Budgeting/Expense Tracking - Practicalities

[audreyh1]

To "lighten up the load", I would think buying experiences like travel is better than purchasing "stuff". No storage needed. It simply stays in one's head, or at most a corner of the hard drive for digital photos.

I totally concur. Experiences rank top on best things to spend money on.

Audrey

 

[Homebrew]

I guess this is slightly off topic, but what the heck. Since December, I've been using a budgeting software called YNAB (You Need a Budget) to budget and track expenses. I now have sinking funds set up for all the oddball expenses that come up once or twice a year, in addition to my regular categories. All the money for these is in my checking, but the software knows how much is allocated to what expense. Anyway, I love this software, so anyone who is looking for budgeting software might want to take a look.

By the way, I paid for the software and have no affiliation with the company...just a satisfied customer!

 

[Moemg]

Smithsonian in DC? I remember us wandering through several of them, and at the end of the day had museums out of our ears. Too much of a good thing in too short a time.

I love the Smithsonian especially the new American History building . DC is such a great place for a short vacation . Every time we go we see something we missed . We usually met my daughter ,SIL & grandson there over Thanksgiving and we always have a great time .

 

[walkinwood]

I
Cash - Only able to track cash withdrawn. I've no idea what it is all spent on. So I can tell you how much cash we took out during the year. What it was used for is always a mystery.

Walmart/Costco/Target - We put almost everything on our credit card which I pay off every month. I use the monthly credit card bill to itemize the expenses to specific budget categories in Quicken. For the most part this works great. But charges to Walmart, Costco, or Target could be for many different things.....

For the cash - ATM withdrawals mainly - I created a cash account for me and DW. So the ATM cash goes in there, and then we enter what we spend it for. It took us about a year to get good at this. We still have holes in our tracking, but it is good enough. We minimize our use of cash, so this doesn't add too much work.

For stores like Walmart, you'll just have to "split" the transaction by looking at your receipt. I take on that task and after a while, it just becomes one of those things you do regularly.

 

[TromboneAl]

I really try to do my best but I also spend way less than Firecalc says and I usually have a surplus of $10,000 in my budget at the end of the year . Any suggestions on how I should spend it ?

I started a new thread on this here.

 

[FUEGO]

I don't expect the "copy and paste" idea will work as well as downloading to Quicken or some other application. This goes for you too, W2R. "Type in"? As my daughter would say "What is this 'type in' you speak of?"

I hate Quicken, but it knows that Safeway purchases are groceries, and Chevron purchases are gasoline, and it saves me a lot of work.

Here's one way to handle cash. Go count up all the cash you have in wallets, purses, safes, etc. That's the balance in your "Cash Account." Enter that in as the starting balance.

Whenever you make an ATM withdrawal or receive cash, add it to the Cash Account. Whenever you pay for something with a significant amount of cash, record the transaction as a deduction from the Cash Account.

Periodically repeat the procedure of counting up your cash, and compare that total with the total of the Cash Account. It won't match. If you can think of any major transactions you didn't include, enter those. Otherwise, make an entry for "Miscellaneous Cash Expenditures."

For example, at the end of March you show $520 in your Cash Account, and you only have $200 around the house. You remember that you bought a pet rock on Craigslist for $20, so you enter that, and you enter an amount of $300 for Miscellaneous Cash Expenditures.

Folks, sorry to derail your threadjack and bring this back on topic!

I think in a perfect world Quicken would quicken my expense tracking. However I would have to learn how to use it, prepare reports, troubleshoot, change versions, pay for it, make sure I have access to the computer on which it is installed, etc. I just don't have that many transactions to be concerned with, and it will take some manual review to make sure the expenses end up in the right categories. And I will still have some manual entries, such as buying stuff with gift cards (I buy gift cards from Ebay and save ~10%). If I planned to budget and track expenses "forever", I would invest the time on the front end to set up budgeting software. This will probably be a one year thing though.

I'm pretty good at using excel, and I can sort, query, and organize and analyze the data however I want.

I have done the copy/paste and/or download credit card statements before to look at 6 months of spending at a time. It is really not that time consuming to categorize purchases. Sort by name of merchant, and then classify into the proper category. Then sort by category. It will take a little bit of time. Maybe I do this quarterly instead of monthly (quarterly will not take 3x as long as doing it monthly).

