I’ve been through phases of sticking to a rigid budget, and being more intuitive with my spending. Invariably, the latter serves my lifestyle better. That’s not to say I don’t go ham on a budget sometimes when I’m striving for a short term goal, but I much prefer to be much more dynamic with my budget.

Technically speaking, dynamic budgeting is a technique used by businesses to help with unpredictable variable costs. But, in terms of personal finance, I like to think I’ve kinda invented my own little version – so obviously, I’m sharing it with you guys.

Dynamic budgeting for your personal finances kinda works in the same way as a business. It allows you to be more flexible, and accounts for overspending in certain areas.

The problem with rigid/static budgeting

Some people respond really well to strict budgeting using categories, buckets or even cash envelopes. Usually it involves allocating a set amount to food, eating out, Uber, public transport, and all that jazz. The issue I have when I budget in this way is two fold.

  1. If I need or want to go over in one category, it can be complicated, and sometimes feel disheartening, even if I’m pulling money from another category.
  2. I actually sometimes find I’ll overspend when budgeting this way, because if I allocate $100 to eating out, I’ll almost go in with the expectation of spending that full amount. I’ll think “oh I’ll buy lunch out because I’ve still got that money left”, when I might not have otherwise.

Don’t get me wrong. I think these more rigid types of budgeting are really important when you start out on your money improvement journey. I certainly started out this way, because without clarity and set structure, you’ll struggle to see where you can improve, and where you’re making mistakes.

But since I’ve done work on my money mindset and overhauled my approach to spending, I’ve moved to a more intuitive spending style. I guess you could say it’s a bit like the intuitive eating craze that’s circulating social media. You don’t count calories or track food, but you intuitively understand what your body needs and doesn’t need.

How do I use dynamic budgeting to optimise my finances?

Because it’s such a flexible strategy, there aren’t set rules around how exactly you can budget dynamically. A lot of the planning will come from your own spending personality, so I’ll use mine as an example.

Something I’ve learned about myself over the last couple of years are that I will always love little luxuries. I’m the type of person who will wait it out for an hour for delayed public transport and trudge the rest of the way in the rain, if it means I can get an Uber to and from an event the next day – and order champagne while I’m there. I’m the type of person that’ll stay in 3 weekends in a row, and on the fourth go out and blow $250 at my favourite beauty bar, getting manicures and sipping cocktails with friends.

So my dynamic budgeting approach has to account for this. There’s no point allocating myself $100 a week of fun money, if I don’t want or need to spend much of it until that 4th week. 

Instead, I focus on making sure all my essentials are paid – not just bills and mortgage, but right down to public transport, food shopping, and birthdays for friends and family.

That way, all other spending is non-essential, and can be bucketed into one. I get paid fortnightly, so each fortnight, I pay my set bills, put my savings away, and then my other money into a planned expenses account (for all those things like food shopping and public transport). The rest goes into my spending account with another bank.

Because of the journey I’ve been on with my money mindset, I use my intuition to know how to make that spending money last. Some weeks I’ll buy a coffee every morning, and others I’ll spend hardly anything and end the week with three meals out in one day. The fact that it’s only for non-essentials helps, because I don’t need to be thinking “oh no, I’ve only got $20 left for the week and I need to do a food shop” – that’s all planned for in my other spending account.

Is dynamic budgeting for you?

It really depends on the type of person you are. If you thrive on structure, more rigid budgeting will probably suit you better. For me, I’m somewhere in between. I love autonomy, but I also tend to follow rules to a tee – which is where that overspending can come in. The $100 for food WILL all get spent on food, because I’m so fixated on that limit that my brain almost challenges me to hit it.

I personally find that this flexible way of allocating my money takes the pressure off, and makes money management WAY more fun and abundant. It makes me feel more in control, and like I can have whatever I like. I also usually make it to payday with money still left, which as we all know is the BEST feeling in the world. 


How to Control Your Spending Without a Rigid Budget