That has been roughly my approach. Taxes, savings, mortgage and other critical stuff came out before or immediately after I got paid. If we got close to spending all the rest, that meant that we should slow down our spending. Usually, extra would accumulate and after a while we'd find something to spend it on.
What is the simplest way to handle the household budget?
Re: What is the simplest way to handle the household budget?
Re: What is the simplest way to handle the household budget?
Are you sure you need proscriptive budgeting (ie. $300 on groceries this month, put $300 in cash in an envelope and when you run out, no more groceries til the 1st of next month)? I've never actually done proscriptive budgeting. Rather, I do retrospective tracking. Roughly each quarter, I go through all bank and credit card statements and enter expenses into a spreadsheet I built, organized by category. No double-entry bookkeeping to check for errors; I figure any errors are small enough to not change the overall picture. If you've been doing proscriptive budgeting for this long, your spending habits are probably tuned to something sustainable, so you might try "taking off the training wheels" and just tracking your spending after-the-fact.
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Re: What is the simplest way to handle the household budget?
The simplest method is the “leaky barrel” method. When you get paid, put the money in the barrel (otherwise known as the checking account). As the month goes on, money leaks out of the barrel to pay for things. At the end of the month, if there’s still something in the bottom of the barrel, then you’re golden. Pour the remainder into the “savings” barrel, and start over. If you come up short, adjust as necessary.
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Re: What is the simplest way to handle the household budget?
The simplest way to handle the household budget is not to have one. Buy what you need when you need it, but no more.
Works for me. Everyone is different, but the hassle of managing with cash and envelopes is hard for me to imagine. To what end? This sounds like something geared for those that have trouble controlling spending and / or saving money. Once you have those skills down, what's the point of hose hold budgeting? I DO see the benefit to retroactive tracking.
Works for me. Everyone is different, but the hassle of managing with cash and envelopes is hard for me to imagine. To what end? This sounds like something geared for those that have trouble controlling spending and / or saving money. Once you have those skills down, what's the point of hose hold budgeting? I DO see the benefit to retroactive tracking.
Re: What is the simplest way to handle the household budget?
We "pay ourselves first", so 401k/etc. contributions are taken out automatically.
We split our remaining net payment into $X to cover expected expenses, and anything extra to "savings".
We keep up to 1 year of annual expenses in cash (bulk of that at HMBradley earning 3.5% currently). This covers any unexpected variation in income (which we have as well), and most other ad hoc expenses (like we'll probably take down two trees this year which we hadn't planned on). We'd grow this if we had known expenses like home remodeling coming up. And we usually try to save up extra to front-load 2X Backdoor Roth, HSA, I Bonds, EE Bonds, and 529 contributions in January.
Anything beyond that is invested.
We don't "need" a budget so long as we control our spending.
That said, we do use Mint to understand where the money is going, and track against our "budget". But we don't limit ourselves to the budget - at least not at the detailed level. I could care less if our "food" budget is over, so long as our overall monthly spending is in line with expectations. But even there, exceptions are realistic - for example we can't control (to the extent we may like) the timing and size of medical expenses, and have no say on the timing of things like property taxes. But if we are trending towards being over budget, I'll likely push off a discretionary expense that can wait. But since we live far below our means, I'm not opposed to exceeding the budget on discretionary items - like maybe an extra trip this year then budgeted...
As it was one of the first investment/finance books I read that really resonated with me, I also track expenses (basically just record what was in Mint into an Excel file) to create the "wall chart" from Your Money or Your Life. This helps me track investment growth and expense control (both are largely on autopilot at this point), waiting for the "lines to cross" showing we've achieved Financial Independence.
We also use the above to set next year's "budget". Which primarily means do we need to increase/decrease the amount going to cover expected expenses (via direct deposit).
Again, anything else is saved/invested (along with automatic investments like 401k. So if we have income variations, it primarily means variations on how much we can contribute to taxable account that year.
We split our remaining net payment into $X to cover expected expenses, and anything extra to "savings".
We keep up to 1 year of annual expenses in cash (bulk of that at HMBradley earning 3.5% currently). This covers any unexpected variation in income (which we have as well), and most other ad hoc expenses (like we'll probably take down two trees this year which we hadn't planned on). We'd grow this if we had known expenses like home remodeling coming up. And we usually try to save up extra to front-load 2X Backdoor Roth, HSA, I Bonds, EE Bonds, and 529 contributions in January.
Anything beyond that is invested.
We don't "need" a budget so long as we control our spending.
That said, we do use Mint to understand where the money is going, and track against our "budget". But we don't limit ourselves to the budget - at least not at the detailed level. I could care less if our "food" budget is over, so long as our overall monthly spending is in line with expectations. But even there, exceptions are realistic - for example we can't control (to the extent we may like) the timing and size of medical expenses, and have no say on the timing of things like property taxes. But if we are trending towards being over budget, I'll likely push off a discretionary expense that can wait. But since we live far below our means, I'm not opposed to exceeding the budget on discretionary items - like maybe an extra trip this year then budgeted...
As it was one of the first investment/finance books I read that really resonated with me, I also track expenses (basically just record what was in Mint into an Excel file) to create the "wall chart" from Your Money or Your Life. This helps me track investment growth and expense control (both are largely on autopilot at this point), waiting for the "lines to cross" showing we've achieved Financial Independence.
We also use the above to set next year's "budget". Which primarily means do we need to increase/decrease the amount going to cover expected expenses (via direct deposit).
Again, anything else is saved/invested (along with automatic investments like 401k. So if we have income variations, it primarily means variations on how much we can contribute to taxable account that year.
Last edited by SnowBog on Tue Nov 02, 2021 7:03 pm, edited 2 times in total.
Re: What is the simplest way to handle the household budget?
Nope. One big slush fund in checking - direct deposit covers the amount of normal monthly expenses. For certain larger sporadic expenses we move chunks over to savings.
Everything on autopay to CC wherever possible. Maximize rewards. Sweep the CC balance in full out each month.How do you handle scheduled/periodic bills?
Excel sheet to group the usual monthly expenses by category. I don't track the actual expenses after they hit but plan for them up front with a little cushion.How do you track expenses?
All retirement and taxable investing is automated. Regular savings is kept at a high yield savings at the same bank as primary checking. We set aside in big chunks at year end and draw down throughout the year as needed.Where/how do you set aside for savings?
As others have noted - we segregate personal spending money away from bills. If we want to purchase something outside the norm we wait until there's enough in that those spending accounts.Do you implement any kind of real time spending awareness/contraints?
Re: What is the simplest way to handle the household budget?
So how often do you move excess money into savings? How do you determine how much (especially with the lumpy expenses)? Or do you just set a max checking account balance to determine the excess?MechEngOSU wrote: ↑Mon Nov 01, 2021 7:29 pmBasically this for us. Paychecks come into checking after 401k and HSA deductions, most charges paid out of 2 credit cards and auto bill pay that I can see in advance, and then I keep a 1k buffer to account for any lumpy or one-off expenses. Any excess goes into taxable savings or emergency fund.
Thanks...I've proven to my wife of 20+ years I have a tendency to make the obscenely simple into the painfully complex.....this thread has been very helpful.
Re: What is the simplest way to handle the household budget?
