What Budget? Do you keep one?

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ad2007
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What Budget? Do you keep one?

Post by ad2007 »

Do you know your budget?

We save and invest in order to retire at some point, right? We might be there (late 40's), but can't really be sure. The problem is we don't really know what our annual spending really is. It fluctuates wildly.

For the past 5 years now, I've been trying to figure out our number and have about given up. We can go from spending roughly $75K to $200K per year. And the weird thing is we really don't feel the difference in quality of life, and are just shocked looking at that wide range. The average during those 5 years: maybe $140K, so we figure that might be a safe number for us. But I feel like I'm trying to do a calculus problem and have forgotten all the formulas. So frustrating when you'd figure this should be a cakewalk.

I'm baffled that people can say: "We're going to retire early on $XX per year." Are those people that consistent with their budget?

So the question is: how much does your budget/spending vary? Do you really know why and can account for the variations? Please tell me there are other people out there whose spending fluctuate greatly because that's just life. Things change, habits change.

I guess the other question is, did your spendings steady out later in life, maybe? Or are some of us just not all that consistent with money, ever.
onourway
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Re: What Budget? Do you keep one?

Post by onourway »

We did not budget for years. That combined with wildly varying income led to wildly varying spending habits. It was when peak kid expenses coincided with a down year in income and our savings was dropping rapidly that I finally decided a budget was in order. Changed our life. We had the exact same feeling as you - our quality of life did not seem all that different even in years where we were probably spending double what we needed to. What budgeting has done is allow us to determine our baseline - how much we really need to sustain our lifestyle - and then we are in a much better position to decide how to allocate additional funds as they are available. Previously much of that money would just be frittered away on things we didn't really need - eating out, fancier vacations, stuff, etc. Some of it would get set aside for future goals, but it was not efficient. Now we fill all of our goal buckets - retirement, vacation funds, college savings, car savings, house funds, etc. and only spend what's extra after all living expenses *plus* goal buckets are funded.

In the past year and a half since we started doing this via a budget we've managed to figure out our real cost of living, which allows us to make estimates for retirement based on something realistic, managed to fill all of our goal buckets - including maxing all retirement accounts, plus HSA, plus saving more for college than ever before - all while childcare expenses are still sky-high and simultaneously save enough that we are undertaking major house renovations this year just after we paid cash for a new car.

We would never have been able to comfortably do that in the past unless we were in one of the really high income years. Now we're doing it on a normal year with higher than usual expenses. Budgeting is not about austerity as I mistakenly believed for too many years. It's about putting you in the driver's seat of your finances.
mike_in_ny
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Re: What Budget? Do you keep one?

Post by mike_in_ny »

We do not keep a budget, but what we do is track our spending. To me this is the most
valuable thing that you can do to understand your finances. I don't go crazy--only 10
categories. It takes about 15 minutes each month and I use an old fashioned self-made
spreadsheet.

Some categories are surprisingly consistent, others are variable and make sense based
on what we're doing (travel, kids activities, kitchen re-model, etc.)
AlohaJoe
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Re: What Budget? Do you keep one?

Post by AlohaJoe »

ad2007 wrote: Thu Mar 22, 2018 5:12 amSo the question is: how much does your budget/spending vary? Do you really know why and can account for the variations? Please tell me there are other people out there whose spending fluctuate greatly
I'm usually within +/- 10% of my budget. I know exactly why and can account for the variations.

I'm sure there are people out there whose spending fluctuates greatly and can't account for the variation, though I'm having a hard time imagining someone going from $75,000 to $200,000 and not being able to account for it.
I guess the other question is, did your spendings steady out later in life, maybe? Or are some of us just not all that consistent with money, ever.
My spendings became less steady later in life. When I was younger I was poorer (well, in a relative sense). When you make $30,000 and your fixed costs are $28,000 ... there's just not as much room for variation. When you're making $250,000 and your fixed costs are $60,000...there is a lot more room for variation based on discretionary spending.
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oldcomputerguy
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Re: What Budget? Do you keep one?

Post by oldcomputerguy »

Absolutely I have a budget. If you have a fixed amount of income (be it salary, Social Security/pension, whatever), how else does one make sure one's income will meet one's expenses?
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djpeteski
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Re: What Budget? Do you keep one?