I do like your idea of how to deal with cash. I came up with basically the same idea last night. On April 1, I will record all cash in our wallets as a cash expense. Then as we spend it, we will try to record larger cash purchases in the correct category as an expense, and offset that entry with a credit to the cash account. ATM withdrawals will be entered as a cash expense. Every month or quarter we will reconcile what the spreadsheet says we should have versus what is in our wallets and record any discrepancy as a cash expense. Basically, itemize and categorize the big cash transactions, and lump the remainder into "cash expenses".

I spoke to DW briefly last night and she is on board with this effort. And how we will deal with cash.

I'll try to remember to update the thread after a while of doing the expense tracking.

 

[bhoferp]

I have a pocket calendar that I keep in my purse and record cash expenditures in. If I am in a hurry, I just stick the receipt in the pocket calendar and record it later. I think it's kind of a PITA, and your wife might, too, but it really takes very little time or effort. I picked up 3 free pocket calendars recently-one at the bank, one at the dentist's office and one at CVS in the photo department. Or if she agrees, you could splurge and get her a really nice pocket calendar-like from Hallmark. (You do want the very best for her, right? LOL!)

 

[Nords]

I would love to go to the Smithsonian someday, too. Now THAT would be worth spending money on. I have wanted to go there ever since I was a little girl.

I love the Smithsonian especially the new American History building . DC is such a great place for a short vacation . Every time we go we see something we missed . We usually met my daughter ,SIL & grandson there over Thanksgiving and we always have a great time .

Better give yourself a week, W2R. Maybe two.

The Smithsonian's Native American museum will blow you away with its display technology and interactive exhibits, let alone its inventory. (It includes Hawaiian artifacts and present-day crafts.) And then there's all of the splinter air-space museums. Even the Library of Congress was far more impressive than I expected.

We stayed at a B&B near a Metro station. Each morning we enjoyed a leisurely buffet meal cooked by a local who could help us refine our day's plans. Once rush hour was over we'd make our way to the Mall and spend the day walking our legs off. One of the best family vacations ever.

 

[W2R]

I was thinking of at least 2 weeks. And I don't think I would get burned out on museums as one member suggested I might. The Smithsonian is a national treasure IMO.

You mentioned the Library of Congress - - when I was 10-11 years old, my fantasy was to someday OWN the Library of Congress and to actually live there among the books. Of course in a sense we all own it, but I was thinking of owning it in the sense of it being my house and the books my personal property. I would definitely have to check it out at some point to see what I missed.

 

[kyounge1956]

I've tracked expenses for several years doing Quicken. I understand your 'requirements' from DW about keeping it simple. Similar requriements from my DW limit the detail I'm able to capture. The biggest problems I have are the following areas:

Cash - Only able to track cash withdrawn. I've no idea what it is all spent on. So I can tell you how much cash we took out during the year. What it was used for is always a mystery.(snip)

These are the exact two issues I have. How to account for what little cash we spend, (snip)

I'm a bit late replying on this thread, but there is an easy way to pay cash and track expenses in Quicken more specifically than just a catchall "cash" category. For categories I use every month, I use the "envelope system" advocated by Dave Ramsey and some other financial sorts. When I take my cash for the month out of the bank, I divide it into different envelopes according to budget amounts—so much for groceries, so much for gas, etc, and record the ATM withdrawal as a "split" transaction in Quicken. I pay for purchases out of the appropriate envelope, and if there's anything left at the end of the month, I either leave in the envelope or put into a change jar for that category, in case I run a little short in a future month. That way Quicken gives me a pretty accurate record of how much I spend on each category without my having to type the individual purchases in a separate "cash" register. I tried doing it that way for a while before I started using envelopes, but found it a pain in the neck, and that register never balanced even though my checking and savings usually did with no trouble.

For categories I don't have expenses in every month, I transfer money from checking to savings, again recording it in Quicken as a split transaction, to accumulate a "kitty" for each category. When I have an expense in one of those categories, I either withdraw enough cash to pay for it, or use my debit card and then refill my checking account from the savings. I keep track of those set aside amounts in a spreadsheet. Bills, I pay online, or have them on automatic deduction from my checking account, so those amounts come into Quicken automatically when I download my data from the bank.