Just curious...so do just use last years expenses as the upper limit of the cash you want to hold and just invest the excess? If so at what interval?SnowBog wrote: ↑Tue Nov 02, 2021 6:47 pm
We keep up to 1 year of annual expenses in cash (bulk of that at HMBradley earning 3.5% currently). This covers any unexpected variation in income (which we have as well), and most other ad hoc expenses (like we'll probably take down two trees this year which we hadn't planned on). We'd grow this if we had known expenses like home remodeling coming up. And we usually try to save up extra to front-load 2X Backdoor Roth, HSA, I Bonds, EE Bonds, and 529 contributions in January.
Anything beyond that is invested.
Thanks
Re: What is the simplest way to handle the household budget?
That's exactly where we are at after 20+ years of envelope budgeting.fyre4ce wrote: ↑Tue Nov 02, 2021 5:56 pm Are you sure you need proscriptive budgeting (ie. $300 on groceries this month, put $300 in cash in an envelope and when you run out, no more groceries til the 1st of next month)? I've never actually done proscriptive budgeting. Rather, I do retrospective tracking. Roughly each quarter, I go through all bank and credit card statements and enter expenses into a spreadsheet I built, organized by category. No double-entry bookkeeping to check for errors; I figure any errors are small enough to not change the overall picture. If you've been doing proscriptive budgeting for this long, your spending habits are probably tuned to something sustainable, so you might try "taking off the training wheels" and just tracking your spending after-the-fact.
The main two problems I haven't solved yet which give me a bit of angst:
1) How to assure enough money is available for large routine expenses. This I think I've mostly solved by just looking at 12 month average expenses and keeping account balances above either that or some fraction of it.
More importantly:
2) How do I know when we have extra cash to spend....exactly what does that look like? For me I need an allocation (like we do for stocks/bonds) or some rigid method. So do I just set a max checking account ceiling and everything above that is extra, ie placed in a savings account or invested?
I know this seems very basic but it is very useful.....
Re: What is the simplest way to handle the household budget?
An extravagance is fine as long as you have the money. You don’t sound like this type spending would become a regular thing. What is money for if not to eventually spend?Simple Simon wrote: ↑Tue Nov 02, 2021 5:05 pm Wife and I are both have difficulty spending money. Have never had a budget, yet the cash still keeps piling up
Possibly we need a compulsory spending floor. Like an inverse budget?
I want a cycling toy costing about £700 but have held off buying it for over a year, despite having about 50x this readily accessible outside of our retirement savings.
Because it is clearly an extravagance, I struggle.
Re: What is the simplest way to handle the household budget?
My situation may be a little unique... Part of my compensation is variable, and I get "advances" which may need to be paid back if I don't hit my performance metrics. While money is fungible, and I'd probably be better off not keeping a large cash surplus, we've found having up to roughly 1 year of expenses available in cash helps us sleep at night.guppyguy wrote: ↑Thu Dec 02, 2021 9:58 amJust curious...so do just use last years expenses as the upper limit of the cash you want to hold and just invest the excess? If so at what interval?SnowBog wrote: ↑Tue Nov 02, 2021 6:47 pm
We keep up to 1 year of annual expenses in cash (bulk of that at HMBradley earning 3.5% currently). This covers any unexpected variation in income (which we have as well), and most other ad hoc expenses (like we'll probably take down two trees this year which we hadn't planned on). We'd grow this if we had known expenses like home remodeling coming up. And we usually try to save up extra to front-load 2X Backdoor Roth, HSA, I Bonds, EE Bonds, and 529 contributions in January.
Anything beyond that is invested.
Thanks
Ignoring taxes and medical premiums (both of which change drastically if employment changes) we spend roughly $100k a year (some years less, some more depending on things like travel, medical costs, etc.). This is a "good enough" target for us, we can easily scale back to < $100k if needed. (And we can tap into the portfolio if/as needed.)
As to the mechanics, here was my thought process/setup:
- We "pay ourselves first" with front-loaded allocations to all tax-advantaged accounts, so this really only impacts what's left/taxable investments
- Minimally I want to keep $30k in "cash" (savings/checking/etc.) all year
- By year end, I'd like to have roughly $100k in "cash" (up to $100k in our HMBradley account, potentially another $15k in other accounts)
- I laid out a "savings" schedule, which maps out a combination of:
- Monthly contributions of $2500 to get HMBradley rate of 3.5%
- Expected "advances" at noted above (or more accurately the portion that didn't land in tax-advantaged accounts)
- Expected proceeds from stock grants (RSUs)
- etc.
- The result is for each month I have a minimum/maximum defined for the amount of cash I want available
- This is factored into my portfolio/AA management Excel sheet, so if I have too much or not enough cash - I'll be prompted to rebalance (same as I would if my stocks/bonds are out of alignment)
- In reality though, if we have too little cash it means we cut back on spending, if we have too much cash, any excess is invested
- At year end, we'll have a better view for any impact to the "advances", as well as a tax estimate. Once those are addressed, any remaining balance (down to the original $30k) is used to front load 529, HSA, Backdoor Roths, and EE & I Bond purchases.
- Then we start over...
For example, we've maxed out tax-advantaged accounts this year and had a quarterly stock grant occur in the past few months. I knew how much money I needed to add to "cash", and the rest was invested per our AA. And any excess cash for the remainder of the year (since we've hit our "cash" target) is now all invested as well.
So it took a little bit to setup, but basically no time to manage going forward.
I'd also note I can only justify this large of a "cash" position due to getting 3.5% at HMBradley. If we were only getting say 0.5%, I'd shrink our cash down to $30k (that's the minimum we are comfortable holding), and get the rest invested ASAP. That would mean we likely couldn't front-load everything we do now, and would instead fund them with cash flow throughout the year (basically instead of setting aside cash for next year's investments, we'd just be making current year investments). It would also mean that if I had to repay an advance and/or get hit with an unexpectedly high tax bill, we'd need to sell off investments (and incur more taxes) to cover the gaps.
Re: What is the simplest way to handle the household budget?
Again, I can share with you what we do in our household, and it seems to work well.guppyguy wrote: ↑Thu Dec 02, 2021 10:08 amThat's exactly where we are at after 20+ years of envelope budgeting.fyre4ce wrote: ↑Tue Nov 02, 2021 5:56 pm Are you sure you need proscriptive budgeting (ie. $300 on groceries this month, put $300 in cash in an envelope and when you run out, no more groceries til the 1st of next month)? I've never actually done proscriptive budgeting. Rather, I do retrospective tracking. Roughly each quarter, I go through all bank and credit card statements and enter expenses into a spreadsheet I built, organized by category. No double-entry bookkeeping to check for errors; I figure any errors are small enough to not change the overall picture. If you've been doing proscriptive budgeting for this long, your spending habits are probably tuned to something sustainable, so you might try "taking off the training wheels" and just tracking your spending after-the-fact.
The main two problems I haven't solved yet which give me a bit of angst:
1) How to assure enough money is available for large routine expenses. This I think I've mostly solved by just looking at 12 month average expenses and keeping account balances above either that or some fraction of it.
More importantly:
2) How do I know when we have extra cash to spend....exactly what does that look like? For me I need an allocation (like we do for stocks/bonds) or some rigid method. So do I just set a max checking account ceiling and everything above that is extra, ie placed in a savings account or invested?
I know this seems very basic but it is very useful.....