Post by djpeteski »

Yup each and every month the wife and I meet in our office and do our budget meeting and review our financial standing.

We still use cash for groceries. This pay cycle has been lean as some happen stance caused us to spend all of our grocery money early on. So we eat out of the pantry until Friday, which is payday.
TheOscarGuy
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Re: What Budget? Do you keep one?

Post by TheOscarGuy »

ad2007 wrote: Thu Mar 22, 2018 5:12 am
So the question is: how much does your budget/spending vary? Do you really know why and can account for the variations? Please tell me there are other people out there whose spending fluctuate greatly because that's just life. Things change, habits change.

I guess the other question is, did your spendings steady out later in life, maybe? Or are some of us just not all that consistent with money, ever.
For the first question: yes, I can tell how much I am spending and usually it does not vary. You will have unexpected expenses -- things break down in house, but we have separate allocated budget for that too.
Over the years this is what I have done, and I think in our case it has helped a lot:
list down your "recurring" expenses monthly. They are the ones that for the most part won't change. These generally do not need budgeting and get deducted from our checking accounts or charged on credit card. For example, all of utilities, mortgage, child care expenses, gas (I know its variable, but its within a predictable range).
List down "incidentals", eating out, entertainment, whatever varies, month-to-month. Figure out how much you can safely spend in incidentals. If we start going above it, we are not allowed to spend. Its also tracked by category, so eating out has a separate budget and it can not "spill out" into another category.
For expenses that aren't monthly, we come up with a number at the beginning of the year (vacation, large home expenses, etc.) and keep monthly amounts separate into a savings account.

For the second question, I am not sure I am at a "later in life" stage :D
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SmileyFace
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Re: What Budget? Do you keep one?

Post by SmileyFace »

There is a difference between keeping a budget and tracking your cash-flow.
Keeping a budget means you set goals and try to keep within them.
Tracking cash-flow means you use an app like Mint or spreadsheets (dumping credit card and bank CSV exports into them) periodically to see were your money is going. Of course having a budget is the superset and requires you to track your cash-flow to your budget.
If you are meeting your savings goals you might do the latter versus the former to see where your money is going. 75K to 200K is a very extreme variation and I assume means that some years you have bought vehicles, done remodeling projects, or taken expensive vacation while other years you have not - but if you don't understand this 100%+ variation you certainly need to in order to figure out your yearly retirement expenses.
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Tamarind
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Re: What Budget? Do you keep one?

Post by Tamarind »

I keep an annual budget. The categories where I'm prone to overspending (restaurants) are set as monthly amounts in the Mint budget tool so I get a warning if I'm close to the limit.

I use Mint to update my actuals on my budget spreadsheet maybe once a quarter.

All planned saving for the year is automated, so as long as my checking buffer stays where it is supposed to (ie cash flow neutral after planned expenses), I don't worry too much on a daily basis about how much is being spent or on what. If the buffer drops, I look harder to identify the culprit and find where to cut back. If it rises, I may move some extra to a savings bucket that I want to accelerate.
UpperNwGuy
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Re: What Budget? Do you keep one?

Post by UpperNwGuy »

I have a monthly budget that I maintain in Moneydance. I track my expenses against that budget. It's easy. One of the keys to success is to budget with sufficient margin to permit adjustments within the budget without busting the overall total.
Last edited by UpperNwGuy on Thu Mar 22, 2018 7:38 am, edited 1 time in total.
dknightd
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Re: What Budget? Do you keep one?

Post by dknightd »

We do not have a budget (except to spend less than we earn) and do not track expenses.
I guess we are wild and crazy and reckless ;)
Actually DW did track our expenses for awhile. I'm not sure what she did with that information,
and she soon tired of it.
What we do is have retirement savings, and amounts needed for recurring expenses (property taxes, insurance, things that we know
will come due, but are not due every month), taken out of my check so we never see it.
Then I keep 2 slush funds. A small one that we might dip into every once in a while, and a larger one to cover bigger expenses.
If the small one starts going down too much I let my wife know we should cut back on spending.
If the larger one (earmarked for things like new roof, car, furnace, vacation) goes down we cut back elsewhere to bring it back up.
Perhaps not ideal, but it has worked for us.
If you value a bird in the hand, pay off the loan. If you are willing to risk getting two birds (or none) from the market, invest the funds. Retired 9/19. Still working on mortgage payoff.
NextMil
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Re: What Budget? Do you keep one?

