What to do with budget surplus

[Danmar]

Definitely A. 1.6 % is virtually rounding, no? Good budgeting though. I was 10% over and once I analysed the overage, I still picked A.

 

[Lisa99]

to me it's a rounding error, so I'd pick A.

Now if it were $8000 instead of $800 it would be a different conversation.

 

[audreyh1]

Reduce next year's budget by $800. Duh!

why?

 

[Fedup]

I would put it toward next year vacation, I have a vacation pot.


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[walkinwood]

I'm curious, do you keep this emergency fund actually separated in its own account, or spreadsheet, or is it more of a mental thing?

Its a mental thing, but documented in a spreadsheet. I don't separate the funds from the portfolio - same location, same asset allocation.

It essentially boils down to a lower percentage withdrawal from the portfolio, but, in my experience, these mental games have real-world implications as far as peace of mind goes.

 

[calmloki]

why?

Know a guy who worked for BLM as a park ranger. He was instructed that he needed to use up his full annual budget amount or his next year's budget would be reduced by the amount of surplus. Made for some really kinda dumb end of year purchases to use up that surplus. Ditto a school principal who would stockpile office supplies just to burn up budget excess. Always struck me both sad and funny as the efficient and cost effective manager was forced to make do with less.

I don't budget anymore, our spending day by day is plenty thoughtful and the idea of a surplus is meaningless when you can count on yourself to live as reasonably as you wish.

 

[DrRoy]

You don't have to pick just one. I would a) with $600 and 6) spend $200 on something I wanted as a bit of a reward.

 

[audreyh1]

Know a guy who worked for BLM as a park ranger. He was instructed that he needed to use up his full annual budget amount or his next year's budget would be reduced by the amount of surplus. Made for some really kinda dumb end of year purchases to use up that surplus. Ditto a school principal who would stockpile office supplies just to burn up budget excess. Always struck me both sad and funny as the efficient and cost effective manager was forced to make do with less.

I don't budget anymore, our spending day by day is plenty thoughtful and the idea of a surplus is meaningless when you can count on yourself to live as reasonably as you wish.

But why reduce next year's budget by $800?

 

[Davis65]

I'd go with (vii) put it into an "overflow fund", so that at any point in the future, when you have an unexpected expense, you know that money's available to cover it without having to bite into that year's allocation.

 

[Rustic23]

A.

A budget is a plan. Your's worked! Or you missed it by $800. For me, there really isn't enough information. Does your budget include a sinking fund for thing that may go wrong. I.E. the furnace? We really don't budget. I look each year at how much we spent and if there are any surprises. I know that we can live on X, say $35,000. I know that in the next five to fifteen years we will have to replace a roof, floor covering, appliances, car, A/C, and other stuff. I estimated the life of each of these items, and the cost to repair. Example. Car, 10 years, $35,000. So I must put away $3,500 a year for a new car, and so on. Thus my sinking fund. So while I my expenses are only $35,000 I need to add another say $10,000 savings to account for those things. Thus $45,000.

This works for us as we depend heavily on pension income and not savings. For us the $800 would just go into savings.

To answer the question on how we keep the funds; we keep the local bank with $3,000 to $5,000 pad. Once or twice a year I move funds to to a money market. Been doing this for about 10 years. There is now enough money in the MM to cover asset replacement. We will pad it a little more, but we will also start to spend some of it.

 

[Meadbh]

But why reduce next year's budget by $800?

I don't understand that either. $800, or 1.6% variance, is very close to the budgeted amount. If you couldn't accurately predict the precise number this year, what makes you think you could predict it to be $800 less next year?

 

[pb4uski]

$800 would be in the rounding error category... no cause for any celebration, so (a).

 

[zinger1457]

If my yearly budget ever ends up close to my actual expenses I'll feel like I screwed up. I put a nice buffer in my budget for discretionary expenses.

