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Old 08-17-2009, 01:32 PM   #21
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Some categories lend themselves to zero-based review: mortgage, taekwondo lessons, utility bills, maybe gas. Others not so much: dining out, entertainment, home maintenance. We fill out the zero-based categories first but use historical data for the rest. By the middle of the year we'll have a feeling for how close we are to reality and can adjust.
With YNAB you can do zero based budgeting even if irregular expenses. Irregular expenses tend to be of 2 kinds. One are those that are reasonably fixed but, well, irregular. Things ranging from annual property taxes to the auto registration. Most people using YNAB would divide those annual expenses by 12 and then budget 1/12 of the amount each month in addition to the monthly spending expected for the month and then build up a reserve over the year.

Then there are the type of expenses that are irregular and you may have them or you may not and they can be small or large. Things like home repair, auto repair, etc. For those generally speaking I look at historical data and then I have an irregular expense category and per month budget some amount that I think will fund that category over time. It is a combination of historical information, future expectations and likelihood. Based upon all that I come up with a number and budget that to the irregular expense category. Then when something comes up that can't be funded out of the normal monthly amount allocated to the category then I can pull it from the irregular expense category.

One of the things I like about YNAB (You Need a Budget) is that it can be flexibility set up for a lot of different ways of budgeting. Because you budget to zero each month it really forces you to look at what you are doing. And, if you have done this and on the 15th of the month you realize you are going overbudget in a category by $200 then you know that you have to take that $200 from some other category to stay in balance (or go into debt. The philosophy of the YNAB author is not quite so anti-credit card as Dave Ramsey but the philosophy is certainly not to encourage debt).

I used to love Microsoft Money (and was sorry to see its demise) but it was always much better at recorded what you have than helping with budgeting.

YNAB has been very focused on budgeting and not the what you have piece (many users use YNAB and Quicken or Money). However, the new version coming out before the end of the year will be adding more features on the what you have end. Over the last year I found I was using YNAB more and more and Money less and less.
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Old 08-17-2009, 01:52 PM   #22
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We do not have a budget per category. However, we have a set amount of money each year we aim not to go over. After 5 yrs of keeping track of expenses we have a pretty good idea.
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Old 08-17-2009, 01:59 PM   #23
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Ours, His and Hers is our system.
I created my own customized expense spreadsheet from a template found online before I FIREd. I kept adding line items to it to get my hands around where our money goes. It is a complete data set. There are actual and estimated categories. He elected me to be the budget cop.

His: dh2b has expenses for which I do not share the load, like child support, court ordered medical insurance and copays, LTC and life insurance, investing, lunches with cow*rkers, technotoys, clothing, kid visitation day entertainment, etc.
Hers: I have expenses that he does not share, like medical, life and LTC ins, investing, garden and misc toys, clothing, lunches solo with friends, etc.
Ours: Everything else is shared 50-50. Everything means what we eat, drive, live in and play on (house and toy insurance, maintenance and repair), when we go out together once in a while, take vacations, etc.

My spreadsheet tells us what we need to contribute to satisfy Our bills.
If we fall short or an unexpected OMG pops up, we both bail out Our account as needed. That rarely happens and we have a built-in cushion. Equlibrium is achieved.

What each of us does with His or Her money is up to the person. Peace and tranquility is the law of the land, i.e no money arguments or head-counting for purely fun spending or divorce settlement loads.
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Old 08-17-2009, 02:20 PM   #24
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I use the free pearbudget spreadsheet from pearbudget.com. You fill out regular expenses (ie. auto insurance), irregular expenses (ie. vacation) and variable expenses (ie. food) sections. You do need to enter manually all the money you've spend. It is an envelope system.

It works for me to keep my spending within my budget. I usually tighten up at the beginning of the month (especially my hobby/entertainment expense) and if I go over my food budget for example, I may take some money out of my left-over hobby money or whatever. Any left over money at the end of the month go into ING - leftover money account. If I am negative at the end of the month, I take money out of my ING account and put it back in my checking account. Overall though, it comes out just about right for each month so no money movement from ING to checking or checking to ING necessary.

I don't really use it to analyze the database at the end of the year though. Because I move money from one envelope to another sometimes, I think it would be difficult to do.
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Old 08-17-2009, 03:38 PM   #25
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Might as well fling in my 2 cents. I've kept an excel spreadsheet that I created for the past few years for budget purposes. When DH retired this year, I allocated a certain amount of money to each category. I divided the homeowner's/auto insurance and property tax by 12 so that one month won't appear to be off-kilter.

