Money

Self-made millionaires agree: You don't need a budget. Here's what to do instead

Bobbi Brown speaking at Iconic in New York on June 7th, 2017.
David A. Grogan | CNBC
Bobbi Brown speaking at Iconic in New York on June 7th, 2017.

Budgets can be tedious. And once they're made, they're often hard to stick to.

The good news is, they're not as mandatory as you may think.

"Take those budgets you've been struggling with and throw them in the garbage," writes self-made millionaire David Bach in his book "The Automatic Millionaire."

Instead of budgeting, pay yourself first, says Bach. Meaning, the first dollars out of your paycheck should go to you: your retirement accounts, your investments and your savings. Next, cover all of your fixed costs, such as rent, insurance and car payments, and then live off of whatever is left over.

It's the opposite of budgeting, but it works, says Bach: "The reason [most people] think they need a budget is to help them figure out how much to pay everyone else, so at the end of the month — or year, or their working life — they will have something 'left over' to pay themselves. Pay yourself first and you change everything around you for the better."

He's not the only self-made millionaire who says you don't need to be good with budgeting to take control of your finances.

Bobbi Brown, who used the Yellow Pages to launch her career and build a cosmetics empire, could never stick to a budget, she tells online investing service Wealthsimple.

Rather than focusing on how she should be spending her money and where she could be cutting back, she chose to focus on earning. It's something her dad taught her, she tells Wealthsimple: "He said, 'Forget about following a budget. Why don't you just figure out how you're going to make more money.'"

"Even when I was at my company, I never worried about not having the money to do certain projects," the entrepreneur continues. "It was, 'Okay, okay, we don't have the budget, but how are we going to do it anyway?' Because what I am great at is competition. I like to sell a lot of things. I like to make money. I like to turn a profit. I like figuring out how to get it done."

Everyone's situation is different and budgeting can be a highly effective way to save money — but if it's just not for you, as Bach and Brown share, you have other options.

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