My spending plan is very important to me. I have created and followed my spending plan as it currently exists for four and a half years, so at this point in my life I should be ready to let it go and be able to spend without problems. However, when I consider removing my current planning structure, I get anxious. While I do not like change, I believe my anxiety comes from not having the neat little boxes to put my money in and from which to spend.
In contrast, one of my colleagues says she does not budget. She always knows she has money and just spends what she has. In fact, she usually has enough leftover after maximizing her 401(k) and Roth IRA contributions plus her normal monthly spending (mortgage, utilities, food, etc) that she can add to her money market account or purchase more stocks. This freeform lifestyle works for her and she can obviously live below her means. However, this approach is not for me.
With my personality, having specific spending categories each with its allocated money ensures that I do not raid my savings account for incidental expenses. I am far from perfect and do use the savings account for overages, a rare occurrence that does not total more than $20 in a month. With $45 budgeted for eating out, which includes vending machine snacks, I strictly ration the money. This is a category I could easily spend more on, but my long-term plans are more important than immediate easing of hunger.
Structure works well for me. I keep money out of my hands with automatic withdrawals when I receive a paycheck, I allocate funds in various slots for needs and wants, and record each transaction in my notebook (yes, I am old school with pen and paper). I have a running total of what is in my checkbook and what remains in my spending plan. I feel good about the method I use, making me justify the expense as I place it into a category. Furthermore, I have enough flexibility to change the specific amounts allocated if my circumstances change (e.g., gas prices increase or have a few more dollars as income).
What method helps you spend less than you earn?