First off, we use credit cards for as many purchases as we can (almost all). They give rewards, and also an itemized statement at the end of the month that makes tracking expenses very easy. If you have been using cash, I recommend getting a single credit card, like the Citi Double Cash (no annual fee, simple 2% cash back on everything). There are some folks who spend impulsively with credit cards and shouldn't have them, but I'm not sure you're one of them. If you find you over-spend with credit cards, you can always cancel them and go back to cash.
All bills (especially credit cards) are set on auto-pay, so I have to devote the minimum amount of attention to managing finances. This also helps avoid late fees, penalties, interest, etc.
"Extra cash to spend" just looks like having a higher than normal balance in your checking account. I find that keeping large-ish checking balances helps buffer large expenses and reduces stress. My goal is to keep at least $20,000 each in our personal and business checking accounts. When the balance gets much over that (maybe $30k) I withdraw down to $20,000 and invest that amount. (When we were renting that happened every month or two, now with a big mortgage it's a few times per year). You should have enough in your checking account to cover at least 1-2 months of expenses. Interest rates are so low that the opportunity cost is small. On top of this, I also keep ~$10-25k in a high yield online savings account for larger unplanned expenses, and then have about $100k in municipal bond mutual funds in a taxable account, which doubles as part of my bond allocation and also another layer to our emergency fund. Our gross household income is around $450k so you can scale these numbers up or down depending on your income, expenses, and personal desire to hold more or less cash.
Hope that helps. I'm sure there are other ways to do it, but this works well for me.
PS - my earlier post should have been "prescriptive" budgeting instead of "proscriptive". Oops
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Re: What is the simplest way to handle the household budget?
To your question on how often do I move excess money -- I do it monthly and just leave a safe threshold amount in checking that is very likely to handle the lumpiness. Pick a number based on your likely lumpiness/unexpected expenses - $1k, $2k, $3k. The day before I do the move, this is the conversation I have with my wife : "I'm about to move our money....do you have anything that's going to come out besides your CC bill this month?". Then she tells me and I adjust the amount.guppyguy wrote: ↑Thu Dec 02, 2021 9:47 amSo how often do you move excess money into savings? How do you determine how much (especially with the lumpy expenses)? Or do you just set a max checking account balance to determine the excess?MechEngOSU wrote: ↑Mon Nov 01, 2021 7:29 pmBasically this for us. Paychecks come into checking after 401k and HSA deductions, most charges paid out of 2 credit cards and auto bill pay that I can see in advance, and then I keep a 1k buffer to account for any lumpy or one-off expenses. Any excess goes into taxable savings or emergency fund.
Thanks...I've proven to my wife of 20+ years I have a tendency to make the obscenely simple into the painfully complex.....this thread has been very helpful.
There have also been times where a charge comes up mid-month and it's gonna be tight against the buffer. I simply just transfer money from my online savings account (Efund) and it's back in checking in 2 days.
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Re: What is the simplest way to handle the household budget?
We have learned to live beneath our means over the last almost 40 years married
We always set up our savings and automated them thru auto deductions
We have a list of defined monthly bills for situational awareness
We know generally how much we have left over
We mentally are aware and pretty much stay within those limits
Annually we look back and see how we did plus or minus a few thousand
We adjust our big purchases based upon how we are doing in the macro picture
At age 60 we have had some life style creep but in the last third of our life we have earned a little of that I think
As we know:
If your out goes exceed your income your upkeep will be your downfall
We always set up our savings and automated them thru auto deductions
We have a list of defined monthly bills for situational awareness
We know generally how much we have left over
We mentally are aware and pretty much stay within those limits
Annually we look back and see how we did plus or minus a few thousand
We adjust our big purchases based upon how we are doing in the macro picture
At age 60 we have had some life style creep but in the last third of our life we have earned a little of that I think
As we know:
If your out goes exceed your income your upkeep will be your downfall
Re: What is the simplest way to handle the household budget?
I use excel for budgeting and to track spending. If you want the tracking part to be simple, I'd recommend charging everything to one or a small handful of credit cards. Then download that info into excel (or upload into YNAB - note, I am not familiar with that program). This as long as you are disciplined and not apt to spend more money simply because you are paying with a CC. Also, must pay bills in full on time.guppyguy wrote: ↑Mon Nov 01, 2021 12:15 pm My wife and I are long time envelope budgeters (since before the internet) but lately I’ve had the feeling that I’ve possibly made our day to day personal finances unnecessarily complex. We use YNAB, which is a great product, but I’ve had my head down in the details for so long I am wondering if it can be done any simpler.
So what is the simplest way to budget and what does it look like?
Do you use a bucket or envelope system?
How do you handle scheduled/periodic bills?
How do you track expenses?
Where/how do you set aside for savings?
Do you implement any kind of real time spending awareness/contraints?
I realize there are probably a million ways to do this…..but I’m looking for the simplest, the equivalent to the 3 fund portfolio for household finances.
Real Knowledge Comes Only From Experience
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Re: What is the simplest way to handle the household budget?
I used to do what most others here do: about 40% went to savings/investment, 30% went to fixed costs (mortgage, bills monthly and annual) and we spent the rest. And it was smooth sailing.
But since we started using YNAB (because my wife wanted better visibility into our grocery and dining-out spending), the clarity it has provided has been very helpful. In one week of using it, I managed to save $60 which was a tacked-on fee for a GEICO monthly premium payment instead of twice-a-yearly payments. Another benefit is earning extra interest by not having to keep a padded checking account with sufficient buffer for any autopaid bills: so instead of maintaining a 10-15k balance in checking for stuff that will get auto-withdrawn by billers as it comes due (yearly life insurance, estimated tax payments etc), I was able to reduce the minimum balance to 3k with money allocated specifically in the checking account when the need is there. This let me move >10k on average out to an interest-bearing account every month earning some more fun monthly spending money.
Another change we've experienced is in loosening our purse strings a bit to indulge in guilt-free spending. Even though we said we would spend 30% of the money, for some reason being frugal by nature, we saved money there too and kept moving the excess to savings/investment. Now with specific envelopes allocated for fun, regular massages, manipedis for DW and whatnot, we're learning to live it up a bit and enjoy our money in the present. Not everyone needs this nudge to spend of course, but we did.
The benefit of YNAB vs Mint/Simply is in getting forward-looking visibility into your spending which allows you to plan better instead of backward-looking tracking of how things went.
I agree it's a tradeoff between time vs money as usual, but so far we've found it low-maintenance enough to stick with it.
But since we started using YNAB (because my wife wanted better visibility into our grocery and dining-out spending), the clarity it has provided has been very helpful. In one week of using it, I managed to save $60 which was a tacked-on fee for a GEICO monthly premium payment instead of twice-a-yearly payments. Another benefit is earning extra interest by not having to keep a padded checking account with sufficient buffer for any autopaid bills: so instead of maintaining a 10-15k balance in checking for stuff that will get auto-withdrawn by billers as it comes due (yearly life insurance, estimated tax payments etc), I was able to reduce the minimum balance to 3k with money allocated specifically in the checking account when the need is there. This let me move >10k on average out to an interest-bearing account every month earning some more fun monthly spending money.
Another change we've experienced is in loosening our purse strings a bit to indulge in guilt-free spending. Even though we said we would spend 30% of the money, for some reason being frugal by nature, we saved money there too and kept moving the excess to savings/investment. Now with specific envelopes allocated for fun, regular massages, manipedis for DW and whatnot, we're learning to live it up a bit and enjoy our money in the present. Not everyone needs this nudge to spend of course, but we did.