 

[Ronstar]

I have downloads from checking and credit card accounts into Quicken. I also have a cash account that gets deposits from ATM. I used to track all cash expenses with categories, but now I use credit card as much as possible and record almost all cash expenditures as misc. I do like the kyounge1956 method with split transactions though - I may try it.

 

[FUEGO]

To each their own of course, but I shudder thinking about the envelope method! It sounds harder than using a credit card and just copy/pasting transactions, and I wouldn't get the random cashback rewards check of $50-250.

And if I implemented the envelope in my household, I'd need a "divorce attorney" envelope because DW would say "this is stupid" and return to using her credit cards like we do now!

Thanks for the thoughtful responses though guys. This has helped me flesh out the plan, even if I'm not incorporating all the ideas/methods presented here.

 

[kyounge1956]

To each their own of course, but I shudder thinking about the envelope method! It sounds harder than using a credit card and just copy/pasting transactions....

Then it sounds harder than it really is. I only have five envelopes—groceries, gas, food at work, cat costs, and miscellaneous. The last three of those usually only get used once a month, and I could probably use my debit card for those categories without overspending.

....and I wouldn't get the random cashback rewards check of $50-250.

True, you wouldn't. I don't use credit cards and haven't for years, so this is a non-issue for me.

And if I implemented the envelope in my household, I'd need a "divorce attorney" envelope because DW would say "this is stupid" and return to using her credit cards like we do now!

Being single, I don't need an envelope for that category.

Thanks for the thoughtful responses though guys. This has helped me flesh out the plan, even if I'm not incorporating all the ideas/methods presented here.

You're welcome.

 

[FUEGO]

Then it sounds harder than it really is. I only have five envelopes—groceries, gas, food at work, cat costs, and miscellaneous. The last three of those usually only get used once a month, and I could probably use my debit card for those categories without overspending.

I'm curious how this is implemented. For example, food at work - if you run out to lunch with coworkers and spend $7 on lunch, when do you take the money out of the envelope? Do you follow strict rules about envelope management? As in you forget to grab $40 for groceries from the proper envelope in the morning and you had planned to stop by the store on the way home. Do you still stop by and spend the $40, and then just reimburse your pocket cash from the grocery envelope?

I don't mean to be patronizing, I'm just curious how this system is implemented in practice. Maybe I really am not understanding the simplicity of the system. It just seems somewhat more complicated than using a single credit/debit card (or three). Is the motivation primarily emotional spending control that you would lose with a bottomless CC?

True, you wouldn't [receive credit card cashback rewards]. I don't use credit cards and haven't for years, so this is a non-issue for me.

This is something that perplexes me. Why not take advantage of a free 1-5% of everything you spend, the consumer protections of anti-fraud, chargebacks for consumer disputes with a merchant, plus a month or two of interest free loans in the meantime? I assume you could incorporate credit card usage with envelopes by immediately transferring money from the proper envelope to a sixth envelope labeled "credit card bill". That way you know to stop using the CC if you deplete a particular envelope's funds.

 

[Leonidas]

This is something that perplexes me. Why not take advantage of a free 1-5% of everything you spend, the consumer protections of anti-fraud, chargebacks for consumer disputes with a merchant, plus a month or two of interest free loans in the meantime? I assume you could incorporate credit card usage with envelopes by immediately transferring money from the proper envelope to a sixth envelope labeled "credit card bill". That way you know to stop using the CC if you deplete a particular envelope's funds.

I don't use the system, but understand it. Ramsey uses it and I've seen a TV show based in Canada in which another FA uses something similar (little glass jars holding money). The thing you have to remember is that these people are on a strictly cash basis (except for essential bills that are paid by check). Trying to use credit cards and stay on some kind of budget has proven their undoing - using the envelope system keeps them on budget. They don't need to be worried about missing out on some piddly cash back rewards - their regular spending habits have them tens of thousands of dollars in debt.