Post by NextMil »

Holy smokes! :shock: How do you not have a budget? I have a master spreadsheet that I do every month for all living expenses and then we each get some spending cash. Anything left over at the end of the month gets plowed into mortgage and investments - a long while ago it would go to debt servicing. It’s upsetting to me (for you :happy ) that you are not capturing every penny to advance your goals.

I’ve been doing it so long now, it maybe takes me five minutes every month.
BogleMelon
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Re: What Budget? Do you keep one?

Post by BogleMelon »

I have a zero-based budget. I give every dollar an earmark (a job) and then track expenses. If I overspent a category, I have to choose another category to reduce its allocated dollars by the same amount. It is called YNAB!

I budget monthly for non monthly expenses as well, example: car insurance, disability insurance (annual is cheaper)..etc So I don't spend this month what is supposed to be set aside as "annual premium divided by 12". Also when it is time to pay that fat bill, I don't think twice, and I don't feel the negative impact on my cash flow since I have been saving for 12 months for this day..

If you don't want to budget, you can look at your monthly cash flow instead of annually, the range you are referring to is alarming. Any chance one of your cards or accounts has been hacked and the hacker was enjoying spending your money?

I wouldn't let that $200K per year go without further digging and investigating if I were you..
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UpperNwGuy
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Re: What Budget? Do you keep one?

Post by UpperNwGuy »

By the way, if you don't like detailed budgeting with lots of categories, a simple way to do it is to divide up your monthly income into three parts: fixed expenses, variable expenses, and savings/investments. The only part that will require any management is the variable expenses.
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22twain
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Re: What Budget? Do you keep one?

Post by 22twain »

We've been retiring gradually during the past few years. We just figure out the total annual cash flow after the fact, from our checkbook balances. After breaking out "unusual" expenses (vacation trip, new refrigerator, etc.) it's been pretty consistent for the past several years. Even with those expenses added back in, plus taxes, it's been below 2% of our total savings, so we feel no need to budget in advance.

Even while we were still working, we simply made sure we were "saving first" via payroll deduction to our 403b plans, and that our checkbook balances were slowly but steadily increasing. When they got "too big" we stashed the extra money somewhere else. When we inherited money, we set it aside and didn't tap it for expenses.

We live and worked in a small town so we have to go "out of our way" to spend a lot of money.
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rixer
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Re: What Budget? Do you keep one?

Post by rixer »

We're retired. The way we budget is to draw out a year's income and that's all we got to live on for the year. So far it's worked out and we're spending less than our draw without trying. (not a whole lot less)
For keeping track of our expenses, we use a google doc that works easily for us.
raisinsaregrapes
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Re: What Budget? Do you keep one?

Post by raisinsaregrapes »

We don't really keep a detailed budget. We have an idea of big picture spending, but no budget. Maybe do one someday, but as we are saving about 40-50% of income I don't see an urgent need.
soccerrules
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Re: What Budget? Do you keep one?

Post by soccerrules »

No Budget, but we track our spending using Mint. Mint is FREE, it links to your checking/credit card accounts and categorizes your expenditures.

Once you have 12 months of expenses "logged" in MInt you can see where your money is going.

You can also look at your bank/CC statements and create your own spreadsheet with categories (Auto, House,Food etc) Mint will do this for you and the program offers subcategories for each Main category. (Under Food - Groceries, Work Lunches, Dining Out, Fast Food, Snacks etc)

I agree with others that it is a little odd that you can spend $75K in one year and then $200K the next and not feel/know where your money is going.
Don't let your outflow exceed your income or your upkeep will be your downfall.
Hillview
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Re: What Budget? Do you keep one?

Post by Hillview »

Mid 40s here. We never budgeted and then we started to have the thoughts you had (what do I really need to retire). I used Mint for a few months and about 3 months ago moved to YNAB. It has been an eye opener for sure. I have been able to export my monthly expenses from YNAB into Excel and then play around with what I think it will cost in retirement (remove after school and tutoring $ and add health insurance, etc) and it is all based on my actuals.
HAF-VA
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Re: What Budget? Do you keep one?

