Is your monthly expense really that stable or in reality, pretty volatile?

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cj2018
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Is your monthly expense really that stable or in reality, pretty volatile?

Post by cj2018 » Fri Aug 10, 2018 3:34 pm

Speaking from personal experiences and interested in hearing what other wiser people think as well.

I've never been a big believer in budgeting. I think it's a good yardstick but already knew that future is inherently unpredictable and how can people actually stick to a fixed budget on a monthly basis, consistently, over a long period of time?

Questions:
  • Does it ever happen to you during certain month where your expense just go way up and how do you generally think about managing your cash flow in this case?
I presume retirees will have much stable expenses during later stage of life so my concern is mostly towards couples in their 30s or 40s who are in accumulating stage with paycheck coming in regular cadence and have a lot of activities/things going on etc.
  • Under what circumstances do you feel it's necessary to evaluate and adjust your monthly expenses? Either up or down of course.
Case in point:

I target a $2500 monthly budget in the household and the actual monthly expenses over the past 6 months have averaged between $2200-$2800, which to me is good. This month however, there are some additional expenses coming up that seems like 1-time expense in nature:

August 1-time expense:
  • deep cleaning: $400
  • out-of-pocket ortho treatment: $3600 ($1000 down paid already and remaining will be paid out in installment)
  • potentially other dental expenses: let's say $500
  • vacation in hawaii: $5000-$6000 in total for 2 week 2 people
  • business trip (reimbursable): $900
  • oil change: $220 (damn you, jiffy lube) - i drive a Honda and only do oil change stuff probably once and twice per year
So for the month of August, i'm looking to spend an extra $8-9k or so in addition. The vacation is planned so it's not really unexpected. The rest kinda just happened on the fly and wasn't planned. So how would you even account for these in the so-called monthly budget?

I have the surplus cash flow to take care of these, but what's sort of bothering/annoying me i guess is these on the fly expenses are throwing my monthly investment ritual off balance - e.g. i expect to invest $X amount in taxable, but now can only do $X-$3000. I suppose that's what extra savings in cash/EF you already have designated some purpose is really for - you know it's money that will get spent one way (to cover unexpected expenses) so you don't really miss it.

jebmke
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by jebmke » Fri Aug 10, 2018 3:44 pm

I don't use a budget but when I look at my last 6 years of expenses. The average low month is -32% (March) and the average high month is +41% (July) - that isn't including income taxes or large "capital" items like home improvements which would probably make the dispersion even greater. July is my property tax bill so I understand that data point.
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Jags4186
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Jags4186 » Fri Aug 10, 2018 3:45 pm

You do a yearly budget and divide it by 12. Then you accrue money in months where you have lower expenses and have it to spend in months with higher expenses.

It's impossible to account for everything--you never know when you're going to fall and break your wrist or if you engine is going to blow up, but that's why we have emergency funds. In practice if you generally save a decent amount of money every month you don't need to accrue savings, you just invest less the month the expense occurs.

Everything you listed isn't an unknown with the possible exception of the dental work. If it is elective dental work then you budget for it. If you got hit in the face with a baseball, then that's "emergency fund" material (or ideally, cash flowed). I have $1000s of reimbursed business expenses every month and they just sit on a credit card until I get the reimbursement check. I always get reimbursed before my payment is due.
Last edited by Jags4186 on Fri Aug 10, 2018 3:48 pm, edited 1 time in total.

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Sandtrap
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Sandtrap » Fri Aug 10, 2018 3:47 pm

IMHO an Emergency Fund or (substantial) "Emergency Fund" depending on one's cash flow over average expenses, acts as a "shock absorber" or buffer to smooth out the variances of monthly expenses over the year.
And, the more volatile one's monthly expenses, the greater the need for a larger Emergency Fund.
Think of it as "operating capital".
j

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Artsdoctor » Fri Aug 10, 2018 3:49 pm

At some point, meaning later on in life!, you kind of realize that those "one-off's" are actually just routine road bumps. There will always be plumbing issues, you'll replace a roof, you'll replace a car, there might be a huge educational expense, a large tax bill, a loan, a renovation, etc., etc. It just goes on and on; in reality, the monthly (boring) predictable expenses are just baseline expenses and those "one-off's" just get factored into the annual expense budget. After you've been at it for several years, you get a sense of what those amounts might be. Once you assume you're going to have those large, occasional, inevitable outlays, you budget for them and if they don't come up one year, you just roll those funds into the next.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by livesoft » Fri Aug 10, 2018 3:50 pm

I think our annual expenses are pretty stable. it is clear to us that we have month-to-month volatility because of factors such as you mentioned, but mostly known factors:

1. College tuition payments.
2. Property tax payments.
3. Vacation payments.
4. Health care payments.
5. Roth IRA contribuitons.
6. Annual insurance payments.
7. Watering the grass depends on the weather.

In addition to the above expenses, we have extra income at various times of the year:

1. Quarterly dividend payments.
2. Bonus payments in December.
3. Hitting maximums from paycheck such as 401(k) contributions and FICA limits which in turn creates higher take-home money.

