Do you have an annual budget?

[Heian]

My wife and I want to have one but am looking for realistic advice on how to make it work.

Has anyone successfully kept one? If so, how?

[runner3081]

Yes, we have a budget, but it is not something we worry about meeting each category - it is more to get a feel for year-to-year spending changes in each bucket. We do track 100% of spending to ensure we know our costs into retirement.

Fortunately, our spending has not gone up annually (actually gone down), for the last 7-uears.

[faanger101]

My wife and I want to have one but am looking for realistic advice on how to make it work.

Has anyone successfully kept one? If so, how?

No, we have a saving goal. If it's achieved - just spend the rest on any category
We booked few trips for the next year already

[MGBMartin]

I’m about the same as the poster above.
I created a budget in Quicken based on previous year spending and known expenses.
For variable expenses and expected items like repairs and maintenance etc I add reasonable amounts to the budget.
I usually come in under budget but have a lot of wiggle room if needed.
I don’t worry if I’m going over as I do the budget more to keep an eye on on spending compared to expected expenses.

[Normchad]

My wife and I want to have one but am looking for realistic advice on how to make it work.

Has anyone successfully kept one? If so, how?

No, we have a saving goal. If it's achieved - just spend the rest on any category
We booked few trips for the next year already

This is how we’ve always done it too. Budgeting just didn’t work for us. But automated savings did, then we didn’t care how we spent the rest.

For some people though, budgeting does work well.

[rob]

I've been fighting with this recently... Never had a budget but now looking at retirement - I need better nbrs on spending. I imagine that a budget - or negativing savings - will become a thing during this phase.

[KlangFool]

OP,

I do not budget. I have 5K per month to spend. After "Pay Yourself First" deduction from my pay check, 5K go into my checking/spending account. I keep 15K buffer in my checking/spending account. If it is significantly less than 15K in my checking/spending account, I spend less. If I have more, I spend more.

KlangFool

[Dottie57]

My wife and I want to have one but am looking for realistic advice on how to make it work.

Has anyone successfully kept one? If so, how?

Not a budget, but an annual allotment. At end of year (December) I total up everything I have spent there. Everything goes through the one checking account. Mid year check my spending. Find out the exact spend.

Recently I’ve settled on 60k per year - 5k per month.. Annual money is put in savings at end of December.

I have big bills that come on a regular basis that are not monthly. These are totaled up and divided by 12. The amount is subtracted from my monthly “gross paycheck” and left in savings so that the money is there when bill comes. My non monthly bills include property tax, medicare, and quarterly HOA fees, house and car insurance. It works quite well. The rest is monthly stuff I know I have pay for- prescriptions, utilities, cell phone , tv. So I have a good idea what the max monthly spend will be.

When big bills come in I take the money out of saving where I put the annual amount during January.

At end of August all was going swimmingly.

[mrsbetsy]

Yes, we budget...not just track. We've had a spreadsheet for more than a decade and have it so streamlined that our budget meeting lasts about an hour a month.

We have sinking categories for everything from soup to nuts. It took several months to initially create and get it right, but it's become just as much of a habit to do as tracking our net worth each year.

After 25 years of marriage, we were simply tired of arguing about money so we decided we would commit to doing it no matter how painful it might be. The last 10 years of marriage have been SO much better because when we are both pulling in the same direction, we are more financially well off. My husband is a spender and I'm a saver. He makes sure we have fun today and I make sure we will have fun until our death.

I agree with the other poster who said our spending has actually gone down over time and we no longer argue about anything.

[rule of law guy]

we dont set an annual budget, it sets us. meaning, we have a lifestyle that is below our means, so we spend what we spend and tally it up (that credit card report at end of year captures most of our spending other than house-related), and see that we can afford it. so we are set.

now if you are spending above your means, or you want to save more, then you have to figure out not just what to cut, but who cuts what. you cut one thing, your spouse cuts another, even steven. believe it or not, economizing can be a way to enhance your marriage, as long as each sees the other making the effort and sacrifice

[muffins14]

My wife and I want to have one but am looking for realistic advice on how to make it work.