All I have to do is look at the total at the end of month. If we're spending too much in one area, we cut back or take money away from another category that has seen less expense.
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Old 08-17-2009, 08:44 PM   #26
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I just spend what I have left over after the regular bills and savings allocations on whatever I feel like! (sometimes this includes tossing more into investments/savings!)
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Old 08-17-2009, 08:49 PM   #27
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I just spend what I have left over after the regular bills and savings allocations on whatever I feel like! (sometimes this includes tossing more into investments/savings!)
I have a similar "budgeting methodology"...
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Old 08-17-2009, 08:53 PM   #28
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I have a similar "budgeting methodology"...
Well, hey, there is only so much "coming in"....pay your bills, and pay yourself!
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Old 08-17-2009, 08:56 PM   #29
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Well, hey, there is only so much "coming in"....pay your bills, and pay yourself!
Works for me, too!
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Old 08-17-2009, 11:21 PM   #30
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I am a Quicken fan (on good days anyway) and have been for years. It has been very helpful in helping us project and track expenses. Except for about $200 a month "allowances", everything goes on a debit card, and unplanned expenses (i.e. car repair) go on a credit card--to manage cash flow.

We are 19 months from FIRE when we will be 55. But we have been living on (testing) what we expect to be our retirement income for the past 2 years.

We use the retirement planner in Quciken, and print out the current year plan at the beginning of each year. Hubby doesn not care much about the details, but this is an easy way for him to see where the money goes when interested.

We've settled on, and will keep after retirement, a weekly paycheck (which will be on autotransfer to the checking acc't once retired). We have a second account that on January 1, we deposit what we expect to use for "planned" expenses--income taxes, property taxes, car ins, life ins, vacations, vehicle purchase etc...) We transfer money from that account to the checking as needed when those expenses come due.

Any money that is left over at the end of the month, gets swept back into that account. So far, this has worked really well for us. And it makes us feel pretty comfortable going forward, as we know we are on plan.
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Old 08-18-2009, 05:53 AM   #31
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I tracked our expenses and income for a few years in Quicken. I take our income minus the sum of the fixed expenses and budget the variable expenses to be less than the remaining dollars. These variable expenses are generally home improvement and travel / entertainment expenses.

Income - savings - fixed expenses - variable expenses > 0
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Old 08-18-2009, 11:11 AM   #32
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I appreciate all the feedback, thanks everybody! I've gotta say, I'm surprised at how many here don't have detailed budgets. For some reason, I thought more people would be in the Nords, RonBoyd, et. al. camp of meticulous record-keeping and tracking. Glad to know I'm not the only one who hates budgeting!

I'm probably going to try Ramsey's zero-based budget for a few months, using the worksheets he makes available on his website. If we can condition ourselves to spend less on groceries and dining out over that time, I'll probably revert back to my passive budgeting at that point (assuming we're meeting our savings goals, etc.).
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Old 08-18-2009, 11:52 AM   #33
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I just spend what I have left over after the regular bills and savings allocations on whatever I feel like! (sometimes this includes tossing more into investments/savings!)
I do the same thing, but have been attacking my debts ala Dave Ramsey. I run Quicken and balance every month, but don't track spending. I'm certainly not extravagent, but no tightwad either.

Just about have things paid off, except for the house. Something interesting I've noticed is that I can cash flow daycare and medical copays and not touch my FSA reimbursments (I set aside $5K daycare, the max, and $2500 medical). So this is building up into a nice emergency fund.

I'll probably start savings accounts for things. Like 1 for vacation, 1 for my next car, etc. Then work on maxing out my 401K.

But as I've found out with life, plans change. So for now, that's the way I'm approaching it.

I shoud say I have a relatively secure gov't job, so am having success paying off debts without maintaining a good emergency fund. Once things are paid off, I'll sock away some $ for emergencies.

I suspect as DD gets older I may end up spending more on her, but time will tell.
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Old 08-18-2009, 12:31 PM   #34
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I appreciate all the feedback, thanks everybody! I've gotta say, I'm surprised at how many here don't have detailed budgets. For some reason, I thought more people would be in the Nords, RonBoyd, et. al. camp of meticulous record-keeping and tracking.
Well, if I find myself spending more than usual, then I start keeping closer track of things.

This year my expenses in May were really high. So, I looked at May a little more closely and found that I spent money on car repair and maintenance, and auto insurance.