Post by HAF-VA »

We use YouNeedABudget.com Also known as YNAB. It is the best budgeting program you can use. I makes you budget and think before spending but it is flexible to roll with the punches. You can then run reports that show spending by category per month and average over a period. If you have really odd spending - major house repairs, car purchase, etc. Just make sure it is its own category so you can properly analyze how often that will repeat.YNAB gave me a good understanding of my true run rate costs so that I could make the decision to retire.
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ad2007
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Re: What Budget? Do you keep one?

Post by ad2007 »

djpeteski wrote: Thu Mar 22, 2018 5:50 am Yup each and every month the wife and I meet in our office and do our budget meeting and review our financial standing.
That's impressive.
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Re: What Budget? Do you keep one?

Post by Dottie57 »

mike_in_ny wrote: Thu Mar 22, 2018 5:40 am We do not keep a budget, but what we do is track our spending. To me this is the most
valuable thing that you can do to understand your finances. I don't go crazy--only 10
categories. It takes about 15 minutes each month and I use an old fashioned self-made
spreadsheet.

Some categories are surprisingly consistent, others are variable and make sense based
on what we're doing (travel, kids activities, kitchen re-model, etc.)
+1

I have three years of downloaded.csv files from my checking. All spending goes through my checking.account. I know that my take home after taxes and benefits was $XXX a month. So I added in taxes and healthcare and this gave a base number. Savings from my paycheck can pay for surprises.
maddogio
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Re: What Budget? Do you keep one?

Post by maddogio »

We track spending in Mint. That information gleaned from this has become a de facto budget, I guess. We expect what we will spend every month based on historical data. We don't necessarily earmark every dollar of discretionary spending, but we're able to fairly easy detect if we're spending more than we'd like on things that aren't necessary.
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Re: What Budget? Do you keep one?

Post by Call_Me_Op »

I loosely track my budget but do not "stick" one religiously. I have noticed that it keeps getting bigger - my personal inflation.
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ad2007
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Re: What Budget? Do you keep one?

Post by ad2007 »

soccerrules wrote: Thu Mar 22, 2018 8:14 am
I agree with others that it is a little odd that you can spend $75K in one year and then $200K the next and not feel/know where your money is going.
To be fair, our income was much higher and we maxed out all avail tax advantage space and some brokerage savings to boot.

I suppose we do know, the credit card and bank statements are there.

Vacations can be big ticket items. There's a huge difference between a Disney cruise in the Caribbean vs a European cruise. We'd spend 4-5x more going to NY/Chicago/Boston vs roughing it in the mountains.
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CyclingDuo
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Re: What Budget? Do you keep one?

Post by CyclingDuo »

ad2007 wrote: Thu Mar 22, 2018 5:12 am Do you know your budget?

We save and invest in order to retire at some point, right? We might be there (late 40's), but can't really be sure. The problem is we don't really know what our annual spending really is. It fluctuates wildly.

For the past 5 years now, I've been trying to figure out our number and have about given up. We can go from spending roughly $75K to $200K per year. And the weird thing is we really don't feel the difference in quality of life, and are just shocked looking at that wide range. The average during those 5 years: maybe $140K, so we figure that might be a safe number for us. But I feel like I'm trying to do a calculus problem and have forgotten all the formulas. So frustrating when you'd figure this should be a cakewalk.

I'm baffled that people can say: "We're going to retire early on $XX per year." Are those people that consistent with their budget?

So the question is: how much does your budget/spending vary? Do you really know why and can account for the variations? Please tell me there are other people out there whose spending fluctuate greatly because that's just life. Things change, habits change.

I guess the other question is, did your spendings steady out later in life, maybe? Or are some of us just not all that consistent with money, ever.
I will give you a typical example of what we use by more or less following the 50/30/20 rule. Difference in our household is we are currently saving more than 20%, so that has to come from the 50/30 portions to accomplish.

