Our Strategies for Saving without Budgeting

As we move through our gradual glide path to eventual retirement, my goal is to show a steady increase in our net worth. I’m not looking to hit home runs. I just want to be sure that when the day come, our nest egg is large enough to support our retirement spending plan.

Because we are not currently taking a lot of investment risk (and perhaps losing possible rewards for doing so), showing a continuous increase in net worth means not overspending. The conventional strategy for being sure that your income always exceeds your outgo is through a budget.

When we were a young married couple years ago – and living closer to a paycheck-to-paycheck existence – we kept a detailed budget. This was hard. For one thing, our budget was entirely on paper as PC’s were a rarity and smartphones and tablets non-existent.

We eventually abandoned the detailed budgeting strategy.  It was definitely a life buzz killer.  We have evolved today to using a few simpler strategies for making sure we are saving money for our retirement future. There is nothing radical about any of them and you may be doing the same things.

1.  We maximize my 401(k) contributions, dividing the annual limit (including older folks “catch-up” contributions) into semi-monthly contributions directly out of my paychecks.

Of course, we never withdraw or borrow from my 401(k) account. I would only do that to avoid bankruptcy.

2.  We maximize contributions to my Health Savings Account (HSA) to reach the statutory limit. These contributions are also taken directly out of my paychecks.

3.  We never spend HSA funds. That’s right, non-insured medical expenses are paid from cash flow. The reason is that an HSA is an outstanding retirement savings vehicle – better than a Roth IRA.

4. All paychecks are direct deposited into our savings account.  We don’t pay bills from this account (now at Ally Bank). We pay bills from our rewards checking account.  The savings and checking accounts are electronically linked so that it is easy to transfer money back and forth using simple online commands.

5. Transfers from savings to checking are always smaller than the paycheck deposited.  For example, if I receive a net pay check of $5000, only $4000 (and never $5000) may be transferred to the checking account to pay bills. This insures that this savings account balance is always increasing.  The only exception to this is if we plan for and undertake a capital project, such as remodeling our master bath last year.  How much we actually transfer of each paycheck will depend on two things: whether we are close to the high interest limit balance in our checking account (currently $25k) and our projected bill pay cash flow (see strategy 6).

6.  We monitor projected monthly expense cash flow.  Almost all of our bills are paid directly from our checking account. A few are auto-pay, e.g., mortgage, electricity and natural gas. The rest are payments that I schedule, well in advance. It is very easy to then estimate the total cash outflows from that account, allowing me to roughly determine how much we need to transfer in.  Some folks load up their credit cards with auto-payments to take advantage of the rewards offered. I don’t like to do that for two reasons. First, I am philosophically opposed to rewards credit card programs because these end up increasing the prices of goods and services for all of us. Second, it is not as easy (at least for our credit card) to estimate outflows in advance using the credit card online site. Our checking account user interface presents a much clearer picture, schedule, and totals of upcoming payments.

These six strategies allow us to consistently increase the balance in our savings account, so that it can be used for any emergencies (none yet) or for unusual planned expenses (e.g., the bath reno). We don’t have to track individual expense categories as in a conventional budget.

Our strategies may not work for folks who are living close to the income vs. expense margin. In those cases, careful budget hawking is called for.

What are your strategies for saving without budgeting?



  1. Bill says

    I’ve struggled with point #3. The question is whether it is better to pay taxes now (when there is income to pay them) or to pay taxes later (out of savings). My calculations certainly work out in favor of paying later, especially if the tax bracket will be lower in retirement. But it feels better to not “waste” the savings. I understand your strategy of saving up unreimbursed medical bills, and then retroactively reimbursing yourself out of the HSA, but it is still equivalent to paying income taxes now on that amount, so as to not pay it later. Have you worked through the numbers? How are you able to make it come out better not using the HSA now?

    • MJP says

      Bill- The tipping point for me in this decision is that by not spending the HCA funds now, I can invest them in one or more mutual funds available in our plan then use investment earnings for future medical expenses, also tax free.

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