So while we don't worry about a monthly budget because we use credit cards for almost all payments and don't have mortage payments, we could in fact create a budget and use it.
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by KlangFool » Fri Aug 10, 2018 3:55 pm

OP,

I track my expenses but I do not budget. I save 1 year of expense every year. I do the "Pay Yourself First" saving method. I auto-deduct my paycheck and save the money first. Then, I spend the rest. So, I do not understand why it is necessary to waste my time looking at my expenses.

KlangFool

jaj2276
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by jaj2276 » Fri Aug 10, 2018 4:04 pm

cj2018 wrote: โ†‘
Fri Aug 10, 2018 3:34 pm
  • oil change: $220 (damn you, jiffy lube) - i drive a Honda and only do oil change stuff probably once and twice per year
I hope this is a typo and you really don't get charged $220 for an oil change. Even if that oil change is full synthetic.

mw1739
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by mw1739 » Fri Aug 10, 2018 4:07 pm

I suppose day to day spending is fairly stable but as you mentioned, one time things pop up. I had about 6k in extra bills last month. Some came out of normal cash flow and some came from savings. I have a rough idea of when our big annual bills are due and try to factor those into the overall budget.

jebmke
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by jebmke » Fri Aug 10, 2018 4:07 pm

jaj2276 wrote: โ†‘
Fri Aug 10, 2018 4:04 pm
cj2018 wrote: โ†‘
Fri Aug 10, 2018 3:34 pm
  • oil change: $220 (damn you, jiffy lube) - i drive a Honda and only do oil change stuff probably once and twice per year
I hope this is a typo and you really don't get charged $220 for an oil change. Even if that oil change is full synthetic.
Yes; I think mine is ~$50 for a 7-quart change.
When you discover that you are riding a dead horse, the best strategy is to dismount.

MrBeaver
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by MrBeaver » Fri Aug 10, 2018 4:08 pm

As others have suggested, I 'monthize' those expenses. I'm pretty dogmatic and use a (digital) envelope style system for budgeting, so that funds not spent at the end of a month in one budget category roll over as available money for the next month. For example, I save $X for car maintenance or replacement every month because I know my cars are breaking down. Right now, I have roughly $14k available in that category because we have a 12 year old car and a 7 year old car, and I expect to need to replace at least one of them within 5 years.

If I exhaust all the money in a category and have to dip into emergency savings, I will increase my monthly budget for that category (and reduce others). If I encounter an expense other than cashflow need from loss of job that doesn't fit in any previously known category, I'll create a category for it and start saving for the future, knowing that I'll probably encounter the same thing again.

To manage cash flow, I just keep ~2 months of expenses in checking, 9-12 months in money market hoping to keep up with inflation, and dump the rest into taxable. After a large expense out of one of these actuarial categories, I'll pull money out of taxable into money market to keep a cash cushion. I know money is fungible, but if I don't break it down like this into expected future expenses and pre-decide how much I want to spend on variable expenses (clothes), I would spend more than I want to and not hit my long term savings goals.

Some tools to manage these 'digital' envelopes if this style of budgeting appeals to you:
https://www.youneedabudget.com
https://www.mvelopes.com

Good luck!

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Sandtrap » Fri Aug 10, 2018 4:09 pm

Artsdoctor wrote: โ†‘
Fri Aug 10, 2018 3:49 pm
At some point, meaning later on in life!, you kind of realize that those "one-off's" are actually just routine road bumps. There will always be plumbing issues, you'll replace a roof, you'll replace a car, there might be a huge educational expense, a large tax bill, a loan, a renovation, etc., etc. It just goes on and on; in reality, the monthly (boring) predictable expenses are just baseline expenses and those "one-off's" just get factored into the annual expense budget. After you've been at it for several years, you get a sense of what those amounts might be. Once you assume you're going to have those large, occasional, inevitable outlays, you budget for them and if they don't come up one year, you just roll those funds into the next.
+1
Well said.
j

cj2018
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by cj2018 » Fri Aug 10, 2018 4:33 pm

Thanks everyone for sharing thoughts on this topic - very insightful to hear the diverse approaches people use.

I def think having a mental yearly budget once you collected some past yearly expenses make more sense given the monthly volatility can more or less be smoothed out. Monthly up/down can be properly managed by saving buffer and cash-flow.
jebmke wrote: โ†‘
Fri Aug 10, 2018 4:07 pm
jaj2276 wrote: โ†‘
Fri Aug 10, 2018 4:04 pm
cj2018 wrote: โ†‘
Fri Aug 10, 2018 3:34 pm

  • oil change: $220 (damn you, jiffy lube) - i drive a Honda and only do oil change stuff probably once and twice per year
I hope this is a typo and you really don't get charged $220 for an oil change. Even if that oil change is full synthetic.
Yes; I think mine is ~$50 for a 7-quart change.
Sorry, yes $220 is the total cost - except for the oil change (around $70) which was what i intended to do, also ended up having a transmission fluid change which was close to $100 and an air filter change which was close to $40...after it's all said and done, i realized i probably got ripped off probably by them for agreeing the transmission fluid and air filter change but in the moment i caved..i suppose i should be stronger next time to say no or learn how to deal with oil change stuff myself...