50/30/20 Budget Rule (based on after tax income)

•50% should go to fixed expenses (mortgage, insurance, utilities, cable, phone)
•30% should go to variable expenses (groceries/food, clothing, entertainment, automobile gas & maintenance, home maintenance)
•20% should go to savings (or servicing any non-mortgage related debt)

Track your spending so you can set a budget. In our case, we track the following items to set our budget (these items and divisions are specific to our household and situation):

Current Annual Gross Income/Dividends/RMD’s

Salary 1: $
Salary 2: $
Dividends: $
Required RMD’s from 2 inherited stretch IRA’s: $

Annual Total Income $



Current Monthly Expenses

Needs - $

Mortgage (PITI) - $ ($ of this is TI)
Health Insurance - $
Dental Insurance - $
Utilities - $ (Electric/Water/Gas/Sewer)
Garbage: $
Insurance (Auto/Umbrella/Flood/Jewelry): $

Wants - $

Pets: $
Hair Styling: $
Family Cell Phone Plan/4 phones + iWatch - $
Religious Tithing - $
Insect Control: $
Netflix: $
Cable/Internet: $
Charitable Organization Monthly Donation: $
XM Radio – $
Sport License - $
Exercise Coaching Plan: $

Total $


Variable Monthly Expenses

Groceries/Food/Restaurants – $
Entertainment – $
Travel – $
Clothing – $
Auto Maintenance/Gas/Repairs – $
Home Maintenance – $

Total $

Current Monthly Savings

Monthly Vacation Fund Savings: $
401k/403b Contributions for Couple: $
457b Contributions: $
401a Mandatory Pension Contribution: $

Monthly Total $

Current Employer Match to Savings

Employee 1 - $
Employee 2 - $

Monthly Total $


**Monthly Optional Roth IRA Contributions for Couple (2 separate Roth IRA’s): $
"Save like a pessimist, invest like an optimist." - Morgan Housel
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Alexa9
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Re: What Budget? Do you keep one?

Post by Alexa9 »

Biggest expenses: Home, Car, Food, Travel. If you can keep these under control you're usually pretty good. I try to keep hobbies and going out inexpensive too.
soccerrules
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Re: What Budget? Do you keep one?

Post by soccerrules »

ad2007 wrote: Thu Mar 22, 2018 8:54 am
soccerrules wrote: Thu Mar 22, 2018 8:14 am
I agree with others that it is a little odd that you can spend $75K in one year and then $200K the next and not feel/know where your money is going.
To be fair, our income was much higher and we maxed out all avail tax advantage space and some brokerage savings to boot.

I suppose we do know, the credit card and bank statements are there.

Vacations can be big ticket items. There's a huge difference between a Disney cruise in the Caribbean vs a European cruise. We'd spend 4-5x more going to NY/Chicago/Boston vs roughing it in the mountains.
Understood. It sounds like you just haven't invested the time to look into your outflow. This would probably be a really good exercise to see were your money is going and then possibly where you could trim some fat and save more (if you want to). I bet if you grabbed your bank/CC statements for the last year and sat down at the computer (Excel) for an hour you could come up with a pretty good idea of your monthly expenses in the big categories ( Housing, Auto, Food, Utilities, Charity, Insurances etc) and then your lumpy expenses (Vacation, Car,Roof). Mint will do it for you going forward, but I do not think it does a look back at prior months once you've link your accounts.
Don't let your outflow exceed your income or your upkeep will be your downfall.
smitcat
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Re: What Budget? Do you keep one?

Post by smitcat »

We have over 20 years of expenses tracked and that has led to a successful budgeting. It is quite easy and quick to do once you get used to it and have some history.
I could not imagine making some value added decisions about spending or savings if we did not know where the funds were going.
LiterallyIronic
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Re: What Budget? Do you keep one?

Post by LiterallyIronic »

ad2007 wrote: Thu Mar 22, 2018 5:12 am Do you know your budget?

I'm baffled that people can say: "We're going to retire early on $XX per year." Are those people that consistent with their budget?
We don't budget per se, but we do track every cent we spend. The average over a long period should take care of fluctuations. As for figuring out how much you need to retire on per year, we just look at our categories of expenses and remove the ones that won't exist in retirement. The rest is the amount we need.

So we take out mortgage principal/interest, retirement contributions, charitable donations, and expenses for our kid. Everything else will continue into retirement. That gets us to about $1,500/month or $18,000/year. That ignores inflation and the fact that health insurance will probably be more than the $107.32/month we're paying now, so I bump that up to $24,000/year and say we need $600,000 (and a paid off house) to retire.
AntsOnTheMarch
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Re: What Budget? Do you keep one?

