Budgeting/Expense Tracking - Practicalities

[FIREd]

We started living on our (reduced) retirement budget on July 1st and so far so good. Expenses are down about 15% from last year. The reduced budget inspired me to cut some recurring expenses that had outlasted their raison d'etre. We bought a new mattress and a new iPad for DW. The county sent us a whopper of a tax bill. But we managed to stay on budget nonetheless.

 

[bbbamI]

So far this year we've spent 1.76% of the balance of our portfolio at the beginning of the year. T Al's spreadsheet came in mighty handy...

I don't want to go over 3%....mmmm, looks like I won't....fingers crossed...

 

[easysurfer]

So far this year, I'm pretty much on par. Categories that I spent more than budgeted are medical (got some unexpected dental expenses this year) and gifts (to help care for a friend's four legged friends -- gotta spoil them "kids"). But I've spent less in some categories to balance that out. Just had a discussion about budgeting with someone the other day. I explained, it's kind of like flossing. At first, it seems very cumbersome and tedious but after a while it's second nature. Plus, there's a big advantage to sticking to it.

 

[FUEGO]

Thread Update:

I completed my one year trial run of detailed expense tracking. Success! I kept track of all expenses throughout the year. I stuck with my original plan more or less, and updated my spreadsheet mainly at the end of each month using copy/pasted credit card statements and copy/pasted checkbook spreadsheet entries (supplemented with an occasional manual entry for cash expenses or to split a big walmart/target purchase into multiple categories). The DW was receptive to this tracking effort, and diligently (with a roll of her eyes) reported to me all cash expenses more than a buck or so.

After one year, I had $10 in "cash" expenses that went unaccounted for. Otherwise, everything was categorized into some spending category.

For the curious voyeurs, my "essential" or "bare bones" spending ended up at $22,000 for the year and when I lump in some discretionary spending (mainly vacations) it was $26,000 a year. This is for a family of 4 (including 2 young children).

Not included in these quotes of annual expenditures were mortgage payments (they go away if I choose to pay off the mortgage), child care expenses (not necessary when I ER), and student loan payments (during ER, I think I will qualify as low income so as to avoid paying most or all of these loans).

My goal in tracking detailed spending was to figure out what I would be spending during ER on the basics. The answer there was $22000 a year. Then I need to subtract out some work related expenses (mainly auto/gas) and add in a bunch of stuff like health insurance (which may be cheap/free come Jan 1 2014), more fun/discretionary spending/travel funds, and amortization of big capital expenses like auto purchases, roof, a/c, etc.

Going forward, I'm committed to tracking my expenses in detail like this long term. It will help me refine my spending target for ER, and also to see "where is the money going". Not that we are spendthrifts, but there is always the chance that some spending will grow out of control.

 

[Sarah in SC]

Thanks for the update, Fuego. Oddly, I just restarted this practice in our household, including the eye-rolls, with the same intent of recognizing patterns of spending and monitoring the categories we know are out of whack with our goals.

 

[haha]

Thanks for the update, Fuego. Oddly, I just restarted this practice in our household, including the eye-rolls, with the same intent of recognizing patterns of spending and monitoring the categories we know are out of whack with our goals.

Sarah, can you tell us more about the eye rolling part?

Ha

 

[FUEGO]

Thanks for the update, Fuego. Oddly, I just restarted this practice in our household, including the eye-rolls, with the same intent of recognizing patterns of spending and monitoring the categories we know are out of whack with our goals.

I hope your DH is giving you the good-natured, appreciate eye rolls that I get from DW. Or at least that is how I interpret them.

Do you use a spreadsheet or Quicken?

 

[Sarah in SC]

I'm getting those DH/DW exasperated eye-rolls, yes. Ha, I'm pretty sure that you are a veteran of the eye-rolling wars, even though you are blissfully unmarried!

And how's this for old school, Fuego: I'm using the 3x5 notecard method advocated long ago by Joe Dominguez. Yep, I did a re-read of YMOYL a week or so ago and started thinking about that whole "spending in alignment with your goals" stuff again.

But I also use Quicken, this is in addition to keeping up with the receipts and such--what I want to capture is what we spend cash on, and also make us stop and think about our daily purchases a bit more and spend less "automatically" on things.

 

[ksr]

Thread Update:
Not included in these quotes of annual expenditures were mortgage payments (they go away if I choose to pay off the mortgage)...

This is probably obvious but don't forget that the property tax and escrow (for homeowner's insurance, etc) portions of your mortgage payment don't really go away. When I first started planning to pay off my mortgage and RE, I managed to forget those little tidbits!

 

[simple girl]

Thread Update:
For the curious voyeurs, my "essential" or "bare bones" spending ended up at $22,000 for the year and when I lump in some discretionary spending (mainly vacations) it was $26,000 a year. This is for a family of 4 (including 2 young children).

Not included in these quotes of annual expenditures were mortgage payments (they go away if I choose to pay off the mortgage), child care expenses (not necessary when I ER), and student loan payments (during ER, I think I will qualify as low income so as to avoid paying most or all of these loans).

I'm quite impressed at your spending for a family of 4. I too, continued to track our spending all through 2010, and we ended up spending more than I had estimated: total for the year almost $47K for just two of us. If I back out what we paid for rent/mortgage, the total comes to $39K...comparing this to your $26K, well, wow, let me just say I don't know how you do it! We are pretty conservative in our spending. My hat is off to you!

 

[FUEGO]

This is probably obvious but don't forget that the property tax and escrow (for homeowner's insurance, etc) portions of your mortgage payment don't really go away. When I first started planning to pay off my mortgage and RE, I managed to forget those little tidbits!