 

[FUEGO]

I don't use the system, but understand it. Ramsey uses it and I've seen a TV show based in Canada in which another FA uses something similar (little glass jars holding money). The thing you have to remember is that these people are on a strictly cash basis (except for essential bills that are paid by check). Trying to use credit cards and stay on some kind of budget has proven their undoing - using the envelope system keeps them on budget. They don't need to be worried about missing out on some piddly cash back rewards - their regular spending habits have them tens of thousands of dollars in debt.

Maybe the envelope system for overspenders works like limiting oneself to a six pack of beer a week for overdrinkers (alcoholics). You could always go out and get more money/booze, but as long as you stay within the self imposed rules, you remain solvent/sober.

Hey, if the envelope system saves you tens of thousands of dollars per year, clearly $500 or so in credit card rewards are meaningless. I wonder if proponents of the envelope system would suggest having additional income tax withheld out of each paycheck in order to get back a bigger refund at tax time (which could be used to invest or pay down debt)?

 

[simple girl]

I just started tracking our expenses in detail this year. Prior to this I always did a monthly summary where I tracked in total what we spent vs. what we made. Now, though, as we are getting closer to semi-FIRE (hopefully in 3-5 yrs), we need to track our expenses even closer. We need to be sure of exactly how much we spend every month, and we also want to see if we can "trim the fat" anywhere else.

I use excel to track our expenses. I have Quicken, but I prefer to do this by hand.

We use one credit card for the majority of expenses (cash back). So once a month when I pay this bill I enter all of the expenses into the various categories. Other bills paid by check or online are entered at the time of the expense.

We also go to Walmart and get the big lump bill. I've been very surprised how much of our budget goes to this. So, reluctantly, I am going to start collecting receipts from Walmart so I can fetter out how much we are spending on toiletries vs. household vs. alcohol vs. food. The main goal here is to figure out the excess spending and hence find ways to trim the budget, if possible.

We also have a cash/ATM line item, and I don't worry about splitting that out in any more detail.

We've recently moved into a new apartment and the utility bills are higher...tracking expenses is getting us to be much more aware of turning lights/t.v's off, taking shorter showers, and turning down the temperature on the hot water tank. Hopefully these little changes will add up?

I am finding that as I track each month I am refining my categories into what I really need. It's an evolving process.

 

[Leonidas]

Maybe the envelope system for overspenders works like limiting oneself to a six pack of beer a week for overdrinkers (alcoholics). You could always go out and get more money/booze, but as long as you stay within the self imposed rules, you remain solvent/sober.

Hey, if the envelope system saves you tens of thousands of dollars per year, clearly $500 or so in credit card rewards are meaningless. I wonder if proponents of the envelope system would suggest having additional income tax withheld out of each paycheck in order to get back a bigger refund at tax time (which could be used to invest or pay down debt)?

I don't know, I guess you can customize it if you're not in as bad a shape as others. But an envelope system is more of a budget control tool rather than a comprehensive financial planning tool.

Envelope systems are for people who can't do all that tricksy mental math and say no at the point of sale because they know exactly how much is allocated toward "X" , and realize that this one purchase will put them over for the month. It's for people who find it easy to say, "oh, it's only a couple of extra dollars", and then a few weeks later wonder why they're hurting to pay a bill on time because the checking account is cleaned out. Too many people resort to credit, make the minimum payments, and then wonder why they find themselves in a hole so deep they can't see the light.

Or, they don't spend themselves in debt, but they constantly wonder why it is that they can't reach their financial goals. Any increase in income just seems to be swallowed up by spending. Maybe they worry more about how to make more money than they do how to spend what they got more sensibly.

The way I see it, the first rule around here is LBYM. You have to fix the leaks on the boat before you start worrying about the sails and the rudder. If the problem is that those $3 coffees and $10 lunches are causing a problem, and you find it difficult to fix, an envelope system will force you to address the issue every time you spend money. You can see exactly how much you have left for the week and decide on the spot how you want to spend it. You can worry about how to make more money after you fixed the spending problems.

