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Old 09-10-2015, 12:38 PM   #21
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For us the only budget item that is for "control" purposes is spending money which covers hobbies, liquor, coffee shops, fast food, and "non shared" purchases. DH and I get the same monthly amount. We started this in 2008 after I did a thorough review of our spending which had been slowly creeping up. We both agreed that we needed better control. I agree with thee others that say you discuss it in advance and keep joint goals in mind.
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Old 09-10-2015, 12:48 PM   #22
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We live within our means. So the budget is really there for something to compare against, and to see whether we are on track during the year. Any surprise or sudden increase we would notice quickly. We don't see it as a constraint, but that's because we already don't overspend.

Maybe we should set it up to push us to increase spending in certain areas?
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Old 09-10-2015, 02:03 PM   #23
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We record spending, we don't budget.

Before retirement, we spent far less than I earned. Spending was never an issue. Going into retirement, it looked like we had a comfortable cushion (like we could double our spending), so I wasn't concerned. We never had the sit down meeting, I assumed we'd continue to be thrifty.

However, we (more my wife than I) got into helping relatives who were legitimately hurt by health issues and the Great Recession. Not a big deal. Until the relatives started thinking this was a permanent situation.

We would have been better off if we had laid out a joint plan before retirement. I could have used the plan to start conversations and control spending when the unexpected happened.
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Old 09-10-2015, 02:53 PM   #24
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Originally Posted by RetiredGypsy View Post
I budget for spending knowledge, and that leads to both control and planning...
It's a good question. The quote above sums up my thoughts as well.

I track actual spending against planned expenses by category. I typically compare last 12 months to annual plan to remove the effect of seasonal or lumpy items. If something is trending significantly higher or lower, we discuss it, analyze what's changed since the plan was made, and jointly decide whether to adjust the plan or change our spending behavior. We also discuss priorities and timing of large items, like travel and home improvements.

As someone else mentioned, we have a pretty large buffer (~30-40%) between the annual expense plan we monitor against, and what i-orp/RIP/etc suggest we can safely spend. So we don't sweat it if we overspend a little, and we have no strict control mechanisms of any kind. We just spend what we want, track it after the fact, analyze for knowledge and understanding, adjust the plan or behavior if needed, and hopefully one day soon we'll get comfortable enough to start spending some of that 30-40% buffer.
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Old 09-10-2015, 03:00 PM   #25
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We have found it really helpful to have three separate bank/brokerage accounts for spending.

Every month a specific amount is deposited into our main spending account. Then we automatically transfer 1/12 of what we calculate our annual, non-monthly expenses are. For example property taxes, auto and house insurance. Things like that. This way we never have to worry about budgeting for them, it is already saved in that account.

The third account is our "savings" account. This is what we budget for larger expenses such as long distance travel, furniture, home improvements, or whatever bigger non-monthly expenses are.

We usually put a fixed amount each month in this "savings" account too, but may add or subtract from it as needed.

Keeping these three separate accounts makes our spending easier. The general monthly expenses, gas and electric, phone, cable, trash and water, etc are known and easily budgeted. The rest we spend how we want and don't feel guilty about it. If we spend too much early in the month, we spend less later in the month. If we have extra, we put it into our "savings."

So far has worked for us and keeps things simple and we can both easily see where we stand at any given time.
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Old 09-10-2015, 03:12 PM   #26
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Since ER I have analyzed spending by category at the end of every month on my customized spreadsheet. I do look at taxes. I started with an annual budget for each category, based on previous spending. Each year I tweak the budget based on experience, but I have not yet given myself a raise. I use my expense spreadsheet primarily for planning. I find that for the most part, categories balance each other out over the year. Clothing and tuition are two categories that I greatly overestimated. One year I had a larger tax bill due to unexpected income, so I cut back on travel. So I guess I use the data for guidance rather than for control.
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Old 09-10-2015, 04:09 PM   #27
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I initially set up a budget that seemed reasonable to me, and it worked out to a WR of about 3.15%. Each year, the total amount has been increased to match inflation.

Over the years, we have never actually spent as much as the budget allowed, because we live a very modest lifestyle. For the last few years, we've dramatically increased our vacation travel spending, including things like business class flights on long hauls, better hotels, etc.

This year we will go over the budget amount for the first time, partly due to buying a new home and partly to pre-paying for a big vacation trip next year.

But even after that, next year's budget looks like being a WR of a little less than 3% so we're in good shape.

As others have said, we don't let the budget control our spending, but it is nice to be able to see how our spending works out against our "income."
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Old 09-10-2015, 04:21 PM   #28
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Both. DW is still w*rking so we're not at the withdrawal stage yet. But we budget for both:
Planning: I dislike money surprises (e.g., unexpected home or car repair) so we budget for various contingencies, as well as nice things like vacations.
Control: We are not spartan. Having a budget helps to control spending - there's always something else to want or buy. On the other hand, having a budget won't restrict us from a last minute invite to a dinner with friends, or treating my own kids to a restaurant dinner, etc.
That's about where we are too, except that we're both retired. We have enough wiggle room that the occasional splurge doesn't cause any havoc with the budget.
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Old 09-10-2015, 04:52 PM   #29
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Will DW resent needing to adhere to the budget we have created together once we are mid year? Would relations be better if we overspend in our first retirement year? Planned spending is WR 3.5% so we could think of .5% as contingency/positive domestic relations buffer.
If it is truly something both of you agree is the best then it probably shouldn't be a problem. If it is something you insisted on and DW agreed to in order to keep the peace then it might be a problem.