The benefit of YNAB vs Mint/Simply is in getting forward-looking visibility into your spending which allows you to plan better instead of backward-looking tracking of how things went.
I agree it's a tradeoff between time vs money as usual, but so far we've found it low-maintenance enough to stick with it.
Last edited by InvestingGeek on Mon Jan 09, 2023 1:41 pm, edited 1 time in total.
Re: What is the simplest way to handle the household budget?
Indeed.Admiral wrote: ↑Mon Nov 01, 2021 12:20 pmPay 1/3 in taxesguppyguy wrote: ↑Mon Nov 01, 2021 12:15 pm My wife and I are long time envelope budgeters (since before the internet) but lately I’ve had the feeling that I’ve possibly made our day to day personal finances unnecessarily complex. We use YNAB, which is a great product, but I’ve had my head down in the details for so long I am wondering if it can be done any simpler.
So what is the simplest way to budget and what does it look like?
Do you use a bucket or envelope system?
How do you handle scheduled/periodic bills?
How do you track expenses?
Where/how do you set aside for savings?
Do you implement any kind of real time spending awareness/contraints?
I realize there are probably a million ways to do this…..but I’m looking for the simplest, the equivalent to the 3 fund portfolio for household finances.
Save 1/3 through auto-deduction from paycheck
Spend the rest and don't worry about it.
That's about as simple as it gets.
And you will achieve FI in about 20 working years.
Re: What is the simplest way to handle the household budget?
Not to diminish your approach (which is what I used to do as well), but since I moved my "checking" account to Fidelity using their Money Market funds, I don't bother to micromanage this as much. If you can scrounge up $100k for initial purchase (you don't need to maintain the $100k), FZDXX currently has a 7-day yield of 4.26%. Otherwise SPRXX (no minimum) has a 7-day yield of 4.14%. In general, these are massively higher than any other "checking" account I've found (unless rates drop back to near 0%, and and banks maintain inflated rates); and are usually higher than many "savings" accounts. (As a reference, they are normally lower than the high rate at someplace like HMBradley [now 4%], which is usually where I park my money when not needed elsewhere, but at the moment they even beat that.) As a result, I'm not as concerned trying to "minimize" what's in the account, instead we just keep roughly 1-month expenses in the account, with incoming direct deposits mostly maintaining that one month balance.InvestingGeek wrote: ↑Mon Jan 09, 2023 1:23 pm Another benefit is earning extra interest by not having to keep a padded checking account with sufficient buffer for any autopaid bills: so instead of maintaining a 10-15k balance in checking for stuff that will get auto-withdrawn by billers as it comes due (yearly life insurance, estimated tax payments etc), I was able to reduce the minimum balance to 3k with money allocated specifically in the checking account when the need is there. This let me move >10k on average out to an interest-bearing account every month earning some more fun monthly spending money.
Re: What is the simplest way to handle the household budget?
I've been single most of my life and now nearing retirement am married. I never used a budget. I had money withdrawn from my pay for saving and then had mostly a 6th sense to know when I seemed to be spending too much and to shut it down for a while to recover. My wife never earned much money and basically spent what she earned since she needed it for herself and her parents (both were low wage earners).
Now this causes some trouble since my wife seems to think if there is money in the account, it can be spent whereas I know only some of it should be spent. To help fix this I'm having here go through all of our credit card payments and bank spending and categorizing it so she can see how much we are spending and how they will have to change since I plan to retire and things will be more restricted. And it isn't as if she spends on luxury items for herself but tends to buy stuff for other people. I figure seeing the actual numbers will help her realize where we are and where we need to get to.
For her, I can easily see that she might need an annuity or some process where only a fix amount of money comes to her per month once I'm gone.
Now this causes some trouble since my wife seems to think if there is money in the account, it can be spent whereas I know only some of it should be spent. To help fix this I'm having here go through all of our credit card payments and bank spending and categorizing it so she can see how much we are spending and how they will have to change since I plan to retire and things will be more restricted. And it isn't as if she spends on luxury items for herself but tends to buy stuff for other people. I figure seeing the actual numbers will help her realize where we are and where we need to get to.
For her, I can easily see that she might need an annuity or some process where only a fix amount of money comes to her per month once I'm gone.
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Re: What is the simplest way to handle the household budget?
The simplest is to stop budgeting. That's what we did when we realized we were spending such a small percentage of our income that it was irrelevant. Our spending was dwarfed by the amount we were giving to charity, the amount we were paying in tax, and the amount we were investing. So we quit. We still sum it up once a month and make sure there were no fraudulent charges. But there's literally one category on our budget now "spending." And the only reason we have it is so we know how much to invest or give (subtract the spending from the income and then decide what to do with the rest.)guppyguy wrote: ↑Mon Nov 01, 2021 12:15 pm My wife and I are long time envelope budgeters (since before the internet) but lately I’ve had the feeling that I’ve possibly made our day to day personal finances unnecessarily complex. We use YNAB, which is a great product, but I’ve had my head down in the details for so long I am wondering if it can be done any simpler.
So what is the simplest way to budget and what does it look like?
Do you use a bucket or envelope system?
How do you handle scheduled/periodic bills?
How do you track expenses?
Where/how do you set aside for savings?
Do you implement any kind of real time spending awareness/contraints?
I realize there are probably a million ways to do this…..but I’m looking for the simplest, the equivalent to the 3 fund portfolio for household finances.
It takes a relatively fortunate set of circumstances to adopt this method, but it's awfully simple. The bottom line is that the fewer your budgeting categories, the simpler budgeting becomes. We just kept cutting back and cutting back until we ended up with one category.
Other do something similar "an anti-budget" where they take their investing money and tax money and giving money off the top and then just spend the rest without tracking it at all. Similar philosophy.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy |
4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Re: What is the simplest way to handle the household budget?
One 3-fund portfolio way to budget with Excel:guppyguy wrote: ↑Mon Nov 01, 2021 12:15 pm So what is the simplest way to budget and what does it look like?
Do you use a bucket or envelope system?
How do you track expenses?
Where/how do you set aside for savings?
I realize there are probably a million ways to do this…..but I’m looking for the simplest, the equivalent to the 3 fund portfolio for household finances.
1. Revenues = Pension + SS + Withdrawal (from investment portfolio)
2. Expenses = sum of credit cards/buckets (roughly maintenance, operations, leisure)
--- A) Credit card A = House + Car related expenses (taxes, HOA, insurance, repair etc. no gasoline, no utilities)
--- B) Credit card B = Utilities (electricity, natural gas, water, security, cable, internet, phone, gasoline, toll tags, groceries)
--- C) Credit card C = travel and miscellaneous (everything else)
--- D) Debit from checking account = health insurance as required by provider, for a few more months till we both turn 65.
3. Savings and investing:
--- A) Previously during accumulation, pay ourselves first - maximize tax-advantaged accounts,
--- B) Now in retirement, Roth conversions at least till 72.
Of course every now and then there are exceptions to the norm.
By changing the due dates for all credit cards to be same/close, so we can pay for all 3 at the same time.How do you handle scheduled/periodic bills?