Has anyone successfully kept one? If so, how?

I have a monthly budget that I try to stay under.

Basically:
Restaurants
Groceries
Home stuff
Clothes
Drinks / entertainment like tickets, concerts
Gym membership
Personal care
Travel

I track travel to stay within a certain yearly goal, and track the sum of all the others at a monthly grain. The individual subcategories are not as important to me as the sum.

I use an app called “daily budget” that is extremely simple. Additionally, I track monthly goals and my overall portfolio in a google sheet.

[UpperNwGuy]

I have a monthly budget.

[FrugalProfessor]

No budget, but I track every penny of income and expenses. Really informative and pretty addictive. I think everyone should do it.

We buy whatever we want whenever we want it. But we're pretty easy to please, so we save roughly 2/3 of our income.

Here's my template: https://frugalprofessor.com/my-updated- ... readsheet/

[PaddyMac]

Like others, it's not so much that we budget but more that we track. After all, I can't very well not pay the gas bill because it came in "over budget"!

I use accounting software to enter everything into categories. I just sat down yesterday and entered all the subtotals (about 10, for Health Care, Housing, Utilities, Vacation etc.) for the past 13 years into a master spreadsheet so that I can see at a big glance the trends in our income and expenses. We are pretty much retired now, so I need to get a better handle on a safe withdrawal rate. And I want to plan for a couple of major remodels and a new car in the next few years.

One thing that jumps out when you do that is medical expenses. Most years are the same, but throw in major surgery or an accident and there is a big spike in expenses. I offset major bills with a withdrawal from our HSA, but then that also spikes our income. So I may move them to Other Income and Other Expenses so I can better see what our normal expenses are. The HSA is still healthy and will continue to be used for larger-than-normal medical bills only.

[capran]

Married since the late 70's. Never really had a budget per se. We know our bills and our income. Bills got paid. Once we finished grad school we still spent about what we were spending before we got upgraded jobs and started saving aggressively most of the excess. Over time upgraded a few things but have lived debt free except for housing, which we paid off as soon as possible. house #1:10 years. House 2:5 years. House 3: 4 years. We only formally started keeping a spending spreadsheet 5 years ago (retired 10 years ago). This year inflation seems to have caught up with us according to the spreadsheet. But knowing our Go-Go years are waning, not too concerned about it.

[stocknoob4111]

I do and track it in Google sheets, I used to use Quicken before. I have monthly and annual categories. I like numbers so it works for me

[TipsQuestions]

When I retired recently I created a line item budget, but it was so much less than my safe withdrawal ceiling I didn't see a point in budgeting continuously. At the end of the year, I'll check my spending, which I'm fairly certain will be within the bounds of my withdrawal ceiling.

[Wannaretireearly]

Yes, we budget...not just track. We've had a spreadsheet for more than a decade and have it so streamlined that our budget meeting lasts about an hour a month.

We have sinking categories for everything from soup to nuts. It took several months to initially create and get it right, but it's become just as much of a habit to do as tracking our net worth each year.

After 25 years of marriage, we were simply tired of arguing about money so we decided we would commit to doing it no matter how painful it might be. The last 10 years of marriage have been SO much better because when we are both pulling in the same direction, we are more financially well off. My husband is a spender and I'm a saver. He makes sure we have fun today and I make sure we will have fun until our death.

I agree with the other poster who said our spending has actually gone down over time and we no longer argue about anything.

Can you share the type of costs that have changed/reduced to this point where you’re both happy and on the same page?

[StayTheCourse60]

Still in accumulation phase...

Budget = Take home - savings (investments)

Withholding is calculated to basically net zero in taxes still owed at tax time.

Savings = Max employer Roth 401k + Max Roth IRA (beginning of year) + DCA to brokerage taxable account each month. All saving is automated.

Each quarter I research what can be trimmed (better utility/service plans) to maximize my budget and re-balance my 401k contributions to max out on the last check of the year. Pay is outpacing max contribution annually so the contribution rate has lowered each year while still maxing out.