I looked through the previous months and discovered that in January and April I had some unusual medical expenses. That's about it for the one-time "big hit" expenses for the first five months of 2009. I determined that I am still way under budget for "big hit" type of expenses for the year, and once they are subtracted out, I found that my more usual monthly expenses were reasonable too. So, it's all cool.

Now if I hadn't found a reason for my high expenses in May, I would be beating my budget to death and writing down every container of tic-tacs that I bought until I got my budget back in line. I have been doing this for a long time, and have a feel for it, I guess.
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Old 08-18-2009, 12:58 PM   #35
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This year my expenses in May were really high. So, I looked at May a little more closely and found that I spent money on car repair and maintenance, and auto insurance.

I looked through the previous months and discovered that in January and April I had some unusual medical expenses. That's about it for the one-time "big hit" expenses for the first five months of 2009. I determined that I am still way under budget for "big hit" type of expenses for the year, and once they are subtracted out, I found that my more usual monthly expenses were reasonable too. So, it's all cool.

Now if I hadn't found a reason for my high expenses in May, I would be beating my budget to death and writing down every container of tic-tacs that I bought until I got my budget back in line. I have been doing this for a long time, and have a feel for it, I guess.
That is kinda how we operate without a budget. If I notice abnormally high credit card bills above what we usually spend, or that our checking account balance is low, I look around a little to see what caused it. Usually it is things like a 1 time big purchase, or annual insurance or tax bills, or a large car maintenance item (timing belt, tires, etc).
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Old 08-18-2009, 01:58 PM   #36
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I am a big fan of Your Money or Your Life. That said, I was never disciplined enough to track expenses on a category-by-category basis. Over the years, I've just tracked my monthly expenses across the following large categories:

- taxes (income taxes, property taxes, utility taxes, etc.)
- long-term debt repayment (mortgage, student loans)
- living expenses (everything else)

I generally can't do much to bring down taxes or my long-term debt repayment monthly numbers, but seeing my total living expenses each month over time (which I chart out on a nice graph) helps motivate me to keep living expenses under control.

My monthly chart of living expenses has two lines: actual expenses, and a cumulative average trendline. Gives me a rough idea of what my expenses would be post-FIRE and what sort of stash I'll need to generate sufficient monthly income.
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Old 08-18-2009, 02:10 PM   #37
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I keep track of every dollar with Excel. Previously, I used scrap paper that I lined with a ruler.

I aim for annual expenses to be below a certain amount. Similar to bbbam1, large yearly expenses, such as property taxes, are amortized so that December doesn't look crazy.

The best way for me to keep within my annual budget is to reduce vacation costs.
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Old 08-18-2009, 03:22 PM   #38
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Along with keeping a budget with 'budget advisor' software that I mentioned previously, I keep a "cheat-cheat" (spreadsheet document) that I refer to as necessary showing when my monthly automatic payments (such as utilities, health insurance premiums) and non-monthly payments (such as property taxes, LTC premium, car and home insurance, car registration, etc.) are due so I can plan for irregular months. For example, looking at my "cheat-cheat", I already see that in October, my expenses are going to be higher than income as I have a property tax payment and LTC premium payment due in that month.
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Old 08-18-2009, 06:37 PM   #39
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We use the track and inspect method. We track all expenses by category, and review at the end of the month. We try to use Dominquez's method of questioning if we're realizing the right value for the expense.

We also keep a 12 month, and year-to-date cumulative expense sheet so we know how we're faring against our annual budget and how we're comparing to previous time periods. This really helps with the lumpy expenses like home & auto repair and vacations.

So far, its worked well and we're usually below the 12 month budget. On the other hand, we do have some room to play in our budget.
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Old 08-18-2009, 06:56 PM   #40
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Now if I hadn't found a reason for my high expenses in May, I would be beating my budget to death and writing down every container of tic-tacs that I bought until I got my budget back in line. I have been doing this for a long time, and have a feel for it, I guess.
I forgot to say that for each month I divide my expenditures (in excel) into the following categories, just to get a feel for where my money goes:

groceries, gasoline, cable tv/internet, natural gas, electricity, cell phone, landline, water, car insurance, house insurance, clothing, fitness, books, electronics, medical, home improvement, home maintenance, car maintenance, travel, property tax, and unspecified.

But I don't really say to myself, "oops! I spent too much on electronics and not enough on books." Since I always seem to stay within my budget, I build this Excel summary not for month to month planning but for long term thought and analysis.
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