. FAF had a similar experience growing up, so traveling is not always among his top priorities.
Second, we’re not outdoor lovers. Mr. FAF and I enjoy a brief hike in at national parks every once in a while, but we rarely go hiking, swimming in the beach, or camping.
We enjoy the comfort of our home maybe a little too much. One key reason is that I don’t really work out, so a short hike for many end up an exhausting workout for me. But I do think we should explore nature more often.
Third, when we visit our families in China and Vietnam, it usually takes at least 3 weeks and costs thousands of dollars. We rather save our leave and money for that.
Lastly, we feel that there are still lots of inexpensive touristy places we can explore on a road trip on the cheap. And we plan to do that until we have lots of money in our bank account to travel to exotic places without feeling guilty about it.
10. We combine travels for different purposes.
Even when we travel, we try to couple it with something that we know we will need to in that particular location.
For example, we did a three-hour road trip to Reading, PA to attend my best friend’s wedding.
We had always talked about exploring that city, so it was efficient and cost-saving to kill two birds with one stone – attending the wedding and traveling at the same time.
Another example is our trip in December 2017. Mr. FAF wanted to take my MIL to visit his alma mater and attended the graduation ceremony.
We also wanted to take Baby FAF to the city where his parents met and decided to build a family together.
Instead of taking the whole family on a trip to the city at a random time, we waited until December when Mr. FAF had his graduation ceremony.
According to American Express, the average vacation expense for a family of four in America is $4,580 a year.
By taking inexpensive road trip to nearby cities or combining travels for different purposes, our family spend less than $1,000 on traveling each year if we don’t visit family in Asia.
I know the word ‘budget’ sounds a bit scary and even depressing to a lot of people. It can conjure up the imagine of someone punching numbers and burying their head in an Excel spreadsheet.
But I know spending some extra time on a budget at the beginning of each month has saved many families a lot of headache and tension in the long run. You might want to give it a try before saying no forever.
If you still think a budget is not for you even after you try detailing one for yourself and your family, don’t get discouraged. At the FAF household, we have never had a budget. We try to keep our expenses at the minimum.
We don’t have a ballpark number for each of the expense category. But we perform a careful cost-and-benefit analysis for every single item that we want to purchase.
When you focus on the detail and know the big goals you want to achieve, the path might be laid out nicely for you without much effort.
When you know you save money every single day, you wouldn’t have to worry about not saving at all at the end of the month.
Saving money will become a habit even you will find it hard to get out of one day. But you will be pleasantly surprised when you look at your savings and investment now and in the future.