All the re-balancing and re-optimizing allows me to evaluate contributing more money to the brokerage account. All in an effort to prevent lifestyle creep by way of starving the checking account. Bonuses are paid early in the year and are retained in a MMF (not in checking where they can be spent) and are pulled as necessary to pay lumpy expenses.

Otherwise...I dont keep that close of an eye on a budget, because it likely would require me to sweat the small stuff and life is too short for that.

My basic mindset is set the savings plan for the year + lumpy discretionary expenses (vacations, house upgrades/projects). The rest of the budget expenses are largely set/fixed expenses. There is certainly a surplus after all of that, but leave that for extra emergency funding which may or may not turn into a longer term emergency fund or a lump sum brokerage investment or car purchase.

[invest4]

My wife and I want to have one but am looking for realistic advice on how to make it work.

Has anyone successfully kept one? If so, how?

No, we have a saving goal. If it's achieved - just spend the rest on any category
We booked few trips for the next year already

We also focus on savings goal. The rest is for everything else…required and discretionary.

Once in a year or two, I do assess how our expenses are trending and their stickiness (ex: car insurance for 6 drivers has increased significantly and no relief anytime soon)…plan accordingly.

[Cyan]

We also focus on savings goal. The rest is for everything else…required and discretionary.

I agree with the "savings goal" as mentioned here and by others.

(No tracking yet, but these types of discussions have me considering the value of doing so.)

One way way we achieve our savings goal is to "pay ourselves first" (for the DW and I). This way, the savings come off the top and get put away before those dollars hit our checking account - our most easily accessable funds. (We don't really use a lot of checks, mostly debit and credit cards. The credit card balances are paid-in-full monthly.)

This savings is done by way of aggressive 401(k) contributions, maxing out Roth IRA contributions, and weekly transfers to a credit union savings account. These are all automatic transactions.

What's left is available to spend. However, much of that goes to groceries, credit card payments, and the monthly bills.

Our checking account is always a bit tight when it comes to paying the monthly bills. It almost feels like we don't quite have enough. It's that feeling that helps keep our spending is check.

In the background though, our savings get that nice bump each month without requiring any action from us.

[pizzy]

No budget, but we track spending, saving, taxes, and income.

[Blue456]

We have pay yourself first, monthly and annual expenses. After that we have dedicated savings accounts of specific savings goals.

[Braqum]

My wife and I want to have one but am looking for realistic advice on how to make it work.

Has anyone successfully kept one? If so, how?

No, we have a saving goal. If it's achieved - just spend the rest on any category
We booked few trips for the next year already

I like the simplicity. How did you determine your savings goal?

[racy]

We tried a budget early in our married life. But it became a source of irritation. Instead, we agreed on 2 rules.
1) invest monthly in our 401ks via paycheck deduction, and
2) always payoff the monthly credit card bill.
Spend what's leftover.

https://www.calculator.net/401k-calculator.html

[flyfishers83]

We’re also in the saving budget camp. We created a very loose spending target. Basically known expenses plus regular stuff plus a very healthy “other”. From there I know how much we should be saving in our taxable account every month. If we’re high or low in a given month, I might look.

[AnnetteLouisan]

Yes, I’ve operated pursuant to a “spending plan” for decades. Here’s what I did. It’s not a recipe for becoming rich, but it’s helpful in avoiding being poor.

Step 1: track every single expense for 3-4 months no matter how small. Save receipts.

Step 2: Tally up what you spend each month in each category, be shocked and determine that your spending does not reflect your priorities and values. Also tally up monthly and annual income and taxes.

Step 3: *Determine your priorities* and allocate money to them and to your other expenses such that you are devoting money in accordance with the priorities, which may mean spending more in some areas. Cut way back in non-priority areas. The spending plan can have 3-4 main categories and 25-35 subcategories, but it’s individual. Have monthly and annual columns. Include a “misc” category.

Step 4: Monitor compliance, read about frugality and money saving strategies. *Come up with creative ways to reduce your spending*. Do / buy certain things less often. At year end, add an “actual” column. Note whether some items trend up or down, whether some are seasonal, etc.

Step 5: spending will fluctuate but keep an eye on it. Add or eliminate categories as needed and as priorities and circumstances change.