Post by AntsOnTheMarch »

I’ve been tracking all expenses for decades. Sometimes it’s very detailed, sometimes less. Lately, it’s been about 30 categories but that includes self-employment expenses. I can tell you exactly what we need to live on but things can change in a way that can’t be planned for. For example, an illness, exorbitant increases of certain insurances, property tax, severe loss of income, etc. If our expenses fluctuate by 10k/yr, it would be a lot and something would have happened that was unusual. And, I can tell you what it is and than discuss any possible courses of action. It could be that nothing can be done—say it’s a medical expense. What’s the alternative except to cut expenses somewhere else—and if there’s not much in the way of discretionary expenses in the budget...

Surely deviations such as the OP has noted should be easy to figure out even without a detailed budget. I would not want to conduct my life in a way that I had no idea where my money was going. This would be true if I were extremely wealthy or very poor.
BradJ
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Re: What Budget? Do you keep one?

Post by BradJ »

My wife and I have been doing the zero based budgeting for years now. We have created an Excel sheet that is updated daily, it keeps us on track. Everyone is different, but I have a hard time imagining how anyone functions without a budget. I couldn't imagine not knowing where my money went. To many, the word budget is a cuss word, but it's simply tracking your expenses.
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Re: What Budget? Do you keep one?

Post by jebmke »

ad2007 wrote: Thu Mar 22, 2018 5:12 am So the question is: how much does your budget/spending vary? Do you really know why and can account for the variations?
A couple of years prior to retiring I made up a fairly detailed budget for retirement spending - excluding income taxes.

I recently looked at the last 6 years of aggregate spending (again, excluding income taxes) and found that the average for the six years was +2% - this doesn't even cover "inflation" although much of our cost has not inflated much for some reason. The range is +9% and -6%.

The +9% was my cataract surgery, mainly.
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adamthesmythe
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Re: What Budget? Do you keep one?

Post by adamthesmythe »

oldcomputerguy wrote: Thu Mar 22, 2018 5:47 am Absolutely I have a budget. If you have a fixed amount of income (be it salary, Social Security/pension, whatever), how else does one make sure one's income will meet one's expenses?
Simple, consistently spend less on average than you have coming in.

As I am now retired, I think I may need to set up some sort of budget so I don't spend too little.
RollTide31457
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Re: What Budget? Do you keep one?

Post by RollTide31457 »

We track overall spending. Usually try to stay below $35k.
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Re: What Budget? Do you keep one?

Post by sjt »

We use an incredibly simple budgeting app that both DW and I can update called "goodbudget". This mostly accounts for our discretionary / credit card spend (repeating monthly costs like mortgage, childcare, utilities are not tracked on our budget since we have little to no control). We have different buckets: $800 for groceries, $200 for gas, each of us gets $250 each month to spend on things that are important to us (this has been great since we can each spend on things the other deems unimportant without arguing), outings, etc. This allows us to keep annual credit card spend around $25k. We are finally maxing tax advantaged accounts and the only debt is a 15-year mortgage.
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delamer
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Re: What Budget? Do you keep one?

Post by delamer »

I’d start with reviewing you expenses over the last few years. As someone else said, you have fixed or variable. Plus you have savings, and I’d add income and payroll taxes as a 4th category. (Income taxes are variable but you have limited control over them. They aren’t like a vacation that you can choose to downsize or not take.)

Part of the point of budgeting is not to have the wild fluctuations— most people don’t want to live a life where they eat all Whole Foods organic in Year 1 and then have to switch to pork and beans in Year 2.

The fact that you don’t feel a difference in lifestyle isn’t really relevant. The objective is to deploy your money as the scarce resource that it really is. Once you are past the basic existence issue, the most important thing is aligning your spending with your priorities.

Whatever period you use to budget, your budget has to account for expenses that don’t fit solely in that time period. if you have an annual budget, then you need to account for new cars every 5 years (or whatever). If you go monthly with the budget, then you need to account for the new cars plus semi-annual payments like auto insurance or property taxes. Otherwise, you wind up living paycheck to paycheck.

EDIT: Yes, we keep a detailed budget on Quicken. The set up takes a bit of time, but the maintenance is easy with downloads from our bank and credit cards.
Last edited by delamer on Thu Mar 22, 2018 11:03 am, edited 1 time in total.
Miguelito
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Re: What Budget? Do you keep one?