KlangFool wrote: โ†‘
Fri Aug 10, 2018 3:55 pm
OP,

I track my expenses but I do not budget. I save 1 year of expense every year. I do the "Pay Yourself First" saving method. I auto-deduct my paycheck and save the money first. Then, I spend the rest. So, I do not understand why it is necessary to waste my time looking at my expenses.

KlangFool
I understand the merit and importance of "Pay Your First" saving method - i actually do a good job using the same approach until some bigger unexpected expenses come up and therefore break this. I suppose that's why having extra EF or saving buffer is important so one doesn't derail from paying himself first.

cj2018
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by cj2018 » Fri Aug 10, 2018 4:41 pm

Sandtrap wrote: โ†‘
Fri Aug 10, 2018 4:09 pm
Artsdoctor wrote: โ†‘
Fri Aug 10, 2018 3:49 pm
At some point, meaning later on in life!, you kind of realize that those "one-off's" are actually just routine road bumps. There will always be plumbing issues, you'll replace a roof, you'll replace a car, there might be a huge educational expense, a large tax bill, a loan, a renovation, etc., etc. It just goes on and on; in reality, the monthly (boring) predictable expenses are just baseline expenses and those "one-off's" just get factored into the annual expense budget. After you've been at it for several years, you get a sense of what those amounts might be. Once you assume you're going to have those large, occasional, inevitable outlays, you budget for them and if they don't come up one year, you just roll those funds into the next.
+1
Well said.
j
This is pretty great advice! I like the way you think about this and how it could relieve the anxiety and stress from the inevitable "one-off's" that life throws at you. Thanks.

jebmke
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by jebmke » Fri Aug 10, 2018 4:45 pm

cj2018 wrote: โ†‘
Fri Aug 10, 2018 4:41 pm
This is pretty great advice! I like the way you think about this and how it could relieve the anxiety and stress from the inevitable "one-off's" that life throws at you. Thanks.
Most of life is a series of one-off events.
When you discover that you are riding a dead horse, the best strategy is to dismount.

KlangFool
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by KlangFool » Fri Aug 10, 2018 4:54 pm

cj2018 wrote: โ†‘
Fri Aug 10, 2018 4:33 pm

I understand the merit and importance of "Pay Your First" saving method - i actually do a good job using the same approach until some bigger unexpected expenses come up and therefore break this. I suppose that's why having extra EF or saving buffer is important so one doesn't derail from paying himself first.
cj2018,

When you had kids, there are always unexpected big expenses. My daughter went to see a doctor. She had a ct scan. Then, she had to see a specialist. After that, she needs a colonoscopy to confirm that she has no problem. The whole affair costs a few thousand.

I have 1 year of the emergency fund. I have a buffer in my expense for this.

KlangFool

acegolfer
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by acegolfer » Fri Aug 10, 2018 5:00 pm

cj2018 wrote: โ†‘
Fri Aug 10, 2018 3:34 pm
Questions:
  • Does it ever happen to you during certain month where your expense just go way up and how do you generally think about managing your cash flow in this case?
  • Under what circumstances do you feel it's necessary to evaluate and adjust your monthly expenses? Either up or down of course.
To answer your questions,

1. Yes, my monthly "cash outflow" is very volatilie because I make lumpsum payments for property tax, HOI, auto insurance, etc.

OTOH, I use Quicken to generate my monthly "expenses", which is different from cash "outflow". My Quicken is set up so that these lumpsum payments are automatically monthesized in the expense report. If you want how-to, let me know.

2. We analyze our expenses once a year (typically in January). Compare 12 monthly expenses against previous year's (month by month, category by category). However, we don't use budget.

Misciagno
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Misciagno » Fri Aug 10, 2018 5:46 pm

jebmke wrote: โ†‘
Fri Aug 10, 2018 4:07 pm
jaj2276 wrote: โ†‘
Fri Aug 10, 2018 4:04 pm
cj2018 wrote: โ†‘
Fri Aug 10, 2018 3:34 pm
  • oil change: $220 (damn you, jiffy lube) - i drive a Honda and only do oil change stuff probably once and twice per year
I hope this is a typo and you really don't get charged $220 for an oil change. Even if that oil change is full synthetic.
Yes; I think mine is ~$50 for a 7-quart change.
Just my .02: change your own oil and filters. It's not hard, much cheaper, and then you can do it more often, like 4x/year, which will keep the car alive and happy longer.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Grogs » Fri Aug 10, 2018 6:08 pm

cj2018 wrote: โ†‘
Fri Aug 10, 2018 3:34 pm
I have the surplus cash flow to take care of these, but what's sort of bothering/annoying me i guess is these on the fly expenses are throwing my monthly investment ritual off balance - e.g. i expect to invest $X amount in taxable, but now can only do $X-$3000. I suppose that's what extra savings in cash/EF you already have designated some purpose is really for - you know it's money that will get spent one way (to cover unexpected expenses) so you don't really miss it.
Sounds like you've got a pretty good buffer in your taxable contributions. This is what I tend to do. I have a target I have a target for where my bank accounts should be throughout the year. If they're above a certain point, I make a contribution to taxable. If they're not, I pass for the month to let the account balances recover. Sometimes, like last year, I end up contributing more to the taxable that I had originally budgeted. Other years, like this one, I'll probably contribute less. Averaged over many years, I'll probably contribute about what I expect to the taxable.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by N10sive » Fri Aug 10, 2018 6:11 pm

cj2018 wrote: โ†‘
Fri Aug 10, 2018 3:34 pm
  • oil change: $220 (damn you, jiffy lube) - i drive a Honda and only do oil change stuff probably once and twice per year
If this is just an oil change you are being ripped off.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Horsefly » Fri Aug 10, 2018 6:45 pm