We track our budget/expenses/investment portfolio every month at month's end, so we can detect in case anything is outside the norm, and/or if anything suspicious might happen one or more of our accounts.Do you implement any kind of real time spending awareness/constraints?
Last edited by DSBH on Mon Jan 09, 2023 3:31 pm, edited 1 time in total.
John C. Bogle: "Never confuse genius with luck and a bull market".
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Re: What is the simplest way to handle the household budget?
This sounds pretty good, thanks!
Can you write checks against these funds? What about automated direct withdrawals? Withdrawing cash from ATMs or depositing checks?
Can you write checks against these funds? What about automated direct withdrawals? Withdrawing cash from ATMs or depositing checks?
SnowBog wrote: ↑Mon Jan 09, 2023 2:19 pm Not to diminish your approach (which is what I used to do as well), but since I moved my "checking" account to Fidelity using their Money Market funds, I don't bother to micromanage this as much. If you can scrounge up $100k for initial purchase (you don't need to maintain the $100k), FZDXX currently has a 7-day yield of 4.26%. Otherwise SPRXX (no minimum) has a 7-day yield of 4.14%. In general, these are massively higher than any other "checking" account I've found (unless rates drop back to near 0%, and and banks maintain inflated rates); and are usually higher than many "savings" accounts. (As a reference, they are normally lower than the high rate at someplace like HMBradley [now 4%], which is usually where I park my money when not needed elsewhere, but at the moment they even beat that.) As a result, I'm not as concerned trying to "minimize" what's in the account, instead we just keep roughly 1-month expenses in the account, with incoming direct deposits mostly maintaining that one month balance.
Re: What is the simplest way to handle the household budget?
+1 except when we worked we saved nearly 50% of income, and now we have everything on auto pay. Wrote a few gift checks and that's it. But I know some couples have very different spending habits. Lucky we were both on the same page, since the late 70's.StartedAt22 wrote: ↑Tue Nov 02, 2021 7:58 am All deductions (taxes, tax-deferred contributions, after-tax investments, etc) are taken directly out of the paycheck.
All else sent to the checking account to be spent as needed / desired.
I save 40%+ of my income this way
Re: What is the simplest way to handle the household budget?
I do a pay yourself first.
1. Certain amount of money each month is earmark to stuff like retirement or college savings.
2. Certain amount is save toward a large ticket item like replacing the retaining wall in 5 years, etc.
3. During the year, you have big ticket items like Life insurance bills. Break down these big ticket items into 12 months and make sure that amount is save to emergency fund each month. For example, let's say insurance is $3K per year, break it down to saving $250 per month.
4. Any leftover can be spend accordingly.
1. Certain amount of money each month is earmark to stuff like retirement or college savings.
2. Certain amount is save toward a large ticket item like replacing the retaining wall in 5 years, etc.
3. During the year, you have big ticket items like Life insurance bills. Break down these big ticket items into 12 months and make sure that amount is save to emergency fund each month. For example, let's say insurance is $3K per year, break it down to saving $250 per month.
4. Any leftover can be spend accordingly.
Re: What is the simplest way to handle the household budget?
Yes. That's all I hold in my "checking" account (a cash management account), and any checks, debit cards, ATM withdrawals (and they reimburse any ATM fees - even those charged by the machine), direct debts, ACH pulls, etc. are all redeemed automatically from the money market account as needed.InvestingGeek wrote: ↑Mon Jan 09, 2023 2:38 pm This sounds pretty good, thanks!
Can you write checks against these funds? What about automated direct withdrawals? Withdrawing cash from ATMs or depositing checks?
SnowBog wrote: ↑Mon Jan 09, 2023 2:19 pm Not to diminish your approach (which is what I used to do as well), but since I moved my "checking" account to Fidelity using their Money Market funds, I don't bother to micromanage this as much. If you can scrounge up $100k for initial purchase (you don't need to maintain the $100k), FZDXX currently has a 7-day yield of 4.26%. Otherwise SPRXX (no minimum) has a 7-day yield of 4.14%. In general, these are massively higher than any other "checking" account I've found (unless rates drop back to near 0%, and and banks maintain inflated rates); and are usually higher than many "savings" accounts. (As a reference, they are normally lower than the high rate at someplace like HMBradley [now 4%], which is usually where I park my money when not needed elsewhere, but at the moment they even beat that.) As a result, I'm not as concerned trying to "minimize" what's in the account, instead we just keep roughly 1-month expenses in the account, with incoming direct deposits mostly maintaining that one month balance.
The only thing you have to do is "buy" the money market. For example, if I get paid $1000, I'll go in and "buy" $1000 more (or whatever the balance is if there were also debits). If you don't, any "new" money added just ends up in your "core" account, which usually pays out a lot less.
There's a "Fidelity as a one stop" thread that goes into more detail, with many people (including me) moving most of their financial life into Fidelity (My employer accounts were all there anyway).
- AerialWombat
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Re: What is the simplest way to handle the household budget?
…………………………
Last edited by AerialWombat on Mon Jan 30, 2023 3:22 am, edited 1 time in total.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
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Re: What is the simplest way to handle the household budget?
We don't technically budget either.
DH and I talk to each other before big ticket purchases and expenses. We know we want to pay off credit card bills in full each month - which will not happen magically - established over the years thus the need to talk and be aligned and make, over the long run, better decisions on how we spend.
We save first. We allow some wiggle room in the primary checking accounts. If we go beyond the wiggle room, well, it's time for transparency. Luckily neither of us likes paying interest on credit card balances so it forces rebalancing behaviors/expenses sooner than later.
The key is, we save first.
DH and I talk to each other before big ticket purchases and expenses. We know we want to pay off credit card bills in full each month - which will not happen magically - established over the years thus the need to talk and be aligned and make, over the long run, better decisions on how we spend.
We save first. We allow some wiggle room in the primary checking accounts. If we go beyond the wiggle room, well, it's time for transparency. Luckily neither of us likes paying interest on credit card balances so it forces rebalancing behaviors/expenses sooner than later.
The key is, we save first.
Re: What is the simplest way to handle the household budget?
I might become known as the YNAB guy on this forum given how many times I've posted about it recently (it seems that way to me anyway). My wife and I started using YNAB at the beginning of 2022 and it was a huge blessing to us. In short, YNAB is essentially a digitized version of Dave Ramsey's "cash in envelopes" system. YNAB can be set up as simple or as granular/complex as you'd like, and is really easy to use. My previous manner of "budgeting" (in my head) started to display obvious cracks at the end of 2021 and YNAB helped us to stop the bleeding before it became a bigger problem and build a solid foundation for moving forward.
Bogleheads® emphasize regular saving, broad diversification, and sticking to one's investment plan regardless of market conditions.
- AnnetteLouisan
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Re: What is the simplest way to handle the household budget?
When I was just starting out I read that the best way to budget was to pay yourself first by having a portion of your income go to savings automatically so that you don’t even see it. This way you don’t feel flush and get tempted to spend it. Instead you create an artificial environment of scarcity. Worked for me. I then create a spending plan based on my priorities (with columns for monthly and annualized expenses for each line item) and revise it periodically.
Last edited by AnnetteLouisan on Mon Jan 09, 2023 6:28 pm, edited 1 time in total.
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Re: What is the simplest way to handle the household budget?