Post by Miguelito »

We don't budget. We tend to buy what we need. Have I spent more than I should have on a few tools, or bought a shirt I didn't absolutely need? Sure. But for our income that variability is absolutely in the noise. Big ticket items I do pause and think about, but if we feel we need something, we get it.
Last edited by Miguelito on Thu Mar 22, 2018 12:19 pm, edited 1 time in total.
retire57
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Re: What Budget? Do you keep one?

Post by retire57 »

Yes. We use a spreadsheet with categories: Groceries, Gas, Golf, Cash, Insurance, Utilities. Years of Quicken data makes for easy plug-in of the monthly numbers. Whatever is left is ear-marked for Miscellaneous (i.e. household items, pet care, clothing etc...). Zero-based.
DetroitRick
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Location: SE Michigan

Re: What Budget? Do you keep one?

Post by DetroitRick »

We've always budgeted, and have found it to be a useful financial planning tool. But we've also adapted the budget process to meet our specific needs in terms of detail. There also are a few things we don't specifically budget for - like vacations, cars, home renovations. Which are also the things that can really skew spending from average levels. We just view those as separate "projects". The key is to budget at a level of detail that means something to YOU and that helps you position your assets to meet your own needs. Too much detail, you become an accountant. Too little detail, you get no useful information for forward planning. Budgeting also helps us keep the trivial things from getting out of control - to spend on purpose. We don't use it as a hammer to restrict living.

In the end, yes, we are able to identify where and why variances occur. With tools like Quicken (or Mint, or whatever) I find the budgeting process and the tracking process to be relatively quick and easy. I may spend more time thinking about the big picture, but putting together a meaningful annual budget itself only takes me about one afternoon late in the year. Wife and I then review and discuss and make a few changes. And as I entered retirement, I never had much problem knowing what spending levels would become. That, in fact, was the biggest payoff for the effort involved. Tracking against a budget takes almost no time for us - once the "right" tracking categories have been built. We just have to categorize our downloaded transactions - very little time really. It also helps immensely with tax planning.

I've found the variability you mention to be true throughout our own lives too. Not so much related to age (we're retired), but to life events. I don't find it negates the value of having a budget. Big areas where we have historically found those variations to be most material - the 3 categories I mentioned earlier, plus healthcare and veterinary care. The rest of it has been pretty predictable, before and after retirement. Life in my 30's was where I had the most variation. Maybe the real blessing in life was a highly variable income - bonuses, options, commissions. Having that income variability sort of forced a level of budgetary discipline. Plus it made me adaptable to still living as desired with varying income. To this day, I can increase or reduce spending without impacting major quality of life (within reason, of course).

We've considered dropping budgeting and tracking on occasion. But we've always ended up keeping it - concluding the benefit still exceeds the cost.
Beach
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Re: What Budget? Do you keep one?

Post by Beach »

I'm shocked at the amount of people who responded who don't budget. YNAB user here, we track every penny. Our net worth has increased substantially since we actually paid attention to what we spend our money on and got serious about budgeting.
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randomizer
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Re: What Budget? Do you keep one?

Post by randomizer »

I am too lazy to budget in detail. I just go with high-level estimates.
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adam1712
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Re: What Budget? Do you keep one?

Post by adam1712 »

I don't budget. I have an annual savings goal. As long as I do that, I don't worry about spending. Most of the time I'm saving more than the goal. Really the only years I come in under are ones where I buy a car.
TravelforFun
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Re: What Budget? Do you keep one?

Post by TravelforFun »

OP,

If you don't feel any difference in quality of life whether you spend 70K or 200K, why spend 200K?

TravelforFun
H-Town
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Re: What Budget? Do you keep one?

Post by H-Town »

ad2007 wrote: Thu Mar 22, 2018 5:12 am Do you know your budget?

We save and invest in order to retire at some point, right? We might be there (late 40's), but can't really be sure. The problem is we don't really know what our annual spending really is. It fluctuates wildly.

For the past 5 years now, I've been trying to figure out our number and have about given up. We can go from spending roughly $75K to $200K per year. And the weird thing is we really don't feel the difference in quality of life, and are just shocked looking at that wide range. The average during those 5 years: maybe $140K, so we figure that might be a safe number for us. But I feel like I'm trying to do a calculus problem and have forgotten all the formulas. So frustrating when you'd figure this should be a cakewalk.

I'm baffled that people can say: "We're going to retire early on $XX per year." Are those people that consistent with their budget?