[faanger101]

My wife and I want to have one but am looking for realistic advice on how to make it work.

Has anyone successfully kept one? If so, how?

No, we have a saving goal. If it's achieved - just spend the rest on any category
We booked few trips for the next year already

I like the simplicity. How did you determine your savings goal?

2x regular spending

[4nursebee]

My wife and I want to have one but am looking for realistic advice on how to make it work.

Has anyone successfully kept one? If so, how?

No budget.

We kept every receipt for years and at the end of each month totaled them up according to categories we cared about. This provided some tracking and insights. It was a bit painful but helpful.

[Olemiss540]

I have a savings budget. If I hit that amount as scheduled/on schedule, nothing else really matters from my family's perspective. If I start having issues hitting that budget, I will get back to a monthly budget.

[Braqum]

My wife and I want to have one but am looking for realistic advice on how to make it work.

Has anyone successfully kept one? If so, how?

No, we have a saving goal. If it's achieved - just spend the rest on any category
We booked few trips for the next year already

I like the simplicity. How did you determine your savings goal?

2x regular spending

What expenses are not in a "regular expense"?

2x is great savings rate. You must be aiming to retire early or give out to children, family and friends, charities, etc, Congrats!!

[NYCaviator]

My wife and I want to have one but am looking for realistic advice on how to make it work.

Has anyone successfully kept one? If so, how?

For us, the best "budget" has been a pay-yourself-first and then spend the rest budget. Here's what we do:

1. Save 30% of our gross income (401k, Roth IRA, Brokerage)
2. Set aside $ for monthly bills (mortgage, HOA, utilities, etc.)
3. Set aside money for the annual bills (property tax, home/auto/umbrella, life insurance, disability insurance)
4. Spend what we want on what we want (everything goes on 1 credit card)
5. Save the rest, usually to pay down the mortgage

I have a variable income through my business, so I don't like recurring monthly bills. I try to pay things once a year, like our various insurances and property taxes.

I think strict budgets like YNAB work great if income is tight and you need more control over what you are spending where. But if you have a little more breathing room, just make sure you are meeting your savings goals, have money for your recurring bills, and then you can be a bit more flexible with the rest.

[UliKunkel1953]

My family has a good income and a high natural savings rate, so I wouldn't say we strictly need a budget. But we do use YNAB to plan our spending and find it very helpful. It's not about control so much as planning.

[zag00]

Still in accumulation phase...

Budget = Take home - savings (investments)

Withholding is calculated to basically net zero in taxes still owed at tax time.

Savings = Max employer Roth 401k + Max Roth IRA (beginning of year) + DCA to brokerage taxable account each month. All saving is automated.

Each quarter I research what can be trimmed (better utility/service plans) to maximize my budget and re-balance my 401k contributions to max out on the last check of the year. Pay is outpacing max contribution annually so the contribution rate has lowered each year while still maxing out.

All the re-balancing and re-optimizing allows me to evaluate contributing more money to the brokerage account. All in an effort to prevent lifestyle creep by way of starving the checking account. Bonuses are paid early in the year and are retained in a MMF (not in checking where they can be spent) and are pulled as necessary to pay lumpy expenses.

Otherwise...I dont keep that close of an eye on a budget, because it likely would require me to sweat the small stuff and life is too short for that.

My basic mindset is set the savings plan for the year + lumpy discretionary expenses (vacations, house upgrades/projects). The rest of the budget expenses are largely set/fixed expenses. There is certainly a surplus after all of that, but leave that for extra emergency funding which may or may not turn into a longer term emergency fund or a lump sum brokerage investment or car purchase.

great minds think alike

[Sandtrap]

My wife and I want to have one but am looking for realistic advice on how to make it work.

Has anyone successfully kept one? If so, how?

to op:
1
Are you retired?
2
Two incomes, renting, children, car payments, job pension contributions, etc?

Question in your overall larger context: (edit your original post with the pencil icon or new post)
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212

What others do has little to do with your own financial long term strategies, etc.
There are many ways and mental strategies: buckets, spreadsheets, etc.
j

[faanger101]

My wife and I want to have one but am looking for realistic advice on how to make it work.