The year before we retired and the year after I carefully tracked everything in Quicken. My goal was two-fold: To see if my expenses went down in retirement, and to establish a "baseline" of what we spend in a year. Not a budget really, but something to compare to periodically to see how my savings spend-down would do over time.

I completely gave up. Virtually every month in retirement had some special case that made it hard to figure. Two months were really low. We pretty much stayed at home except for some shows and dinners. Several months were exceptionally high, due to trips, home improvement / contractor expenses, or a new car when the previous one got totalled by an antelope.

All the tracking was some amount of work, and I was actively working to rid myself of Quicken. So I just gave up, and decided to just do something like what I think Taylor Larimore does: We do what we want and spend when we want, and periodically look to see if we are hitting our savings too much. Of course, the five years we've been retired the market has been pretty darn good, so there hasn't been a year that our savings was less at the end of the year than at the first of the year.

tl;dr - It is too much work to figure out a baseline, and the variance above and below such a baseline is huge. Every month is an "exception" to the normal spending. Forget about it, and enjoy!

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by stoptothink » Fri Aug 10, 2018 6:57 pm

cj2018 wrote: โ†‘
Fri Aug 10, 2018 4:33 pm

Sorry, yes $220 is the total cost - except for the oil change (around $70) which was what i intended to do, also ended up having a transmission fluid change which was close to $100 and an air filter change which was close to $40...after it's all said and done, i realized i probably got ripped off probably by them for agreeing the transmission fluid and air filter change but in the moment i caved..i suppose i should be stronger next time to say no or learn how to deal with oil change stuff myself...
Yes, you got insanely ripped off. Do not ever walk into a JiffyLube, they once broke two separate lugs off one of my wheels and did not even tell me. I noticed when I got home, went to them and the manager said "prove it". Took it to an actual mechanic to have the lugs replaced and he immediately called the JiffyLube and gave the manager a piece of his mind, but they just told him that I could sue them, and then he preceded to replace my lugs for free. If you go in there asking for just an oil change, they will come back with a bill that includes all kinds of totally useless maintenance items; refuse them all. $40 for an air filter is insane, the part was $5-$12 and takes literally one minute and zero skill to change.

getthatmarshmallow
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by getthatmarshmallow » Fri Aug 10, 2018 9:06 pm

Expenses are lumpy for us. I manage it by "pay yourself first" for saving retirement and kids' college, and then by tucking away roughly 1/12th of the lumpy expenses (insurance premiums, home repairs, taxes, and vacation, mostly) into a savings account. Whatever's not needed at the end of the year will get invested in taxable. I also have a solid emergency fund. Then I mostly try to ignore budgeting as much as I can because I find it tedious.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Taylor Larimore » Fri Aug 10, 2018 9:32 pm

Horsefly wrote:All the tracking was some amount of work, and I was actively working to rid myself of Quicken. So I just gave up, and decided to just do something like what I think Taylor Larimore does: We do what we want and spend when we want, and periodically look to see if we are hitting our savings too much.
Horsefly:

It is what I have done for many years and it has worked just fine.

Keep investing simple.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

cj2018
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by cj2018 » Fri Aug 10, 2018 9:48 pm

stoptothink wrote: โ†‘
Fri Aug 10, 2018 6:57 pm
cj2018 wrote: โ†‘
Fri Aug 10, 2018 4:33 pm

Sorry, yes $220 is the total cost - except for the oil change (around $70) which was what i intended to do, also ended up having a transmission fluid change which was close to $100 and an air filter change which was close to $40...after it's all said and done, i realized i probably got ripped off probably by them for agreeing the transmission fluid and air filter change but in the moment i caved..i suppose i should be stronger next time to say no or learn how to deal with oil change stuff myself...
Yes, you got insanely ripped off. Do not ever walk into a JiffyLube, they once broke two separate lugs off one of my wheels and did not even tell me. I noticed when I got home, went to them and the manager said "prove it". Took it to an actual mechanic to have the lugs replaced and he immediately called the JiffyLube and gave the manager a piece of his mind, but they just told him that I could sue them, and then he preceded to replace my lugs for free. If you go in there asking for just an oil change, they will come back with a bill that includes all kinds of totally useless maintenance items; refuse them all. $40 for an air filter is insane, the part was $5-$12 and takes literally one minute and zero skill to change.
Wow crazy story and thanks for sharing. The mechanics at JiffyLube are indeed too sales-oriented in my view. I think it all came down to my lack of basics car-maintenance knowledge and therefore got taken advantaged by w/e they told me since Iโ€™m thinking safely first in my head.. will get myself more educated and try to DIY for the basic stuff - knowledge is power!

