Poll: How do you budget?

[dirtbiker]

Quote:

Originally Posted by SkisALot We stick to a yearly budget with inflation added. Around 30 years ago I started "funding" every fixed expense a year in advance so that when the bill arrived we had the entire amount to pay set aside. I keep a balance sheet and now I'm 5 years ahead. I realize others can't do this; it was difficult to implement. We went 2 years not buying anything but necessities in order to do it.

This is a great idea. I think I might do this as well. Since we don't budget and pay ourselves first as our budget, when the bigger fixed expenses come in, it does squeeze us a bit (nothing terrible, as we do LBYM and know they are coming).

Do you do a separate account for each fixed expense? Or just one account that you dump into for all the expenses?

[dirtbiker]

The poll results surprised me, as I assumed that nearly no one would have chosen the 'no budget' option here. However, I forget that a large majority of people here are already retired, and that probably sways the results this way quite a bit. I wish I would have worded the poll to say how did you budget when still working.

[RobbieB]

I didn't budget when I was working either. But I did spend less than I made, paid off the house, maxed out the Co 401K, filled up the broker bins...

The only feedback I used was looking at the monthly checking account statements. As long as they were going up, I was spending less than I made.

[Jeffman52]

DW and I use a loosely defined zero target budget. But we are both still W*** and thus our 'extra' income goes directly into our retirement. We have many things on auto-pilot (like charitable giving and our 401K) But we also budget for money to "fun" things and to go on vacations. But our loose budget brings all income to zero (to know where all the money is going) and we check it every month just to make sure we haven't gotten off target.

As we get closer to retirement and after we retire, we will have to be more diligent about the budget (especially early on) since there is no longer any income generated outside of our investments, so going off course could be costly.

[mountainsoft]

My "budget" is a one page Word document that lists all of our monthly expenses at the top (garbage, electric, internet, netflix, etc.). Then I have our annual expenses listed at the bottom (auto licenses, home insurance, property taxes, etc.). However, this document is more for reference than being an actual budget that guides our spending. I rarely even look at it other than recording our annual expenses.

All of our expenses get billed to our credit card (utilities, groceries, clothing, recreation, etc.). I pay off the card in full once or twice each month so we can earn 2% cash back on our purchases. We don't really budget what gets spent, we just live at a level that is comfortable to us. If we spend too much one month, we intuitively know to spend a little less the next month.

All income (paychecks, etc.) gets deposited to our checking accounts automatically. I try to keep a minimum balance of $2500 in each of our checking accounts, for gas and any urgent spending needs that can't wait for a 2-3 day bank transfer. This also prevents the bank from charging a monthly service fee. Any extra above my $2500 minimum gets transferred to our savings account.

Our savings account is a high interest (1.8%) savings account at Discover. This is our emergency fund to cover unexpected expenses, like a new mattress, water heater, etc. I only keep about $20,000 in our savings account. When the balance gets above that, I invest the extra in our taxable brokerage account.

Each January I transfer $7000 from our brokerage account to each of our Roth IRA accounts.

[SkisALot]

Do you do a separate account for each fixed expense? Or just one account that you dump into for all the expenses?[/QUOTE]

I use multiple accounts just to spread the money around because in 2008 when the banks started failing we had to wait a while for the Feds to "give" us our money. It actually doesn't matter where the money is as long as the assets and liabilities columns match on the balance sheet. When they don't I know I've messed up.
One word of warning if it's a warning: As the years go by we've ended up with a lot of cash (the funds - liabilities - include anything that's not paid on a monthly basis such as estimated taxes, travel, and vehicle purchases). It can be a convoluted system but it allows me to sleep very well.

[SkisALot]

Quote:

Originally Posted by dirtbiker The poll results surprised me, as I assumed that nearly no one would have chosen the 'no budget' option here. However, I forget that a large majority of people here are already retired, and that probably sways the results this way quite a bit. I wish I would have worded the poll to say how did you budget when still working.

I budgeted the same way when we were both working.

[brett]

We did not budget when we were working. We always saved a little. We spent what we had and avoided credit, other than mortgage, like the plaque.

I really think this comes down to the type of person you are.

[tinlizzy]

X amt for entertainment, x amt for clothes etc was never my style and felt tedious.

I paid myself first instead. It took some trial and error but I started by transferring a lump sum from my savings (emergency fund) based on what I thought I could live on every month. So it was an annual lump sum that went into checking the first year and I set up my direct deposit to go into savings.

I was short the first year because of large payouts like property taxes, insurance, a vacation but that test year allowed me to hone in on an amount of money that I could live comfortably on and still be LBYM and every subsequent year has been easy.

It was very freeing to not have to think about spending anymore. I was saving most of my salary and still allowed to spend everything in my checking acct. I think paying yourself first takes away any feelngs of deprivation. It also really allowed me to focus 100% on investing the money.

[El Jacinto]

I'm obsessive-compulsive when it comes to budgeting. I have a spreadsheet that estimates my budget for the next 12 months so that I can invest every additional penny.

[ChrisC]

No budget when working or when retired. Just kick the tires and see if all of them are inflated -- take a gauge once in a while to see if the pressure is still in tact. I never felt the need to budget but we are aware when we're paying too much for some things. We've been lifetime savers, in any event.