Has anyone successfully kept one? If so, how?

No, we have a saving goal. If it's achieved - just spend the rest on any category
We booked few trips for the next year already

I like the simplicity. How did you determine your savings goal?

2x regular spending

What expenses are not in a "regular expense"?

2x is great savings rate. You must be aiming to retire early or give out to children, family and friends, charities, etc, Congrats!!

10k cycling trip, evoque for DW, 10k spring break cruise…

[DetroitRick]

We've been doing it for decades and it has served our purposes. Early in life, it was necessary to deal with scarcity and to stage bigger purchases. Later it helped make sure we spent purposefully, and to support both cash flow and tax planning. In retirement, the cash flow planning and tax planning aspects have remained important.

There are different ways to accomplish all this of course. You are best off doing what works for you and, specifically, what gets the job done without become an end in and of itself. But for us, yes, we do the budget.

One key is to only track down to a level that is meaningful. When using personal financial softwware, and presuming downloads vs. manual entry, work can be significantly reduced by limiting detail. Keeping a balance between categories that are too broad and those that are too detailed reduces the work. This detail level can easily change over time as your situation changes. But our software does most of that heavy lifting.

Other benefits - it helped us deal with life changes without too much in the way of surprises - job change, job loss, retirement, etc.

Budgeting is just a form of planning. Budgets can be tight, they can be extremely liberal, or anything in between.

While we find it very valuable, and periodically evaluate the continuing need just in case, nobody I know actually does it. For some I've seen it lead to really bad decisions, for others they are just fine. At this point, it is ingrained enough that I would hate to stop.

[aaaaaa111111]

-----

[winterfan]

I have a variable income through my business, so I don't like recurring monthly bills. I try to pay things once a year, like our various insurances and property taxes.

I think strict budgets like YNAB work great if income is tight and you need more control over what you are spending where. But if you have a little more breathing room, just make sure you are meeting your savings goals, have money for your recurring bills, and then you can be a bit more flexible with the rest.

We are going to do more lump sum payments next year. Our budget feels tight when everything comes out in bits every month. I think that feels more worse and more stressful, even though intellectually I know it doesn't make much difference (I'm saying "I" here because I pay all the bills).

[the_wiki]

Not really. I have savings goals and I try to keep spending low enough to meet those goals, but I don't like tracking every penny. Makes life unbearable to me.

[soccerrules]

No budget. We have been fairly dialed in on what we spend money on and are "reasonable" with our needs/wants.

Being in our late 50's we are in a different spot that a young family, buying a house and adding/raising kids etc.

[stoptothink]

My wife does have a "fun money" budget, but that's a different story and not something I want to be debate/be judged over. Otherwise, I closely track our spending, especially in specific categories, but we've never formally had a budget.

[wwhan]

We have never had a budget, but have reviewed what we have spent in various years. Charging most everything we can with credit cards, helps in estimating yearly expenses.

During our working years, we were very frugal and saved everything we could. Whenever possible we try to minimize expenses, but will spend money if we think it is important or a priority for us.

This has left us with financial freedom to spend as we wish in our retirement years.

[Nver2Late]

Like many others above, we don't budget, we track expenses. We pay ourselves first (targeted savings) then pay for expenses. If I find myself transferring funds from savings to checking to cover expenses, I mention it to DW and we go lean for a couple months until we have excess and transfer funds back to savings. We've done it this way for years.

Our HHI has dropped the last couple years significantly, so we've adjusted our upfront "targeted savings" downward. So I guess that could be considered budgeting, but at the 30,000 foot level.

[GerryL]

I'm retired. I don't have an annual budget, but I do have an annual spending target. That is, what I can afford to spend and keep my retirement plan on track.

I have always been an after-the-fact budgeter. I keep track of expenses and include savings right at the top, after necessary expenses like mortgage and other commitments. As I prepared to retire, I used years of data in Quicken to estimate how much I wanted to cover expenses each year. I had a Vanguard CFP run my plan and learned that I could easily spend more. A lot more. Eventually, I had the plan run again with a much higher spending target. In my 10th year of retirement, I have yet to actually hit the target, but I keep a running tab of how much I have not spent to target.