 

[FUEGO]

The way I see it, the first rule around here is LBYM. You have to fix the leaks on the boat before you start worrying about the sails and the rudder. If the problem is that those $3 coffees and $10 lunches are causing a problem, and you find it difficult to fix, an envelope system will force you to address the issue every time you spend money. You can see exactly how much you have left for the week and decide on the spot how you want to spend it. You can worry about how to make more money after you fixed the spending problems.

I'm not saying you have the answer, but I'm curious how this works on a day to day basis. Does someone keep the five categorized envelopes with cash in each in their wallet, and spend from each envelope as the expense arises? Or just take note of the amount remaining each day in their envelopes and at the end of the day settle up that day's spending?

Could someone implement the envelope system by writing every expense, as it is incurred, on the back of an envelope for that month, and reducing the starting value by the expense in a running account? Like this, say, for groceries:

$300 - 3/1 starting balance
$270 - 3/4 $30 Food mart for groceries
$265 - 3/7 $5 Milk and bread from Quickmart
$170 - 3/15 $95 Walmart run for month
$140 - 3/19 $30 Food mart for groceries
$55 - 3/22 $85 Steaks and beer for NCAA party
$5 - 3/25 $50 Food mart for groceries

So now I know I have exactly $5 left for groceries for the remainder of March. When I get hungry this weekend, I'm going to be spending my last $5 on a dozen eggs and a case of ramen to get my family through the rest of the month. No need to use actual cash in the envelopes. Cash can be stored in a wallet, or debit/atm cards can be used. Keep the back of the envelope in your wallet too while you are at it so you can keep track of what you have spent.

So those using the envelope system, where do you physically keep the envelopes? How do you implement this system?

 

[FUEGO]

I just started tracking our expenses in detail this year. Prior to this I always did a monthly summary where I tracked in total what we spent vs. what we made. Now, though, as we are getting closer to semi-FIRE (hopefully in 3-5 yrs), we need to track our expenses even closer. We need to be sure of exactly how much we spend every month, and we also want to see if we can "trim the fat" anywhere else.

I use excel to track our expenses. I have Quicken, but I prefer to do this by hand.

It sounds like your tracking is very similar to what I intend to do. Good to hear it is working.

I had a copy of Quicken that I recently won from Vanguard from a facebook contest. But I sold it for $55.

Very off topic, but I wanted to let you know I am using your artichoke dip recipe you posted in the ER Forum cookbook years ago. I noticed your name on the recipe when I was making it this past weekend. I have revised it some, but it is always a hit at parties and is the one dish guaranteed to be completely consumed regardless of how much I make. So thanks! I use less mayonnaise and more cream cheese and parmesan cheese. Also use marinated quartered artichokes (from TJ's).

 

[rescueme]

I want to keep the following categories off my budget/expense tracking spreadsheet: "divorce attorney", "alimony", "child support". You know, to simplify.

What if I'm the divorce attorney for your DW and she just happens to currently live with me (along with your children).

Would that not be income for me and worthy of tracking

 

[ksr]

I am probably a little (a lot?) odd, but every month when I receive my bank statement I am really excited. Why? Because I am just dying to type in the stuff and see how much I spent in the previous month.

One of the great things I appreciate about this forum is finding so many like-minded people! Although I use a slightly different system, I love tracking my expenses and tallying up by month and then by year. In fact, at about the middle of December last year I realized I was getting anxious to see my year-end totals.

I've used Quicken for many years - 10 to 12 I think. It was my SO who got my going on it. I can't remember why, but I fought it before that. He convinced me to try it, and we agreed that I'd give it a go for a year. If I didn't want to continue, he would drop the subject after that year. Well, imagine my surprise when I loved using it.

I've found that tracking expenses, regardless of exactly how it's done, has an unexpected benefit. It forces me to face up to what I'm really spending, by category, and then to decide if I feel that I'm getting sufficient value for my money. It's been instrumental in my shifting spending in certain areas so that my spending is more closely aligned with my values. And then there's just the fun of running the reports and seeing the results.

 

[FUEGO]

I've found that tracking expenses, regardless of exactly how it's done, has an unexpected benefit. It forces me to face up to what I'm really spending, by category, and then to decide if I feel that I'm getting sufficient value for my money. It's been instrumental in my shifting spending in certain areas so that my spending is more closely aligned with my values. And then there's just the fun of running the reports and seeing the results.