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by AerialWombat » Sat Aug 11, 2018 12:46 am

It feels like my expenses are extremely volatile, but it's only because I have a hard time mentally separating my biz from personal expenses.

In reality, my personal expenses are incredibly stable. Even my utility bills do not fluctuate that much seasonally, compared to everybody else I know. I am accustomed to a certain low-cost lifestyle, and it's just the way I'll always live, no matter my income. I have never used a budget, and never will.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by 2015 » Sat Aug 11, 2018 11:50 am

Jags4186 wrote: โ†‘
Fri Aug 10, 2018 3:45 pm
You do a yearly budget and divide it by 12. Then you accrue money in months where you have lower expenses and have it to spend in months with higher expenses.

...
What I do using excel. I budget because it helps with the game of trying to come in under budget without compromising on anything (e.g., it helped me make the conscious decision to investigate (previously overlooked :oops: ) ACA vs. COBRA, resulting in that budget line item plummeting by 90% this year and next.)

MathWizard
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by MathWizard » Sat Aug 11, 2018 12:33 pm

cj2018 wrote: โ†‘
Fri Aug 10, 2018 9:48 pm
stoptothink wrote: โ†‘
Fri Aug 10, 2018 6:57 pm
cj2018 wrote: โ†‘
Fri Aug 10, 2018 4:33 pm

Sorry, yes $220 is the total cost - except for the oil change (around $70) which was what i intended to do, also ended up having a transmission fluid change which was close to $100 and an air filter change which was close to $40...after it's all said and done, i realized i probably got ripped off probably by them for agreeing the transmission fluid and air filter change but in the moment i caved..i suppose i should be stronger next time to say no or learn how to deal with oil change stuff myself...
Yes, you got insanely ripped off. Do not ever walk into a JiffyLube, they once broke two separate lugs off one of my wheels and did not even tell me. I noticed when I got home, went to them and the manager said "prove it". Took it to an actual mechanic to have the lugs replaced and he immediately called the JiffyLube and gave the manager a piece of his mind, but they just told him that I could sue them, and then he preceded to replace my lugs for free. If you go in there asking for just an oil change, they will come back with a bill that includes all kinds of totally useless maintenance items; refuse them all. $40 for an air filter is insane, the part was $5-$12 and takes literally one minute and zero skill to change.
Wow crazy story and thanks for sharing. The mechanics at JiffyLube are indeed too sales-oriented in my view. I think it all came down to my lack of basics car-maintenance knowledge and therefore got taken advantaged by w/e they told me since Iโ€™m thinking safely first in my head.. will get myself more educated and try to DIY for the basic stuff - knowledge is power!

Re Jiffy Lube:

This depends a lot on the location.

I do find the service convenient. I am fully capable of changing the oil, having done almost everything on a car, up to including engine overhauls, body work, transmissions, brakes, tire changed with balancing, etc.
I checked everything the first few times with JL, but once confident with our location, I trust their work.

I no longer change the oil, it's not worth my time, and cars are not as high off the ground anymore, and I am a little thicker, so
getting underneath is not as easy anymore.

I also have problems changing the rear plugs with the transverse mounted V6's in my Buicks. Thank goodness you no longer have to change plugs every year.

To the OP,

I save the average yearly expenses in savings, and transfer in as needed . The same savings is used to accululate for my yearly Roth contribution, car replacement, and home maintenance.

This is also my first tier EF.

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FiveK
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by FiveK » Sat Aug 11, 2018 1:30 pm

Past ~6.5 years monthly spending shown below. On the left is +/- from monthly average, and on the right is the histogram of those values.

Image

High spending months are mostly caused by property tax, vacation, and car repairs. One can plan the first two very well, and have allowances for the third.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Traveler » Sat Aug 11, 2018 3:55 pm

Jan-Jul of this year I averaged $3000/month with a low of $1941 and a high of $4078. Volatile but in some cases plannable. The high month had a vacation in it. For planning purposes, because I never know exactly when I will take vacations during the year, I set an annual amount and divide it by 12. However, it shows up in actuals as highly volatile.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by tesuzuki2002 » Sat Aug 11, 2018 4:26 pm

cj2018 wrote: โ†‘
Fri Aug 10, 2018 3:34 pm
Speaking from personal experiences and interested in hearing what other wiser people think as well.

I've never been a big believer in budgeting. I think it's a good yardstick but already knew that future is inherently unpredictable and how can people actually stick to a fixed budget on a monthly basis, consistently, over a long period of time?


August 1-time expene:
  • deep cleaning: $400
  • out-of-pocket ortho treatment: $3600 ($1000 down paid already and remaining will be paid out in installment)
  • potentially other dental expenses: let's say $500
  • vacation in hawaii: $5000-$6000 in total for 2 week 2 people
  • business trip (reimbursable): $900
  • oil change: $220 (damn you, jiffy lube) - i drive a Honda and only do oil change stuff probably once and twice per year
I used to target a $2100 a month budget.. but the spread was large... I stopped monthly budgeting.. I look an annual totals and keep a 6 month buffer. With cash flow I have always been able to weather out any issues and get things balanced again before the next year.