[Mmm Rrr]

Quote:

Originally Posted by dirtbiker The poll results surprised me, as I assumed that nearly no one would have chosen the 'no budget' option here. However, I forget that a large majority of people here are already retired, and that probably sways the results this way quite a bit. I wish I would have worded the poll to say how did you budget when still working.

I think some people like a budget and others don't. I chose "no budget" and am retired.

When I was working I set up automatic contributions to my 401k and IRAs, lived below my means, then just swept anything leftover into my savings/investment accounts.

Now that I am retired I pay a bit more attention to what I spend, I periodically set up a budget, but I don't track to it month to month, or even year to year.

[calmloki]

Quote:

Originally Posted by Rianne I have a hard time with "pay myself first." Not sure what that means. ....

Pay yourself first has always bothered me. I get that it means focus on saving first, but it is totally opposite my activity. I have obligations - those are addressed first and if anything is left it is saved. Lucky enough to have adequate assets that it isn't a strain, but there were earlier times when it got real skinny. Didn't matter. Pay the bills first, luxuries or discretionary items come after that - and saving for something years in the future ranked as discretionary. If I had kids or was starving my view might have been different.

Oh - and no budget now, nor need of one. When Gal and I first got together she saw a two-week back of envelope budget I had done that covered house payment, utilities, food.. and $5 for fun. How could she resist such a high rolling big splash dude?

[dirtbiker]

Quote:

Originally Posted by calmloki Pay yourself first has always bothered me. I get that it means focus on saving first, but it is totally opposite my activity. I have obligations - those are addressed first and if anything is left it is saved. Lucky enough to have adequate assets that it isn't a strain, but there were earlier times when it got real skinny. Didn't matter. Pay the bills first, luxuries or discretionary items come after that - and saving for something years in the future ranked as discretionary. If I had kids or was starving my view might have been different. Oh - and no budget now, nor need of one. When Gal and I first got together she saw a two-week back of envelope budget I had done that covered house payment, utilities, food.. and $5 for fun. How could she resist such a high rolling big splash dude?

I have obligations too. Funding my future retirement is my number one obligation. So I address my number one obligation first too. Then I pay bills. Then discretionary items come last. I'd rather miss a bill payment than to miss a retirement payment.

[Bir48die]

Before I retired I created budget spreadsheets. Used Mint and my bank/credit card statements to reconcile at the end of the month. Developed an income statement with 20 years projections including estimated taxes. All these gyrations helped me develop the confidence that I could retire.

I decided to stop tracking and just fund a years worth of expenses to deposit in MM to see if I could live off that. Have repeated each year. Pay myself twice a month so I don't dip into the coffer. So far so good. When tax time comes and we get a little back we have the discretion to either take an additional trip or put it into a project/repair.

[calmloki]

Quote:

Originally Posted by dirtbiker I have obligations too. Funding my future retirement is my number one obligation. So I address my number one obligation first too. Then I pay bills. Then discretionary items come last. I'd rather miss a bill payment than to miss a retirement payment.

And there we differ. I can twist my head around to see that an obligation or promise to myself is more important than an obligation or promise to another, but it just doesn't work for me. Sounds like we are at different points in our lives though - my retirement is funded+ at this point, you are making sure your retirement gets funded.

[karen1972]

I guess I loosely budget. I use a ton of categories and set a budget in December for the next year as goals. The total number is really what matters as long as we don't go too far over and we will adjust and delay some things to next year. Savings are already set on auto-pilot so we just make the rest fit.

[dirtbiker]

Quote:

Originally Posted by calmloki And there we differ. I can twist my head around to see that an obligation or promise to myself is more important than an obligation or promise to another, but it just doesn't work for me. Sounds like we are at different points in our lives though - my retirement is funded+ at this point, you are making sure your retirement gets funded.

And I should add that I don't miss bill payments. I meet all of my obligations.

[Lewis Clark]

Quote:

Originally Posted by dirtbiker The poll results surprised me, as I assumed that nearly no one would have chosen the 'no budget' option here. However, I forget that a large majority of people here are already retired, and that probably sways the results this way quite a bit. I wish I would have worded the poll to say how did you budget when still working.

We tried budgeting in our first year or two of married life. I found the process frustrating because I never knew how much to budget in many categories and especially for lumpy expenses. It just seemed so random and futile.

Then I had a realization. If we live far enough below our means then a budget isn't needed.

Since our savings rate was usually at least 40% of our combined gross income we decided the effort to budget was not worth it for us while we were working.

My wife has been retired for several years and I am now semi-retired. We're able to keep the same lifestyle and still live below our means (even if I stopped working completely). So we decided we didn't need to start budgeting. While we don't budget by category we do keep a close eye on our total expenses.

[daylatedollarshort]

We have a basic budget for the year. I don't really track non-discretionary expenses much. If vet bills are $1K instead of $400 or car repairs $1.5K instead of $800 then they are what they are. If it happens enough I up the annual budget.

I do track my discretionary spending pretty close. I try to play beat the budget each month. I save the extra for another month or use it for fun or hobby items. Like this month I have most of our November and December entertainment planned out pretty frugally between our various annual passes, Facebook specials, library passes and Goldstar tickets, so I can use the rest of the entertainment budget for extra Christmas gifts or dining out when our family comes to visit for the holidays.