I pay those out of pocket so they are included in my "essential" expenses. Good point though since taxes+house insurance is almost 10% of my annual expenses.

I figured out that my total housing expense is roughly a quarter of my annual expense. Utilities, repairs/maintenance, taxes, insurance, appliances, etc all add up.

 

[easysurfer]

Thanks for the update Fuego. Once you spend a year tracking all the detailed expenses, I bet you wonder how you ever got by without tracking. I feel naked if I don't enter my expenses. Or perhaps better stated, I'd feel lost if I don't keep track of what I'm spending my money on.

 

[Sarah in SC]

Simple Girl, I'll tell you how he does it: buying toilet paper in bulk!

 

[FUEGO]

Simple Girl, I'll tell you how he does it: buying toilet paper in bulk!

That only saved me $18 a year on an annualized basis. And I now know that 288 rolls lasts roughly 7 months in our household.

 

[simple girl]

Simple Girl, I'll tell you how he does it: buying toilet paper in bulk!

Lifestyles of the Frugal and FIRED!

 

[FUEGO]

Thanks for the update Fuego. Once you spend a year tracking all the detailed expenses, I bet you wonder how you ever got by without tracking. I feel naked if I don't enter my expenses. Or perhaps better stated, I'd feel lost if I don't keep track of what I'm spending my money on.

I look at this expense data as invaluable guidance for what we really need to FIRE on. And occasionally it is useful to review the historical record of when we bought something or what specific items we bought.

Like the $1000 we spent on electronics. I couldn't believe we spent that much until I reviewed the electronics category and realized we bought an HDTV, a media player, hard drive, tv cables, 2 computer monitors, digital camera and a couple other assorted items. Nothing really "new", just upgraded items for those things that have become functionally obsolete or broken. But that is probably a fairly typical year for us.

 

[gizmo]

My bank (Bank of America) offers what they call "Portfolio". It keeps track of income, expenses, credit card usage & investments (basically like Quicken-only its FREE). All checks & debit card usage is already there, I just have to re-code some. you can manually add accounts or download the actual accounts (have not done this yet-just manually keeping up with DH checking & investments). On the Walmart issue......I segregate my purchases & pay with 2 debit card swipes so that I can easily re-code when transaction hits my account. The portfolio transaction register lets you "split" a transaction into 2 diff catagories. Most of my shopping at Walmart is groceries, household goods, pets supplies, medical/health so doing 2 swipes makes it easier to split into 4 seperate catagories. On the down side of this tracking expenses system.....I did not realize how much our bird watching hobby was actually costing us until I saw my pet supplies broken down...YIKES! those buggers are eating us out of house & home!!! But we do love it so I guess we will keep at it as long as we can still afford it.

 

[KingB]

Like the $1000 we spent on electronics. I couldn't believe we spent that much until I reviewed the electronics category and realized we bought an HDTV, a media player, hard drive, tv cables, 2 computer monitors, digital camera and a couple other assorted items. Nothing really "new", just upgraded items for those things that have become functionally obsolete or broken. But that is probably a fairly typical year for us.

$1000 for all these items is very good. Hopefully, these are non-recurring items that may even reduce your expenses for next year. People don't normally replace their TVs and monitors every year.

 

[rescueme]

That only saved me $18 a year on an annualized basis. And I now know that 288 rolls lasts roughly 7 months in our household.

We would only use half that amount since I insist that everybody uses both sides ...

 

[FUEGO]

$1000 for all these items is very good. Hopefully, these are non-recurring items that may even reduce your expenses for next year. People don't normally replace their TVs and monitors every year.

Oh yeah, I left out a new full price non-contract subsidized smart phone and a GPS.

I view these electronic purchases more as recurring expenses, since tech items are always becoming functionally obsolete. This year maybe I upgrade the desktop computer(s), netbook, media player, mp3 players, DW cell phone, etc. True I won't do this every year, but there will always be the "need" to upgrade different electronic devices.

 

[FUEGO]

We would only use half that amount since I insist that everybody uses both sides ...

No, you would be about par with us. My kids seemingly only use toilet paper on about 1/2 their transactions. Yes, both kids are girls, and no, neither pees standing up (that I have seen).

 

[W2R]

288 rolls of TP in 7 months? That's more than a roll a day! If it was me, I'd call a family meeting....

 

[FUEGO]

288 rolls of TP in 7 months? That's more than a roll a day! If it was me, I'd call a family meeting....

Not over $5 a month in total expenses! There is a price for familial harmony, and it is somewhere north of $5.

Besides, I'm trying to get the kids to use TP MORE often, not less.

 

[aaronc879]

288 rolls of TP in 7 months? That's more than a roll a day! If it was me, I'd call a family meeting....

No kidding. That's 10 rolls per month per person. That's 10X what I go thru. Maybe I should've taken the job across town at a TP maker instead of staying at the plastics maker

 

[FUEGO]

No kidding. That's 10 rolls per month per person. That's 10X what I go thru. Maybe I should've taken the job across town at a TP maker instead of staying at the plastics maker

Hey, preaching to the choir here! I know it is a ridiculous level of consumption. They use 10x what I use. I have tried to train the 3 ladies in the house about the proper quantity of TP. Somehow "5 sheets" has turned into "less than 50". As long as I can keep the supply flowing for $5-7/mo (not including the occasional water damage from overflowing toilets due to having half a roll of TP tring to be flushed down in one fell swoop), I'm ok with the long term budgetary impact of the ladies' TP consumption.

You should see the conditioner/shampoo budget for the ladies. Probably 100x what I spend (yeah, I'm bald lol).