Iโ€™m glad I donโ€™t drive a Honda. That oil change is way expensive.

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Earl Lemongrab
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Earl Lemongrab » Sun Aug 12, 2018 1:06 pm

There are scheduled, but infrequent, expenses. Insurance payments, property tax, that sort of thing. When I did my pre-retirement analysis, those were pro-rated over the year to get the rough monthly needs.

Unforeseen emergency situations, like water heater replacement or auto repair, come up. That should be accounted for in projected maintenance.

But as I don't budget at all, there's no need to adjust anything. I keep a decent cash reserve, so paying those things (or often the credit card bill for those things) is no big deal.

When I was working, I maxed retirement accounts, then spent what I needed. The leftover went into taxable investing. Even in retirement I spend less than my pension plus taxable dividends, so there's money around.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Phineas J. Whoopee
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Phineas J. Whoopee » Sun Aug 12, 2018 1:46 pm

I think there's a meme, as originally defined, not an ironic picture with text on it, that budgeting is terrible and inflexible and nobody in the real world possibly can follow it.

I have an elderly relative who for years has said budgets are for poor people. He barely scrapes by month to month.

A budget is a plan. As events unfold more information becomes available. In project management we call the project plan progressive elaboration. As new info comes in we account for it.

Quite a lot of my financial success, such as it is and some posters here are multimillionaires who brag about successful market timing because they have the ability to bear more risk without risking homelessness, is because I know what I plan to spend, and I know how I will respond to contingencies.

The way I've structured my assets, and I can only do this because I'm far, far below the eight digits, leaves most protected from judgements and bankruptcy. I'm aware that could change at the vote of a lawmaking body and the stroke of an executive pen. No man's life, liberty or property are safe while the legislature is in session.

I have monthly expenses. Each gets its own monthly line item. Sometimes I spend a little less. That feeds directly into the retirement portfolio.

I have quarterly expenses. Each gets its own quarterly line item.

I have semiannual expenses. Each gets its own semiannual line item.

I have annual expenses. Each gets its own annual line item.

I have weekly expenses, which vary a lot. They include necessities, like laundry detergent, and like food but I have an enormous amount of discretion with respect to how much I spend (from rice and beans to surf and turf), and others. I intentionally sized the weekly budget to be a little more than average spending. What's left from my fiscal week as I like to think of it, accumulates as discretionary funds I can use for something bigger later. Each spending decision becomes a now vs. in the future one, explicitly.

I keep some cash on hand, by which I mean FDIC-insured deposit accounts rather than physical currency on my person. It should be, and has been, enough to carry me through any temporary liquidity problem while I formulate and implement a broader plan.

Last year was an expensive year. I had a $1000+ expense that I had to meet but it wasn't predictable. My liquidity reserve enabled me to handle it at the time while I decided where essentially it would come from.

This year is shaping up to be an expensive year. I already had, and we're only in August, a $1000+ expense that was predictable as to eventually occurring but not as to when or how much.

If I budgeted $0.55 per hour for food and never exceeded it I'd be eating frequently but poorly. That's not what budgeting is.

PJW

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Earl Lemongrab
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Earl Lemongrab » Sun Aug 12, 2018 2:33 pm

Phineas J. Whoopee wrote: โ†‘
Sun Aug 12, 2018 1:46 pm
I think there's a meme, as originally defined, not an ironic picture with text on it, that budgeting is terrible and inflexible and nobody in the real world possibly can follow it.

I have an elderly relative who for years has said budgets are for poor people. He barely scrapes by month to month.

A budget is a plan. As events unfold more information becomes available. In project management we call the project plan progressive elaboration. As new info comes in we account for it.
Budgets are for those that need them. It's a tool. In the right circumstances, you should have one. Others have no need. I don't need to control spending with a budget because I have "internal" control over it through innate frugality. Every purchase I make has been carefully considered, either at the time of purchase or previously in the case of regular purchases. Or I have decided that due to external plans I need a particular item and will buy it whether on sale or not.

Spending analysis, especially getting near retirement, can be useful. But that's backward-looking, as in "what do I spend and how will that change in retirement?"
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Phineas J. Whoopee » Sun Aug 12, 2018 2:42 pm

Earl Lemongrab wrote: โ†‘
Sun Aug 12, 2018 2:33 pm
...
Budgets are for those that need them. It's a tool. In the right circumstances, you should have one. Others have no need. I don't need to control spending with a budget because I have "internal" control over it through innate frugality. Every purchase I make has been carefully considered, either at the time of purchase or previously in the case of regular purchases. Or I have decided that due to external plans I need a particular item and will buy it whether on sale or not.

Spending analysis, especially getting near retirement, can be useful. But that's backward-looking, as in "what do I spend and how will that change in retirement?"
Me also.

I think the only difference is I write internal control and innate frugality down.

If I tell you a story as I read from a book, and you tell me the same story without a book, are the stories different?