Please explain "Pay 1/3 in taxes". Is that the tax bracket?Admiral wrote: ↑Mon Nov 01, 2021 12:20 pmPay 1/3 in taxesguppyguy wrote: ↑Mon Nov 01, 2021 12:15 pm My wife and I are long time envelope budgeters (since before the internet) but lately I’ve had the feeling that I’ve possibly made our day to day personal finances unnecessarily complex. We use YNAB, which is a great product, but I’ve had my head down in the details for so long I am wondering if it can be done any simpler.
So what is the simplest way to budget and what does it look like?
Do you use a bucket or envelope system?
How do you handle scheduled/periodic bills?
How do you track expenses?
Where/how do you set aside for savings?
Do you implement any kind of real time spending awareness/contraints?
I realize there are probably a million ways to do this…..but I’m looking for the simplest, the equivalent to the 3 fund portfolio for household finances.
Save 1/3 through auto-deduction from paycheck
Spend the rest and don't worry about it.
That's about as simple as it gets.
Re: What is the simplest way to handle the household budget?
Don't take it too literally. (But the numbers are very close for us.)valleyrock wrote: ↑Mon Jan 09, 2023 6:26 pmPlease explain "Pay 1/3 in taxes". Is that the tax bracket?Admiral wrote: ↑Mon Nov 01, 2021 12:20 pmPay 1/3 in taxesguppyguy wrote: ↑Mon Nov 01, 2021 12:15 pm My wife and I are long time envelope budgeters (since before the internet) but lately I’ve had the feeling that I’ve possibly made our day to day personal finances unnecessarily complex. We use YNAB, which is a great product, but I’ve had my head down in the details for so long I am wondering if it can be done any simpler.
So what is the simplest way to budget and what does it look like?
Do you use a bucket or envelope system?
How do you handle scheduled/periodic bills?
How do you track expenses?
Where/how do you set aside for savings?
Do you implement any kind of real time spending awareness/contraints?
I realize there are probably a million ways to do this…..but I’m looking for the simplest, the equivalent to the 3 fund portfolio for household finances.
Save 1/3 through auto-deduction from paycheck
Spend the rest and don't worry about it.
That's about as simple as it gets.
Re: What is the simplest way to handle the household budget?
My advice, first priority - max out all our retirement accounts and your pay off credit cards. Next
1) buy quicken
2) spend using credit & debit cards only, no cash
3) every weekend use quicken to update & view your monthly expense
In a few months time you will begin to get a good sense of your spending pattern. At this point I would begin making a practical budget, that is
workable. Moreover I find when I have good sense of my spending habits, I feel I can tighten or lighten my budgeting more easily.
I feel budgets in general are hard. They are easy to make, but difficult to follow.
1) buy quicken
2) spend using credit & debit cards only, no cash
3) every weekend use quicken to update & view your monthly expense
In a few months time you will begin to get a good sense of your spending pattern. At this point I would begin making a practical budget, that is
workable. Moreover I find when I have good sense of my spending habits, I feel I can tighten or lighten my budgeting more easily.
I feel budgets in general are hard. They are easy to make, but difficult to follow.
Re: What is the simplest way to handle the household budget?
And hereI thought I was smart by doing the same. Someone thought of it before me.sport wrote: ↑Mon Nov 01, 2021 12:22 pmHere is a simple budget plan I used successfully for a long time.guppyguy wrote: ↑Mon Nov 01, 2021 12:15 pm My wife and I are long time envelope budgeters (since before the internet) but lately I’ve had the feeling that I’ve possibly made our day to day personal finances unnecessarily complex. We use YNAB, which is a great product, but I’ve had my head down in the details for so long I am wondering if it can be done any simpler.
So what is the simplest way to budget and what does it look like?
Do you use a bucket or envelope system?
How do you handle scheduled/periodic bills?
How do you track expenses?
Where/how do you set aside for savings?
Do you implement any kind of real time spending awareness/contraints?
I realize there are probably a million ways to do this…..but I’m looking for the simplest, the equivalent to the 3 fund portfolio for household finances.
1. Retirement savings came out in a 401K plan.
2. I added up all the large annual bills and divided that number by 12. That amount was set aside each month.
3. I made a contribution to my car fund each month.
4. We maintained an emergency fund.
Since that took care of all the large expenditures, the only thing we had to do was not spend more than what was in the checking account each month. That included credit card spending.
Re: What is the simplest way to handle the household budget?
Dottie, There is also a side benefit to this method. The money that is set aside waiting for the large annual bills to arrive is earning interest in a money market fund.Dottie57 wrote: ↑Mon Jan 09, 2023 8:50 pmAnd hereI thought I was smart by doing the same. Someone thought of it before me.sport wrote: ↑Mon Nov 01, 2021 12:22 pmHere is a simple budget plan I used successfully for a long time.guppyguy wrote: ↑Mon Nov 01, 2021 12:15 pm My wife and I are long time envelope budgeters (since before the internet) but lately I’ve had the feeling that I’ve possibly made our day to day personal finances unnecessarily complex. We use YNAB, which is a great product, but I’ve had my head down in the details for so long I am wondering if it can be done any simpler.
So what is the simplest way to budget and what does it look like?
Do you use a bucket or envelope system?
How do you handle scheduled/periodic bills?
How do you track expenses?
Where/how do you set aside for savings?
Do you implement any kind of real time spending awareness/contraints?
I realize there are probably a million ways to do this…..but I’m looking for the simplest, the equivalent to the 3 fund portfolio for household finances.
1. Retirement savings came out in a 401K plan.
2. I added up all the large annual bills and divided that number by 12. That amount was set aside each month.
3. I made a contribution to my car fund each month.
4. We maintained an emergency fund.
Since that took care of all the large expenditures, the only thing we had to do was not spend more than what was in the checking account each month. That included credit card spending.
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Re: What is the simplest way to handle the household budget?
We just save whatever is left after the credit cards and other expenses are paid for the month. For me, that is the simplest method. We generally save around 50% of gross income each year using this method, so it seems to work fine.
Global Market Portfolio + modest tilt towards volatility (80/20->60/40 as approach FI) + modest tilt away from exchange rate risk (80% global+20% U.S. stocks; currency-hedge bonds) + tax optimization
Re: What is the simplest way to handle the household budget?
I decided to come back to this post. Since I posted I got back on the YNAB loop. It is a fine app, but I find it hard not to obsess over every dollar. I check it all the time waiting for the next transaction to download or to see the new net To Be Budgeted amount. There is something pleasing moving things around.....but, we really don't need to, and my wife says it makes me more stressed out. We are nearly 50, have 6 figures in cash, small mortgage, 1.5M+ in retirement, and save 32% from our paycheck and after 25 years of marriage have never purchased anything large without discussing it first. Yet we have been thru multiple job losses, came from middle-lower class families and have had to earn every dollar, so all of this is not without any merit obviously.White Coat Investor wrote: ↑Mon Jan 09, 2023 2:26 pmThe simplest is to stop budgeting. That's what we did when we realized we were spending such a small percentage of our income that it was irrelevant. Our spending was dwarfed by the amount we were giving to charity, the amount we were paying in tax, and the amount we were investing. So we quit. We still sum it up once a month and make sure there were no fraudulent charges. But there's literally one category on our budget now "spending." And the only reason we have it is so we know how much to invest or give (subtract the spending from the income and then decide what to do with the rest.)guppyguy wrote: ↑Mon Nov 01, 2021 12:15 pm My wife and I are long time envelope budgeters (since before the internet) but lately I’ve had the feeling that I’ve possibly made our day to day personal finances unnecessarily complex. We use YNAB, which is a great product, but I’ve had my head down in the details for so long I am wondering if it can be done any simpler.
