Actually tracking expenses this year - Whew!

[bubba]

I know that most of you on this board track or have tracked your expenses. How else to calculate your retirement needs? But, I'd "estimated" and thought I didn't need the bother of actually keeping up with the outgo around here. Well, on January 1 we starting getting all the data in Excel, using broad enough categories to avoid making this a tedious exercise.

Can I just say that I'm shocked, and after 4 months a total believer in tracking expenses. Now I have another dilemma. I hadn't anticpated the amount needed for retirement properly, so we will either have to work seriously at cutting the budget or work longer/assume more risk going forward. Frankly, it might take cutting the budget and working a little longer.

It's easy to remember the month-in, month-out bills like phone bill, water bill, etc. It's the random stuff that I tend to forget about like paying insurance every six months, or birthday/Christmas gifts or new tires for the cars, etc. All this to say that if you're still employed and think you've nailed your expenses "in your head" and that tracking is too much trouble, you might want to rethink.

 

[LOL!]

For a few years now we have not really tracked expenses, but we know what we spend. We don't ever withdraw money from our investment accounts and only spend current W2 cash-flow. So we just look at our W2 income, subtract out what we put into our investment accounts and the rest is what we spent.

 

[DayDreaming]

It's good that you're now tracking expenses going forward. If you want to fill in some past history, you can probably get a pretty good idea by going over each and every transaction from your last year's credit card statements and checkbook entries. That's what I did when I was first getting a handle on my finances - it's tedious but not really that bad, and it does give you a pretty complete picture of your expenses, assuming you don't buy a lot with cash.

 

[tmm99]

I started tracking my expenses a few years ago, and I am glad I did. Before then, I was spending money frivolously, without conscious effort of saving (although I ended up saving some anyway, although it was nothing near what I am saving now.) After the first year, with the whole year's data, I made a budget. That whole year's data showed me where I could cut and where I didn't want to. Then last year, I tightened my belt a bit too much thinking I could do better, but I felt deprived, so this year, a little looser budget (still saving a lot of money but a couple of thousand dollars less than last year.)

My reason for starting all this was so I could see how little I could live on comfortably. And I'm sure knowing this will be useful come retirement time.

One good thing about having a budget and expense tracking is so I don't feel guilty spending the money that is counted for within my budget. I also save extra *within* my budget not counted for for any special purchases/splurges, so that gives me motivation to cut cost for daily things (ie. electricity, gas, food) I feel like I am accomplishing something (and I am.... saving for early retirement!)

Once I got used to it, it is second nature to me now. Much easier and much more fun than, say, balancing my checkbook.

 

[bbbamI]

It is imperative to keep track of your expenses and have a budget to follow, IMO.

It also makes it easier when my DH says, "I sure would like to get one of those." Then I say, "ok, check the budget."

I'm no longer the "bad guy".

 

[UncleHoney]

We not only tracked expenses but actually lived the planned retirement budget for almost two years before I retired.

At the time I was putting 50% of my paycheck in the 401K and savings and all operating expenses and taxes were coming out of the other half. Just took a little planning to cover things like property taxes and insurance. Worked like a charm.

Since I retired all our spendable income goes into the checkbook each month and we work from there. The monthly balance jumps up and down about $4k but we try and keep a minimum balance of about $5k as a safety factor. We just treat the checkbook like that's all the money we have in the whole world. Working like a fine Swiss watch so far.

 

[W2R]

Preparing for retirement has been an exercise in trying to get my present expenditures to fall below my projected ER income.

If I can't live on it now and be happy about it, then when it comes to retirement income I am cutting it too close, IMO.

 

[ziggy29]

If I can't live on it now and be happy about it, then when it comes to retirement income I am cutting it too close, IMO.

That's pretty much my philosophy, too. If I think I will need X to live on and I can't sustain a secure retirement income of at least (X+delta), it's a no go. Another reason for me to really track expenses now is to see how cheaply we can reasonably live if our personal situation hits the fan. That way I know how long we can tread water on our existing savings and know how much going forward we'd need to earn from future employment to be okay.

 

[W2R]

Another reason for me to really track expenses now is to see how cheaply we can reasonably live if our personal situation hits the fan. That way I know how long we can tread water on our existing savings and know how much going forward we'd need to earn from future employment to be okay.