PJW

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Earl Lemongrab
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Earl Lemongrab » Sun Aug 12, 2018 2:45 pm

Phineas J. Whoopee wrote: โ†‘
Sun Aug 12, 2018 2:42 pm
Earl Lemongrab wrote: โ†‘
Sun Aug 12, 2018 2:33 pm
...
Budgets are for those that need them. It's a tool. In the right circumstances, you should have one. Others have no need. I don't need to control spending with a budget because I have "internal" control over it through innate frugality. Every purchase I make has been carefully considered, either at the time of purchase or previously in the case of regular purchases. Or I have decided that due to external plans I need a particular item and will buy it whether on sale or not.
Me also.

I think the only difference is I write internal control and innate frugality down.

If I tell you a story as I read from a book, and you tell me the same story without a book, are the stories different?
If you read a story someone else wrote, and I make one up, then yeah. I don't think we have the same story, if you need a plan to control your spending and I don't.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Phineas J. Whoopee
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Phineas J. Whoopee » Sun Aug 12, 2018 2:50 pm

Earl Lemongrab wrote: โ†‘
Sun Aug 12, 2018 2:45 pm
...
If you read a story someone else wrote, and I make one up, then yeah. I don't think we have the same story, if you need a plan to control your spending and I don't.
Thank you, Earl Lemongrab, for making my point for me.

Just like my elderly relative who barely gets by anti-budget people imply superiority of those who don't use budgets.

To use a budget is no shame. Not to use one is no honor.

PJW

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Earl Lemongrab
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by Earl Lemongrab » Sun Aug 12, 2018 3:05 pm

Phineas J. Whoopee wrote: โ†‘
Sun Aug 12, 2018 2:50 pm
Earl Lemongrab wrote: โ†‘
Sun Aug 12, 2018 2:45 pm
...
If you read a story someone else wrote, and I make one up, then yeah. I don't think we have the same story, if you need a plan to control your spending and I don't.
Thank you, Earl Lemongrab, for making my point for me.

Just like my elderly relative who barely gets by anti-budget people imply superiority of those who don't use budgets.

To use a budget is no shame. Not to use one is no honor.
And nothing I said was to the contrary. Again, it's a tool some need, and some don't. If you need a budget to control spending then that's something to use. There should be no question about inferiority or superiority. I have yet to meet anyone who was perfect.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by prairieman » Sun Aug 12, 2018 4:40 pm

I would say there is a stable baseline expense pattern that is peppered with larger expenses (home improvement, travel, medical, donation) that present some predictable level of noise. To cover everything we have set up several automatic deposit streams to our bank checking account. Usually, our bank balance eventually grows too large and we need to send money to our brokerage account - never do we need to supplement the bank beyond the automatically deposited amounts.
Checking the bank balance is about all the budget tracking that we ever do - but we do look at every charge, withdrawal, deposit, etc... to make sure what is there exactly reflects reality.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by sambb » Sun Aug 12, 2018 6:53 pm

yes expenses all over the place - travel, education, home improvement. But withdrawal % is also odd. SWR of 3-4%? Could vary based on inflation, if market tanks will lower expenses, healthcare, car purchase, gifts. Very flawed.

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FiveK
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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by FiveK » Sun Aug 12, 2018 7:42 pm

sambb wrote: โ†‘
Sun Aug 12, 2018 6:53 pm
yes expenses all over the place - travel, education, home improvement. But withdrawal % is also odd. SWR of 3-4%? Could vary based on inflation, if market tanks will lower expenses, healthcare, car purchase, gifts. Very flawed.
Note that a "Safe Withdrawal Rate" is a percentage of the initial investment, not the current balance. See that link for more details.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by runner540 » Sun Aug 12, 2018 11:07 pm

cj2018 wrote: โ†‘
Fri Aug 10, 2018 4:33 pm
Thanks everyone for sharing thoughts on this topic - very insightful to hear the diverse approaches people use.

I def think having a mental yearly budget once you collected some past yearly expenses make more sense given the monthly volatility can more or less be smoothed out. Monthly up/down can be properly managed by saving buffer and cash-flow.
jebmke wrote: โ†‘
Fri Aug 10, 2018 4:07 pm
jaj2276 wrote: โ†‘
Fri Aug 10, 2018 4:04 pm
cj2018 wrote: โ†‘
Fri Aug 10, 2018 3:34 pm

  • oil change: $220 (damn you, jiffy lube) - i drive a Honda and only do oil change stuff probably once and twice per year
I hope this is a typo and you really don't get charged $220 for an oil change. Even if that oil change is full synthetic.
Yes; I think mine is ~$50 for a 7-quart change.
Sorry, yes $220 is the total cost - except for the oil change (around $70) which was what i intended to do, also ended up having a transmission fluid change which was close to $100 and an air filter change which was close to $40...after it's all said and done, i realized i probably got ripped off probably by them for agreeing the transmission fluid and air filter change but in the moment i caved..i suppose i should be stronger next time to say no or learn how to deal with oil change stuff myself...


KlangFool wrote: โ†‘
Fri Aug 10, 2018 3:55 pm
OP,

I track my expenses but I do not budget. I save 1 year of expense every year. I do the "Pay Yourself First" saving method. I auto-deduct my paycheck and save the money first. Then, I spend the rest. So, I do not understand why it is necessary to waste my time looking at my expenses.

