5 Steps to Grow Rich Without a Budget

Have you been putting off creating a budget or tried it with no success? Breathe a sigh of relief because you can still achieve your financial goals without one. Laura gives you 5 steps to grow rich even if budgeting isn't your thing. 

Laura Adams, MBA
11-minute read
Episode #516

If you don’t have a budget, you’re not alone. A U.S Bank study found that only 41% of Americans have one. While keeping a close eye on income and expenses can be the key to making better financial decisions, it’s also possible to build wealth without a budget.

No matter if budgeting just hasn’t made it to the top of your “to do” list or you’ve tried it with lackluster success, I’ll give you 5 steps to grow rich without a budget. Many people, including me, have found smart ways to manage money and achieve financial success without being preoccupied with every penny.

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What Is a Budget?

You’re probably familiar with the idea of a budget, even if you’ve never kept one. A personal budget allocates your expected income to certain expense categories, such as housing, food, debt repayment, and savings.

You create categories and subcategories for all the ways you spend money and set limits on each one. Then you compare the budgeted amounts to what you really spend and make cuts or reallocate funds from one category to another, so you don’t go overboard.

If this sounds like an overwhelming math problem, you’re probably one of the 41% who don’t have a budget!

Budgets are often compared to diets because they seem like a temporary, mad dash to meet a short-term goal.

Budgets become a real brain-buster when you don’t have regular or reliable income. If you’re self-employed, get paid on commission, or qualify for a bonus plan, you may have given up on budgets because you don’t know exactly how much you’ll earn from month to month.

Another wrinkle is that we don’t always spend the same amount per month on each expense category, such as insurance, healthcare, food, or utilities. You can make an estimate by calculating how much you spent last year and dividing by 12. But you may not have that data, or it could be different from this year’s numbers.

For me, the roadblock to budgeting isn’t so much the math, but a feeling of deprivation. Budgets are often compared to diets because they seem like a temporary, mad dash to meet a short-term goal.

These types of sprints can work when you’ve gone completely off the rails and need to get back on track quickly. However, I generally believe that a better approach for long-lasting financial success is to set up a sustainable, realistic, and flexible money management system.

Don’t get me wrong; it’s not that you won’t need to make sacrifices to achieve your financial goals. Few of us have the resources to afford everything we want for ourselves and our families. My point is that focusing just on the math can be myopic, like not seeing the forest for the trees.

5 Steps to Grow Rich Without a Budget

  1. Focus on your net worth.
  2. Consider your financial end game.
  3. Decide on your financial goals.
  4. Create a spending plan.
  5. Create an earning plan.

Instead of feeling guilty that you don't follow a budget, use these 5 steps to manage your money wisely and grow rich.

1. Focus on your net worth.

To understand how to get where you want to go, you need to know exactly where you are right now. In other words, growing rich starts by getting a grasp on your current financial situation.

I know that can be scary for many people, because you may not be happy with your finances and may not want to face them. But you’ve got to embrace reality to make positive changes.

A PFS gives you a complete view of your current situation, and should be updated on a regular basis, such as annually or even quarterly.

The best way to start is to create a tool that you can use throughout your life to help you gauge your level of financial fitness. The tool I’d like you to create is called a Personal Financial Statement, or PFS.

A PFS gives you a complete view of your current situation, and should be updated on a regular basis, such as annually or even quarterly. Each time you update your PFS, the purpose is to recalculate your net worth, which equals your assets minus your liabilities.

I use an Excel spreadsheet to list out each asset I own, such as cash accounts, retirement accounts, investing accounts, real estate, vehicles, and other personal possessions that have real value. Below these, I list my liabilities, such as mortgages, car notes, and credit card balances. The difference between what you own and what you owe is your net worth.

For instance, if you own $250,000 in assets, but have $200,000 in debts, your net worth is $50,000. Net worth is an important number because it reveals your true financial resources at a given point in time. If you owe more than you own, you’ll have negative net worth.

The goal is to increase your assets and shrink your liabilities every year. Tracking your net worth over time is an incredibly valuable exercise because it keeps you focused on what really matters, which is building wealth.

There’s no magic net worth number that you should have. But here’s a rough guideline to target:

[Your age – 25] x [Gross income / 5]

For example, if you’re 35 years old, subtracting 25 gives you 10. If you earn $60,000, dividing by 5 equals $12,000. Then multiplying 10 by $12,000 gives you $120,000, a good net worth to target for your age.

If you’re 35 years old and that amount of wealth seems out of reach for you, don’t despair. Improving your financial health doesn’t happen overnight. Just follow the remaining steps in this post to build wealth over time.

In chapter two of my book, Money Girl’s Smart Moves to Grow Rich, I review this net worth formula and explain step-by-step how to create a Personal Financial Statement. You can download chapters one and two for free, which includes a sample PFS to help you get started now.


About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.