So what is the simplest way to budget and what does it look like?
Do you use a bucket or envelope system?
How do you handle scheduled/periodic bills?
How do you track expenses?
Where/how do you set aside for savings?
Do you implement any kind of real time spending awareness/contraints?
I realize there are probably a million ways to do this…..but I’m looking for the simplest, the equivalent to the 3 fund portfolio for household finances.
It takes a relatively fortunate set of circumstances to adopt this method, but it's awfully simple. The bottom line is that the fewer your budgeting categories, the simpler budgeting becomes. We just kept cutting back and cutting back until we ended up with one category.
Other do something similar "an anti-budget" where they take their investing money and tax money and giving money off the top and then just spend the rest without tracking it at all. Similar philosophy.
So I guess what I'm trying to say is that I'm learning to "lighten up" a little
One question, I like your single spending category. Do you just look at your account balances once a month or use something like Quicken? How simple is your setup.
There is an irony in the realization that the habits and tools which enable one to find financial freedom often just become the next master.
Re: What is the simplest way to handle the household budget?
Never budgeted but always lived below my means. Simple barometer was watching checking go up and shift that money to a better investment.guppyguy wrote: ↑Mon Nov 01, 2021 12:15 pm My wife and I are long time envelope budgeters (since before the internet) but lately I’ve had the feeling that I’ve possibly made our day to day personal finances unnecessarily complex. We use YNAB, which is a great product, but I’ve had my head down in the details for so long I am wondering if it can be done any simpler.
So what is the simplest way to budget and what does it look like?
Do you use a bucket or envelope system?
How do you handle scheduled/periodic bills?
How do you track expenses?
Where/how do you set aside for savings?
Do you implement any kind of real time spending awareness/contraints?
I realize there are probably a million ways to do this…..but I’m looking for the simplest, the equivalent to the 3 fund portfolio for household finances.
I put almost everything on a 2% cash back credit card so viewing that monthly bill gives a big picture take on spending.
- White Coat Investor
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Re: What is the simplest way to handle the household budget?
We use 3 or 4 credit cards and have one bank account. My wife totals the spending from those sources directly. Since she does most of the spending (obviously on my behalf as well), she is far better at knowing what all the charges are. I add up the income from all the different sources. We total it up. Then together we decide where the giving and investments go (but we just tend to follow our previous plans). I'm responsible for paying the taxes and the cash flow making money is where it needs to be when it needs to be there.guppyguy wrote: ↑Wed Feb 01, 2023 4:55 pmI decided to come back to this post. Since I posted I got back on the YNAB loop. It is a fine app, but I find it hard not to obsess over every dollar. I check it all the time waiting for the next transaction to download or to see the new net To Be Budgeted amount. There is something pleasing moving things around.....but, we really don't need to, and my wife says it makes me more stressed out. We are nearly 50, have 6 figures in cash, small mortgage, 1.5M+ in retirement, and save 32% from our paycheck and after 25 years of marriage have never purchased anything large without discussing it first. Yet we have been thru multiple job losses, came from middle-lower class families and have had to earn every dollar, so all of this is not without any merit obviously.White Coat Investor wrote: ↑Mon Jan 09, 2023 2:26 pmThe simplest is to stop budgeting. That's what we did when we realized we were spending such a small percentage of our income that it was irrelevant. Our spending was dwarfed by the amount we were giving to charity, the amount we were paying in tax, and the amount we were investing. So we quit. We still sum it up once a month and make sure there were no fraudulent charges. But there's literally one category on our budget now "spending." And the only reason we have it is so we know how much to invest or give (subtract the spending from the income and then decide what to do with the rest.)guppyguy wrote: ↑Mon Nov 01, 2021 12:15 pm My wife and I are long time envelope budgeters (since before the internet) but lately I’ve had the feeling that I’ve possibly made our day to day personal finances unnecessarily complex. We use YNAB, which is a great product, but I’ve had my head down in the details for so long I am wondering if it can be done any simpler.
So what is the simplest way to budget and what does it look like?
Do you use a bucket or envelope system?
How do you handle scheduled/periodic bills?
How do you track expenses?
Where/how do you set aside for savings?
Do you implement any kind of real time spending awareness/contraints?
I realize there are probably a million ways to do this…..but I’m looking for the simplest, the equivalent to the 3 fund portfolio for household finances.
It takes a relatively fortunate set of circumstances to adopt this method, but it's awfully simple. The bottom line is that the fewer your budgeting categories, the simpler budgeting becomes. We just kept cutting back and cutting back until we ended up with one category.
Other do something similar "an anti-budget" where they take their investing money and tax money and giving money off the top and then just spend the rest without tracking it at all. Similar philosophy.
So I guess what I'm trying to say is that I'm learning to "lighten up" a little
One question, I like your single spending category. Do you just look at your account balances once a month or use something like Quicken? How simple is your setup.
There is an irony in the realization that the habits and tools which enable one to find financial freedom often just become the next master.
We just use Excel as we have since we got married in 1999. No Quicken. Maybe we should try it, dunno.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy |
4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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Re: What is the simplest way to handle the household budget?
We never budgeted before last year, and started once we were trying to nail down numbers for our pending retirement. We simply use our credit card and checking account as our clearinghouses for all expenses. Venmo, PayPal, Apple Pay and cash are still used, but it is still tied to one of the two. Then every few days (usually in front of TV or in the train commuting) I plug the numbers from both accounts into a spreadsheet that I keep on my iPhone. I have about 15 or so categories, including a catch all “Misc.”
Once you do this, you can tweak your numbers for next year (taking out any outlier expenses), and use this as your budget for next year. This process has really helped us nail down the leaks, and likely we won’t need to do next year as we can go off “feel” after 2 years of experience. But, as many can attest, you can’t drill down on a budget until you know what you spend, and which expenses are needs and which ones are wants
Once you do this, you can tweak your numbers for next year (taking out any outlier expenses), and use this as your budget for next year. This process has really helped us nail down the leaks, and likely we won’t need to do next year as we can go off “feel” after 2 years of experience. But, as many can attest, you can’t drill down on a budget until you know what you spend, and which expenses are needs and which ones are wants
“The ratio of Stanley Nickels to Schrute Bucks is approximately equal to the ratio of unicorns to leprechauns.” - The Office (2007, NBC)
Re: What is the simplest way to handle the household budget?
Ours has varied over the years but the last couple of years it has worked like this. I get a consistent paycheck twice a month. My first paycheck of the month pays for our mortgage, car, kids activities/babysitters, lawn guy, and insurance. Basically, if it’s auto drafted from our bank account or it’s something I use venmo for (kid stuff), it comes out of the first paycheck.
The second paycheck of the month covers credit card spend.
My taxes, health insurance, and 401k are taken out automatically.
Whatever is left at the end of the month goes to savings.
My husband’s income is a lot lumpier and less predictable. He’s an equity partner in a law firm so his distributions vary wildly over the course of the year. December is 10x higher than January.
We use his income for his share of taxes (paid quarterly, as he earns $$) and everything else that’s lumpy through the year - Roths, property taxes, home insurance, vacations, home repairs, etc. all come from “his” money. His 401k comes out of his distributions before they are made, but nothing else does.