KlangFool

I understand the merit and importance of "Pay Your First" saving method - i actually do a good job using the same approach until some bigger unexpected expenses come up and therefore break this. I suppose that's why having extra EF or saving buffer is important so one doesn't derail from paying himself first.
cj2018, I noticed you said "mental": I suggest actually putting together an annual "zero based" budget. That's where you start with your gross pay, subtract out 401k, taxes, paycheck deductions, taxable saving, giving, and all spending to get to $0 (so every dollar has a planned use). Some monthly spending is stable (in our house, that's rent/utilities/food/gas), and all "annual" categories that are not stable month to month. Some annual things are discretionary (travel, holiday gifts, clothing, etc.), and some are not (insurance premiums, medical copays, car registration, professional society fees, etc.). I have a lot of categories, but it works. I also have some funds in there for things that aren't specifically forecasted down to the dollar, but there's a good chance I'll need to use some: auto maintenance, medical copays, household supplies, etc. When I do the budget, I don't know exactly what I'll spend in those categories, but I'm pretty sure it's going to be >$0, so I pick a number. If I'm wildly off plan, then I might need to pull from the emergency fund or stop taxable investing temporarily.

I keep a big cushion in checking, and send the same amount every month to taxable (that I have budgeted out on annual basis).

You're doing the reverse, without a budget/plan: you spend first, then send the rest to taxable. That's fine if it works but sounds like it's stressing you out. If you are thinking, "I can live on just $X to cover rent, food, and utilities", you are underestimating your cost of living. I like to know what the total annual spend is across all these items.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by AlohaJoe » Sun Aug 12, 2018 11:26 pm

cj2018 wrote: โ†‘
Fri Aug 10, 2018 3:34 pm
Questions:
  • Does it ever happen to you during certain month where your expense just go way up and how do you generally think about managing your cash flow in this case?
I presume retirees will have much stable expenses during later stage of life so my concern is mostly towards couples in their 30s or 40s who are in accumulating stage with paycheck coming in regular cadence and have a lot of activities/things going on etc.
I am retired. I don't see any reason why my expenses should be more stable now than earlier in life. If anything, earlier in life you have a (fixed) mortgage which sucks up around 20% of all your expenses. And you are less likely to have sudden medical expenses. And why would retirees have fewer activities/things going on than someone who spends 1/3rd of their life at work? So I'd guess that earlier in life things are more stable if I had to pick.

Anyway, here's my expenses from March 2016 to now; you can see that it varies.

Image

The way I think about it is: with experience, tracking, and planning I can control/predict, say -- to make up a number, 80% of the variation. The other 20% is life happening and we just need to accept that life happens. By "living below your means" it makes it a lot easier to deal with life happening to us. And the further below your means you live, the more of life happening you can deal with without losing sleep.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by thangngo » Sun Aug 12, 2018 11:34 pm

cj2018 wrote: โ†‘
Fri Aug 10, 2018 3:34 pm
I have the surplus cash flow to take care of these, but what's sort of bothering/annoying me i guess is these on the fly expenses are throwing my monthly investment ritual off balance - e.g. i expect to invest $X amount in taxable, but now can only do $X-$3000. I suppose that's what extra savings in cash/EF you already have designated some purpose is really for - you know it's money that will get spent one way (to cover unexpected expenses) so you don't really miss it.
Like you said, I use the EF/cash cushion to cover large (expected or unexpected expenses). That makes me feel that I maximize the utility of the cash cushion/EF fund; otherwise, it's just useless money in online saving accounts.

I use auto-invest tool from Vanguard so the money is pulled to brokerage account twice a month. I just develop a habit not touching the auto-invest function (except to increase it).

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by catdude » Sun Aug 12, 2018 11:48 pm

If it wasn't for the damn cats (until recently I had four senior kitties... now I have three) my monthly expenses would be fairly stable. Seems like I get hit with major vet bills every few months...
catdude | | The only thing between North Dakota and the North Pole is a barbed-wire fence.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by JBTX » Mon Aug 13, 2018 7:13 pm

Occasionally I work up numbers by category based on quicken and set goals and occasionally a budget, but I rarely follow through with it. Setting a budget with little intention to act on it is mostly a waste of time. These days we mostly just track our liquidity position, to see if we are net saving or depleting (beyond retirement savings)

I think it really comes down to habits. If you have expensive habits, a budget won't cure them.

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Re: Is your monthly expense really that stable or in reality, pretty volatile?

Post by frugalmama » Mon Aug 13, 2018 8:00 pm

My monthly expenses are not very stable, but the amount that I budget monthly towards those expenses is. What is really unstable is our income . I am a YNAB fan so I employ zero-based budgeting. We are frugal by nature so I don't think we need a budget to keep from going into debt, but we need a budget to meet as many goals as we have in life as quickly as possible. We want to make sure we are using each dollar to its greatest potential and avoid lifestyle creep, etc. Our budget allows us to quickly realize if expenses are even going up a little and allows us to come up with ways to cut, etc. It also allows us to make better decisions as to whether we really have enough to do what we want to do without touching our savings rate.

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