Knowing how much you can safely spend makes it easy to plan a lumpy retirement budget.

[Broken Man 1999]

No.

When we were working we had our savings removed from our checks and invested automatically. As well, automatic payments were made from our credit union accounts for the larger bills, like a mortgage, and a car loan if we had one.

After all remaining bills were paid, we knew we could spend everything else on discretionary purchases. We lived "paycheck to paycheck" in a sense.

DW was paid each week, and I was paid every two weeks. Occasionally we would have a month where DW was paid five times, and I was paid three times.

Now in retirement, we know our expenses, having paid them for decades. Income is from SS and distributions from our TIRAs. We spend less than what is generally accepted as a safe withdrawal rate percentage of our assets. I pay my share of expenses with credit cards or pulls from my checking account, in one month, then pay off the credit cards the next month. DW uses her debit card for her share of the bills, so she doesn't enjoy a grace period like I do.

I have a very simple spreadsheet that I use to keep track of expenses each month, majority of my expenses to be paid are just credit card totals. The spreadsheet also keeps track of our distributions.

No budgeting, more simply knowing what I've spent, and how much I need to distribute to pay off those expenses. I could certainly go very deep into the weeds if I wanted to do so as my credit card statements could be analyzed in depth. Never felt the need to do so, though.

Broken Man 1999

[Jeepergeo]

I'm retired. I don't have an annual budget, but I do have an annual spending target. That is, what I can afford to spend and keep my retirement plan on track.

I have always been an after-the-fact budgeter. I keep track of expenses and include savings right at the top, after necessary expenses like mortgage and other commitments. As I prepared to retire, I used years of data in Quicken to estimate how much I wanted to cover expenses each year. I had a Vanguard CFP run my plan and learned that I could easily spend more. A lot more. Eventually, I had the plan run again with a much higher spending target. In my 10th year of retirement, I have yet to actually hit the target, but I keep a running tab of how much I have not spent to target.

Knowing how much you can safely spend makes it easy to plan a lumpy retirement budget.

Steering the boat by looking at the wake is still steering the boat. What you're doing is working for you, and that's worth a lot.

[flyingaway]

In retirement and no budget.

However, we have tracked our total spending for many years. I know that our basic spending (daily needs, insurances, taxes, normal entertainments, etc.) would be met by a 2% SWR. I set a spending ceiling of 4% of my previous-year portfolio balance and track my up-to-month spending month by month (only rough, not itemized tracking). So if I am planning an expensive $20,000 Europe trip which could push my spending over the 4% total, I would trim the trip or find a cheaper alternative (e.g., going to South America).

[zie]

Like others, we budget, but it's sort of lazily. We keep track of total expenses for the month, and as long as we are on track for our yearly spend, we are fine. We don't track categories or anything like that, just total $$'s spent vs Total Income. We usually hit between a 40 and 60% savings rate, just depends on the year.

We did budget pretty hard, counting pennies every day, for a year or two to get ourselves "trained" to a budget, but once we did that, we got lazy, and after many years, this is where we ended up. We spend about 10m a month on finances, that's about as much work as we are willing to put in. If we started consistently hitting 40% or less savings rates, we probably would go back into a stricter mode, but so far we haven't had to.

[MathWizard]

Just retired 5 months.

We had to develop a spending plan, call it a budget, because before, we could get use our combined net pay as a guide.

In retirement, we are basing our spending plan on what we spent on during our working years, with an extra 250K set aside for unexpected expenses

I'm setting up direct deposits and automatic payments on health insurance to make retirement as much like when I was with, except for getting up to go to work.

While working:

Retirement savings besides Roth contributions were taking out before we got our pay.

The pay was direct deposit into savings, and we automatically transferred a fixed amount into checking each month for day to day spending,

The remainder in savings was for short term lumpy spending, and for accumulating enough to fund 2 Roth IRAs, unless some critical spending came up. (Only during the kids college years was this ever an issue.)