 

[jjquantz]

Know a guy who worked for BLM as a park ranger. He was instructed that he needed to use up his full annual budget amount or his next year's budget would be reduced by the amount of surplus. Made for some really kinda dumb end of year purchases to use up that surplus. Ditto a school principal who would stockpile office supplies just to burn up budget excess. Always struck me both sad and funny as the efficient and cost effective manager was forced to make do with less.

I don't budget anymore, our spending day by day is plenty thoughtful and the idea of a surplus is meaningless when you can count on yourself to live as reasonably as you wish.

I saw the same thing when I was interning with Megacorp and then when I was w*rking with BigOil. If you didn't use your supply budget for the year then it was reduced for the next year. Apparently, the logic was that you "obviously didn't need the amount you had asked for." No concept that things could change from one year to the next, needless to say. So, everyone went on a December shopping spree to the supply store.

 

[growing_older]

This use it or lose it budget plan has been in use in EVERY organization I worked for. They are certain this if you didn't use your budget, then you didn't really need it. It means that at the end of each year, we had to use up our budget in any way we could. Every department was involved in similar ridiculous spending.

No reason to use this method if it's your own budget and your own money.

 

[cooch96]

"I'd spend half on sin and vice. The rest I'd probably just waste."
-can't remember who said it first, maybe Yogi Berra?

 

[tmm99]

I would park it and spend it on years I go over the budget. I may give myself a percentage of it as an attaboy.

 

[Moneygrubber]

Out of curiosity how do you track your day to day expenses? Spreadsheet? Software?


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[mattbaxx]

Out of curiosity how do you track your day to day expenses? Spreadsheet? Software?


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I use mint.com and fidelity to gather some numbers, then put them into a spreadsheet. I like the flexibility of the spreadsheet. I used Quicken years ago on a PC and liked it, but I've heard Quicken for Mac is substandard so I began working on my own spreadsheet.

 

[W2R]

Out of curiosity how do you track your day to day expenses? Spreadsheet? Software?

Personally I keep track of spending in Excel, on a spreadsheet that I have most aptly named "Spending 2015". I have set up my "Spending 2016" spreadsheet too, and will transition over to it on Friday.

I like Excel because of its flexibility and because I have used it for many years.

 

[Meadbh]

Personally I keep track of spending in Excel, on a spreadsheet that I have most aptly named "Spending 2015". I have set up my "Spending 2016" spreadsheet too, and will transition over to it on Friday.

I like Excel because of its flexibility and because I have used it for many years.

I use Excel too. I started in 2012 with a downloadable expense accounting template and customized it for my spending patterns and the questions I wanted to ask. I do data entry once a month. Data entry is relatively simple as I can download all my banking and credit card data to Excel for analysis.

 

[FUEGO]

We are in the same situation as you, OP. DW is still working but won't be in a couple more months. But we've been living on our ER budget for 2 years now. Year 1 we slightly overspent the budget to tackle a planned major house renovation (exterior siding, new windows, major roof repair).

Year 2 we are running about 25% under budget (in spite of 8 weeks of international travel - about all we can squeeze in with 3 kids, 2 of which are in school). I'm mostly doing your option (a) - noting it and moving on.

But for 2016 I'm increasing my target budget by about 25% to hopefully get us to live a little larger and spend more. The new and improved larger budget still represents 3% of our actual portfolio (after carving off set asides for kids' college and some other fun stuff).

I'm not worrying about carrying forward our 2015 cost under runs, but I'll certainly feel better about busting the budget in the future if a major unexpected expense pops up or we tackle a major replacement item (HVAC, roof, new(er) car, etc) in the next few years.

I certainly don't see a need to spend the money frivolously, but instead deploy it in your ordinary budget throughout the year. For us, that's meant trying some pure luxury purchases at the grocery store (fancy cheeses, beers, wines, champagnes, caviar, etc) and booking another cruise and searching for a 3rd winter cruise for just me and DW. It also means we can replace our (rarely used) aging car(s) in 2016 and not worry about the spike in expenses for 1 year.