This is a side benefit I'm looking for too. Is there a particular category which we spend a lot of money on that doesn't bring us value based on the cost? It is hard to tell when you spend a few bucks on a one time expense or a few dozen bucks on a monthly expense. But summing that up over the course of a year adds enough zeros to the expenses to seem real.

As in, "wow I spent $500 on an occasional cup of Starbucks suprachinomoccalatino espresso last year". I like em a lot, but I could brew a cup of coffee at home in the morning and buy a new HDTV or laptop every year instead. Maybe others get more value out of a suprachinomoccalatino espresso.

By the way, I used to like tracking expenses, and budgeting and charting, and spreadsheeting. Then I had kids and somewhere along the way my priorities were changed! Hence my desire for a quick-n-dirty approach to get a check on things.

FYI, in case anyone was wondering how I have conducted expense tracking the last 4-5 years, here it is. I set up all investments to be automatically deducted from my account monthly. They are just another bill to be paid. I can increase or decrease these auto investments if I need to (changes in income or expenses). I know we are spending too much when the checking account balance gets low. Up until December 2009, we always had extra money that I would invest (to get rid of it). I think lots of vacations, increased extra payments on the mortgage, increased investments, and some temporary pay cuts and lack of raises and bonuses during 2008-2009 finally caught up with my cash flow by the end of 2009 and I had roughly $30 in the checking account. So I'm not certain whether we are spending more, saving a lot more, or what.

 

[Leonidas]

I'm not saying you have the answer, but I'm curious how this works on a day to day basis. Does someone keep the five categorized envelopes with cash in each in their wallet, and spend from each envelope as the expense arises?

Again, I'm not an expert and never used the system, so I may miss some of the details. Remember that context in which this system is often explained: "Help, I owe $30,000 in credit card bills, $50,000 in student loans, $200,000 on my mortgage and I can't keep all the balls in the air anymore." Usually, the problem is undisciplined spending, failure to budget, reliance on credit, and no communication between spouses on how to spend. The first step is usually to cut up the credit cards and go all cash.

So, cash basis means (especially when you don't have the credit cards on you) that you have to plan purchases in advance. When the grocery envelope is empty you are done buying groceries, unless you take money from another envelope to cover food and reduce something else. It forces you and your spouse to make joint decisions about money in real-time rather than waiting for the credit card bill 30 days later and saying, "Honey, we've got a little problem." Joint decision making and cooperation is forced on you when you can't eat lunch this week because your sig other "borrowed" from the lunch envelope for something else.

The use of physical envelopes and cash is just budgeting with some forced discipline. You have to decide if you need to go that far. If you and your spouse can do it all without going whole hog on the system, then you don't need to do that. From reading your posts I don't think your spending is forcing you into dire straits, but there is an annoying "leakage" of cash that you suspect could be at least reduced with some spending discipline and planning.

Personally, I think if you believe you need to discipline your budgeting and spending and the envelope system works will do what you can't - then you need to do it completely. The envelopes and cash stay in one place and people take money out and note the withdrawal when they do so. When somebody goes crazy they get outed right away because the consequences are immediate.

 

[FUEGO]

Leo, thanks for putting it in context. I can see where it makes sense if you are spending way more than 100% of your income and just can't figure out why the bills can't get paid. And if you have 2 spouses sharing funds but not sharing responsibility for staying within reasonable spending, it works. I know there would be "discussions" ( ) in our house if we had this system, and I drank all the grocery money away at the bar and/or gambled it all away, then today, March 25, DW asks me how her and the kids are supposed to eat the rest of this month since there is no grocery money left. From that point of view, it would work very effectively. Luckily we do not have those problems.

Ours expense problems are more like me asking DW to not spend so much on X unless it brings her value, because we "only" saved 51% of our income last month. Not really a problem in the grand scheme of things. There is undoubtedly some tiny leakage here and there, but only so much can be done about it if I want to preserve marital harmony.

My real concern is that I have budget/expense data from 4-5 years ago pre-kids and I have no idea how close our current spending is to the old spending. And then there is the lifestyle creep, changed priorities, inflation, etc to deal with.