jollystomper
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Apr 16, 2012
- Messages
- 6,210
Our budgeting process changed as our financial situation changed.
When we first decided to get hold of our spending and deliberately become LBYMers and savers, we kept a strict line item budget across perhaps 20 categories. That was the only way we could start discipline in our spending. We made lifestyle changes to accommodate the budget.
As we became better at saving and LBYM, we loosened to more of a general budget, focusing on the categories of largest controllable expenditures. We also became better in knowing when infrequent expenditures might hit (e.g. getting new major appliances), saving for them, and factoring that into the budget.
When our income increased, if we increased our budget, it was at a much lower percent that the increased income percent. Also, my job usually had a bonus component; we never budgeted based on potential bonuses, only on my base salary. That way, when I did get a bonus, we could frivolously enjoy some of it (if we had sometime in mind) and save some of it.
When it was clear that we had LBYM under control, and were saving at a very high rate (due to both controlling expenses and increased income), we moved to more of a "savings rate" budget - that is, we started with an amount that we wanted to save/invest (with FIRE in mind), and just monitored overall expenses to achieve that savings rate.
Now that I am retired and no longer in the accumulation phase, we have a "cash flow" budget. Based on our planned expenses I budget the required SWR from our cash, and track how we are measuring against it. Since we have a comfortable retirement it is not so much to be strict, but just to ensure we are not going wildly overboard when we choose to "blow that dough".
When we first decided to get hold of our spending and deliberately become LBYMers and savers, we kept a strict line item budget across perhaps 20 categories. That was the only way we could start discipline in our spending. We made lifestyle changes to accommodate the budget.
As we became better at saving and LBYM, we loosened to more of a general budget, focusing on the categories of largest controllable expenditures. We also became better in knowing when infrequent expenditures might hit (e.g. getting new major appliances), saving for them, and factoring that into the budget.
When our income increased, if we increased our budget, it was at a much lower percent that the increased income percent. Also, my job usually had a bonus component; we never budgeted based on potential bonuses, only on my base salary. That way, when I did get a bonus, we could frivolously enjoy some of it (if we had sometime in mind) and save some of it.
When it was clear that we had LBYM under control, and were saving at a very high rate (due to both controlling expenses and increased income), we moved to more of a "savings rate" budget - that is, we started with an amount that we wanted to save/invest (with FIRE in mind), and just monitored overall expenses to achieve that savings rate.
Now that I am retired and no longer in the accumulation phase, we have a "cash flow" budget. Based on our planned expenses I budget the required SWR from our cash, and track how we are measuring against it. Since we have a comfortable retirement it is not so much to be strict, but just to ensure we are not going wildly overboard when we choose to "blow that dough".