So the question is: how much does your budget/spending vary? Do you really know why and can account for the variations? Please tell me there are other people out there whose spending fluctuate greatly because that's just life. Things change, habits change.

I guess the other question is, did your spendings steady out later in life, maybe? Or are some of us just not all that consistent with money, ever.
OP,

I do keep budget because I enjoy setting goals, planning, tracking progress, nailing goals and setting new ones.

Thanks to the budget & planning, my spending is very predictable and keep at the lowest level but still maintain the quality of life that my family wants.

As someone here quoted: What get measured, get managed.

Best.
Last edited by H-Town on Thu Mar 22, 2018 11:52 am, edited 1 time in total.
ubermax
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Location: Connecticut

Re: What Budget? Do you keep one?

Post by ubermax »

sjt wrote: Thu Mar 22, 2018 10:32 am We use an incredibly simple budgeting app that both DW and I can update called "goodbudget". This mostly accounts for our discretionary / credit card spend (repeating monthly costs like mortgage, childcare, utilities are not tracked on our budget since we have little to no control). We have different buckets: $800 for groceries, $200 for gas, each of us gets $250 each month to spend on things that are important to us (this has been great since we can each spend on things the other deems unimportant without arguing), outings, etc. This allows us to keep annual credit card spend around $25k. We are finally maxing tax advantaged accounts and the only debt is a 15-year mortgage.
We use a similar approach but using a simple Excel spreadsheet that I built - 16 buckets , 15 fixed (e.g. mortgage, electric, etc.) and 1 representing the remainder of our income after those 15 are filled - Pension, SS , and Asset Draw (RMD's) account for our income and these inflows go into a no frills , low interest local bank savings account - the lion's share of that 1 bucket is used to pay credit card expenses and that bucket gets 31.8% of our annual income - our goal is to pay off our card balances each month and leave a residual in that bucket .

I think the OP is late 40's and has a spending range from 75-200K per year - this means nothing to me without knowing total take home , I mean that kind of money could just be chump change - we really never had a budget until we retired and never made savings a priority other than participating in employer plans to the extent we could depending on the current family expense needs - retirement was something in the very distant future , surprise !! :happy
kaudrey
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Re: What Budget? Do you keep one?

Post by kaudrey »

We don't budget per se, but I keep track of big categories, and do have "estimates" at the beginning of the year. My categories probably would seem a little strange to some, as I don't keep track of things like "Food" or "Dining Out" or other variable expenses that many people do. And that is because we pay ourselves first, so we always know that we are meeting our savings goals.

My travel "placeholder" in my spreadsheet is $10K a year. But it's not a budget, and some years we spend less, and some years more. I have about 10 categories (including 3 savings categories), and the rest ends up as "living expenses", which is the difference between our incomes and all of the other categories.

Having said that, we have never had a variance like you are describing. Maybe we fluctuate about 10-15%, but that's about it. OK, I take that back - in 2010 we bought a cabin in the mountains. THAT year our expenses went way up. But it was a planned, known expense...
MikeG62
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Re: What Budget? Do you keep one?

Post by MikeG62 »

OP, here is another thread on the same topic, which may be worth reviewing:

viewtopic.php?f=2&t=240364&p=3760717&hi ... t#p3760717
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GerryL
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Re: What Budget? Do you keep one?

Post by GerryL »

As a congenital saver, I have not felt the need to actually budget. With each paycheck, savings were automatically deposited into various savings vehicle and the rest was mine to pay bills, spend ... or add to savings. But I do track spending, which I call after-the-fact budgeting.

With 20+ years of spending data in Quicken, I was easily able to figure out how much I would need to live in retirement and gave myself an allowance (which is actually well above what I need). Every few months I take the year-to-date spend amount displayed in Quicken and divide it by the number of months that have passed. Then I multiply the result by 12 to see if I am on track to stay within my budget. (Even though I front load a lot of my travel expenses at the beginning of the year, I am well within my allowance. So I feel freer to treat myself as appropriate.)

I think after-the-fact budgeting works for people who live frugally and are dedicated to saving, but it probably wouldn't work for everyone.
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BolderBoy
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Re: What Budget? Do you keep one?

Post by BolderBoy »

mike_in_ny wrote: Thu Mar 22, 2018 5:40 am We do not keep a budget, but what we do is track our spending.
This. No budget but do track spending.
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