I do believe in budgeting but it isn't rigid. The thing is that I have X amount in a category and we decide to spend more then we need to find where we will take from something else. That works fine.

I would also say that it has helped us to have some amount that we haven't included specifically in the budget but that we know we can spend beyond the budget if we want to. When we will spend it might be this year or next year or 3 years from now. But we have it in mind.

I also don't think every year has to have identical spending. There is nothing wrong with frontloading some spending, knowing that will mean spending a little less later on.
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Old 09-10-2015, 05:43 PM   #30
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After almost 10 years of retirement I have a real good idea as to what it takes to live on. Our financial planning accounts for savings to replace the major components of the home, auto, and recreation. Therefore, our 'budgeting' is strictly informational. I download our spending into Quicken each month just to insure there are no surprises.
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Old 09-10-2015, 06:15 PM   #31
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Initially my budget was for control, but that was back when I was new to LBYM and getting my feet under me. Now it's mostly just for planning. It still gives me a limit as a goal, but if I'm a little over budget I don't stress. I also don't stress moving money between buckets. I spent too much on entertainment this month? No problem, I just won't go clothes shopping. As long as total spending is as planned, I'm good.


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Old 09-10-2015, 07:29 PM   #32
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So far, three years into retirement, budgeting is only for planning purposes. The only thing I track is total expenditures , and travel expenses as a subset of the total. One time infrastructure expenses like vehicle replacement and large home repairs are also tracked separately. We've never bothered to track to any lower level of detail, as we're both fairly frugal and try to keep expenses low, or at least of high utility.

Year over year we can see if standard expenses are creeping up, and we'd take corrective action if needed. The major lever is travel, which runs 20-25% of total expenditures and can be cut back if get up too high. So far, we've been closer to 4% than 3.5% withdrawal rate. But early in retirement the travel urge is high - mostly longer term non-luxury travel by preference. FireCalc and others still have us at 100% survival rate, especially with Social Security and small pensions starting in two to ten years.

My wife doesn't pay much attention to the financial details, but she knows enough to take over if I get hit by the proverbial truck. Since I initiate most of the travel, it's easier to adjust that and the timing of large one-time expenses than to pick at smaller expenses. We're pretty good at spending lockdown mode since that was our reality for quite a few years, but it would take a significant unplanned event or serious investment downturn to get back to that mindset.
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Old 09-10-2015, 09:07 PM   #33
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This is a very good question and I think you will get a diverse response. In our case it is a little complicated. ER in 2006. Currently 65 and 58. We set our rather detailed budget in advance but don't really feel constrained too much by it. Our financial position is such that running over plan won't really affect us much. Have been over "budget" every year since ER to varying degrees (1-15%) The one exception would be in 2008-2009 when things looked dire. It was the only time (so far) we felt compelled to significantly constrain our spending. So maybe 40/60 control/planning.

I think the key is communication. Make sure you discuss things in advance. I wouldn't worry too much about going a little over (say10-15%) as long as you discuss before hand and agree to it.
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If not to personal of a question, would you provide what items contributed to your over budget spend?

Thanks

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Old 09-10-2015, 09:20 PM   #34
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I created my budget from 5-10 years of actual spending numbers. So my budget is mainly for planning. Not much need to control since spending almost always falls in line with historical numbers.


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Old 09-11-2015, 12:36 AM   #35
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We track spending and used the numbers of many years for ER planning. Now we track to know that we stay within the plan.
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Old 09-11-2015, 04:25 AM   #36
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I don't have a written budget or really even a mental budget. I spend what I want to spend but don't like waste so don't over spend. When I turn 70 I can live on SS if I have to but at 67 have almost a million so if I take out 40K a year I can gift it or spend it or just leave alone. I need about 10K-15K to pay expenses more than SS so can gift about 25K or spend more foolishly but even if I spend an extra few thousand it isn't a big deal.
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Old 09-11-2015, 07:41 AM   #37
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Our lifestyle itself has become a self-regulating budget of sorts.
This is a good point and will be true for most people I think. But it might take a few years of retirement to settle into a lifestyle. So best to be a little more careful early on.

In our case there are still "projects " that are fairly expensive that we try to spread out. Eg new vehicles, new boat, redecorating, daughter's wedding(ouch!!) Agree that basic standard items are now pretty consistent
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Old 09-11-2015, 07:48 AM   #38
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Danmar
If not to personal of a question, would you provide what items contributed to your over budget spend?

Thanks

Patrick
Each year is different but a couple of recent overages would include redecorating our Toronto condo(not in plan at all) ,my daughter's wedding which went way over plan, a lot of unanticipated maintenance at our lake house, and a new vehicle we weren't planning for. All the regular stuff balances out each year and is very easy to plan for.
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Old 09-11-2015, 08:03 AM   #39
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We've adhered to a budget/spending plan for over 30 years, and that continued into retirement. Having a budget lets us know we're on track. If we choose to over or under spend, we do so consciously and there aren't any surprises. Keeping a budget is reassuring to us, not a source of friction in any way...
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Old 09-11-2015, 08:04 AM   #40
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Each year is different but a couple of recent overages would include redecorating our Toronto condo(not in plan at all) ,my daughter's wedding which went way over plan, a lot of unanticipated maintenance at our lake house, and a new vehicle we weren't planning for. All the regular stuff balances out each year and is very easy to plan for.
Do you have any concerns about your daughter's ability to LBHM? After all, your NW is an outlier, reversion to the mean is real, and inheritances can be spent down quickly without financial discipline.
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