His distributions are wired to a different account than my paycheck so it’s kept in a separate bucket and grows or declines through the year as he is paid and as our lumpy expenses are paid. At the end of the year whatever is left goes to savings. To be clear, we are both owners on both accounts, but setting it up this way lets us track things more easily. Our monthly recurring bills match up to my take home income pretty well, and then his income is free to be lumpy without stressing us out. It also gives us a place to hold quarterly tax payments which in past years have been 6 figures.
It works for us. We save enough in retirement accounts (started young with generous matches and a ton of deferred space), so we could spend every penny if we wanted to after paying the tax man. But we don’t spend a crazy amount given our incomes, so we always save a lot each year on top of our retirement accounts. I don’t really create a formula or set strict goals for us though. Setting it up this way has worked pretty well, and we don’t worry about it.
The second paycheck of the month covers credit card spend.
My taxes, health insurance, and 401k are taken out automatically.
Whatever is left at the end of the month goes to savings.
My husband’s income is a lot lumpier and less predictable. He’s an equity partner in a law firm so his distributions vary wildly over the course of the year. December is 10x higher than January.
We use his income for his share of taxes (paid quarterly, as he earns $$) and everything else that’s lumpy through the year - Roths, property taxes, home insurance, vacations, home repairs, etc. all come from “his” money. His 401k comes out of his distributions before they are made, but nothing else does.
His distributions are wired to a different account than my paycheck so it’s kept in a separate bucket and grows or declines through the year as he is paid and as our lumpy expenses are paid. At the end of the year whatever is left goes to savings. To be clear, we are both owners on both accounts, but setting it up this way lets us track things more easily. Our monthly recurring bills match up to my take home income pretty well, and then his income is free to be lumpy without stressing us out. It also gives us a place to hold quarterly tax payments which in past years have been 6 figures.
It works for us. We save enough in retirement accounts (started young with generous matches and a ton of deferred space), so we could spend every penny if we wanted to after paying the tax man. But we don’t spend a crazy amount given our incomes, so we always save a lot each year on top of our retirement accounts. I don’t really create a formula or set strict goals for us though. Setting it up this way has worked pretty well, and we don’t worry about it.
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Re: What is the simplest way to handle the household budget?
I create an annual budget, and then we track our spending relative to the budget on a monthly basis. It's all so ingrained in us at this point that we barely compare the numbers. We use last year's totals to help create the budget for this year - wash, rinse, repeat. It's mostly an exercise to remind me not to spend too much (I can be a problem).
Re: What is the simplest way to handle the household budget?
We used the envelope system to get out of debt, but once that was accomplished we keep a shared Excel document that is biweekly and we do a zero based budget, where we keep track of investments, mortgage, taxes, insurance, utlities, Groceries, allowances, etc. Whenever someone needs to add something to the budget, they have to take that money away from another category to keep from going in the red.
Re: What is the simplest way to handle the household budget?
Does anybody track employer paycheck deductions/withholdings (dental insurance premiums, etc).?? Seems like a lot of extra work to me.
Re: What is the simplest way to handle the household budget?
How do you import your transactions?Sax32 wrote: ↑Thu Feb 02, 2023 11:32 am We used the envelope system to get out of debt, but once that was accomplished we keep a shared Excel document that is biweekly and we do a zero based budget, where we keep track of investments, mortgage, taxes, insurance, utlities, Groceries, allowances, etc. Whenever someone needs to add something to the budget, they have to take that money away from another category to keep from going in the red.
Thanks!
Re: What is the simplest way to handle the household budget?
I'd ask, to what purpose?
For ourselves, our "budget" is more to understand current expenses to help project retirement expenses, which we use to understand if we are on track with savings. Since we won't have a paycheck from our employer in retirement, those deductions/withholdings are mostly irrelevant for our needs. The exception being any medical/dental related items, including things like FSA. We don't "track" these specifically, but we do include them in our future expense projections - as part of our estimated medical/dental/vision expenses.
Re: What is the simplest way to handle the household budget?
By hand. I keep the excel file in Dropbox and my wife and I can add or subtract categories. I'm the type of person that edits this doc pretty much everyday. I know it's excessive, but I enjoy knowing where every dollar goes.guppyguy wrote: ↑Thu Feb 02, 2023 12:14 pmHow do you import your transactions?Sax32 wrote: ↑Thu Feb 02, 2023 11:32 am We used the envelope system to get out of debt, but once that was accomplished we keep a shared Excel document that is biweekly and we do a zero based budget, where we keep track of investments, mortgage, taxes, insurance, utlities, Groceries, allowances, etc. Whenever someone needs to add something to the budget, they have to take that money away from another category to keep from going in the red.
Thanks!
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Re: What is the simplest way to handle the household budget?
I don't import my transactions. I key them in manually. I only have a few transactions a day.guppyguy wrote: ↑Thu Feb 02, 2023 12:14 pmHow do you import your transactions?Sax32 wrote: ↑Thu Feb 02, 2023 11:32 am We used the envelope system to get out of debt, but once that was accomplished we keep a shared Excel document that is biweekly and we do a zero based budget, where we keep track of investments, mortgage, taxes, insurance, utlities, Groceries, allowances, etc. Whenever someone needs to add something to the budget, they have to take that money away from another category to keep from going in the red.
Thanks!
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Re: What is the simplest way to handle the household budget?
I dont know if what I do is budgeting.
But i do something simliar to what others have mentioned.
After deductions from my pay (including pension contributions) I am left with about %70 of my pay.
All recurring bills are on autopay.
Everything else is charged to my credit card.
Pay off credit card every month.
At end of the year, there is usually money left over.
I take a bunch of it and put it in investments in my investment accounts.
The rest I spend on a trip or hobby.
I usually just end up with savings as I spend less than I earn.
Mainly because I have no car, and my housing is about %20 of my gross pay.
So I knew I would use the pc part and finally bought it. Sounds like you might actually use the item you want. Go for it!
But i do something simliar to what others have mentioned.
After deductions from my pay (including pension contributions) I am left with about %70 of my pay.
All recurring bills are on autopay.
Everything else is charged to my credit card.
Pay off credit card every month.
At end of the year, there is usually money left over.
I take a bunch of it and put it in investments in my investment accounts.
The rest I spend on a trip or hobby.
I usually just end up with savings as I spend less than I earn.
Mainly because I have no car, and my housing is about %20 of my gross pay.
It helps if you have friends that spend. I hesitated to buy a $1,000 video card for my pc. I told a friend about it. He replied "dude, I spent more than that on my ski pass this year and I haven't even gone skiing yet - no time."Simple Simon wrote: ↑Tue Nov 02, 2021 5:05 pm Wife and I are both have difficulty spending money. Have never had a budget, yet the cash still keeps piling up
Possibly we need a compulsory spending floor. Like an inverse budget?
I want something costing $x but have held off buying it for over a year, despite having about 50x this readily accessible outside of our retirement savings.
Because it is clearly an extravagance, I struggle.
So I knew I would use the pc part and finally bought it. Sounds like you might actually use the item you want. Go for it!
Re: What is the simplest way to handle the household budget?
There are just budget categories, like a car payment.
It’s really simple in Quicken.
But, ultimately, it depends on whether the information is useful to you.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils