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Old 12-28-2015, 01:13 PM   #21
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I say a) but with a modification that takes 10% ($80) to fund a celebration outing; celebrating both the underage and the fact that you had a very successful first year of FIRE. Congrats!
That's probably what we'd do. Buy a little treat and put away the rest.
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Old 12-28-2015, 01:18 PM   #22
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Strongly leaning toward a), but holding it aside as a slush fund for next year sounds good too.

Practical answer has already been given. Whatever DW wants.
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Old 12-28-2015, 02:08 PM   #23
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In my ER budgeting, any surplus of investment income over expenses automatically gets reinvested into the fund(s) which generate the income.
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Old 12-28-2015, 02:14 PM   #24
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What would you have done if you had a Budget deficit of $800? My recommendation would be to put it in a separate "bucket" from your other investments and draw from this bucket when ever you have a deficit and add to it when you have a surplus. Every five years or so, spend the money you have in this bucket.
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Old 12-28-2015, 02:40 PM   #25
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a) less enough for a nice dinner out
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Old 12-28-2015, 02:53 PM   #26
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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.
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Old 12-28-2015, 02:53 PM   #27
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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.
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Old 12-28-2015, 03:11 PM   #28
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Reduce next year's budget by $800. Duh!
why?
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Old 12-28-2015, 03:40 PM   #29
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I would put it toward next year vacation, I have a vacation pot.


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Old 12-28-2015, 03:48 PM   #30
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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.
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Old 12-28-2015, 07:38 PM   #31
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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.
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Old 12-28-2015, 07:43 PM   #32
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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.
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Old 12-28-2015, 08:13 PM   #33
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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?
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Old 12-28-2015, 08:14 PM   #34
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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.
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Old 12-28-2015, 08:17 PM   #35
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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.
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Old 12-28-2015, 08:19 PM   #36
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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?
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Old 12-28-2015, 08:40 PM   #37
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$800 would be in the rounding error category... no cause for any celebration, so (a).
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Old 12-28-2015, 09:19 PM   #38
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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.
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Old 12-28-2015, 09:40 PM   #39
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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.
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Old 12-28-2015, 11:27 PM   #40
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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.
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