I used to have a terrible job situation (though it is much better now that I have a new supervisor). Anyway, at that time I channeled my almost unbearable levels of stress and misery into LBYM. I told myself that if I could get my expenses down to a certain level, I was just staying on the job because I wanted to and not because I had to.

I managed to stick it out but as a side benefit, I managed to reach my financial goals that much faster.

 

[ziggy29]

I told myself that if I could get my expenses down to a certain level, I was just staying on the job because I wanted to and not because I had to.

This is actually my specific goal, not retirement itself. In other words, take care of the FI part of FIRE and the RE can follow if you want it. I'd imagine it's a lot less stressful to put up with workplace BS if you know you don't HAVE to take it.

I know that was true for my dad once he hit 55 and was eligible (and financially able) to retire. His last couple years were among the best and least stressful he had there, partially because he knew he could leave if the BS became too much and partially because his bosses withheld a lot of BS because they knew he could retire and they didn't want to lose him. Of course, after a couple years of that he received an early retirement incentive that my generation and those younger can only dream about.

 

[REWahoo]

We not only tracked expenses but actually lived the planned retirement budget for almost two years before I retired.

Same here - only we lived the retirement budget for 3 years before I pulled the plug.

The first year of retirement (05/06) we were afraid to spend anything and came in well below budget. The second year we were more comfortable and spent the full budget amount. Then the growth of our portfolio lulled us into believing we "had it made" and the beginning of year three we splurged on a motor home.

Reality soon followed - we're back to year one thinking and spending 10-15% under budget YTD.

 

[audreyh1]

Here's my thoughts on splurging on a motorhome:

If you bought one while your portfolio was up - well at least you still have a motorhome to show for it, otherwise the money would just have gone "poof"!

We withdrew funds to help pay for our motorhome in early 2005. Our portfolio proceeded to grow significantly after that (30% or more) so much so that it seemed like buying the motorhome didn't cost anything it recovered so quickly.

Then when things went bust last year and our portfolio sunk to well below where we bought the motorhome, my immediate thought was - "thank goodness we bought the motorhome since that money would just have evaporated anyway!".

Heh heh heh - I feel like a winner either way!

Audrey

 

[freebird5825]

It is imperative to keep track of your expenses and have a budget to follow, IMO.
It also makes it easier when my DH says, "I sure would like to get one of those." Then I say, "ok, check the budget."
I'm no longer the "bad guy".

Ditto to the third power.
However, dh2b deferred to me to be in charge of the budget, so I get to be the "bad guy". I'm darn good at it.
Items I added to our tracking expenses spreadsheet is 3 budget lines for "his", "hers" and "our" money pots. The "our" line can then be subdivided as usual. I read about this system years ago in an article somewhere. It really w*rks. It removes the "permission to spend" and "keeping score" potholes.
If I feel like splurging on some gardening stuff or books, I use my money. If dh2b wants some techno-toys, he uses his money.
If it is something we will both use or it is for the house/cars/yard/vacations, we split the cost.
The negotiations are a riot. My trump card is "the budget".

 

[REWahoo]

- "thank goodness we bought the motorhome since that money would just have evaporated anyway!".

Heh heh heh - I feel like a winner either way!

I admire your thought process...

 

[freebird5825]

...Then the growth of our portfolio lulled us into believing we "had it made" and the beginning of year three we splurged on a motor home.
Reality soon followed - we're back to year one thinking and spending 10-15% under budget YTD.

Methinks you deserved your very nice gift to yourselves.
This is coming from a gal who can't wait to get her mid-life crisis car back on the road. One more rainstorm and off I go, top down, burning fossil fuel, cranking the tunes.

 

[Sam]

"thank goodness we bought the motorhome since that money would just have evaporated anyway!".
Audrey

That's much better than thinking about the current market value of the motorhome.

Sam

 

[audreyh1]

That's much better than thinking about the current market value of the motorhome.

Sam

I never think about the current value of the motorhome. That's irrelevant. It wasn't an investment — well, at least not a financial investment. It's here to use and use well (100% of the time in fact), and we have had four fabulous traveling years now.

Audrey

P.S. and these ever dropping diesel prices keep making me smile....

 

[Independent]

This is actually my specific goal, not retirement itself. In other words, take care of the FI part of FIRE and the RE can follow if you want it. I'd imagine it's a lot less stressful to put up with workplace BS if you know you don't HAVE to take it.

I know that was true for my dad once he hit 55 and was eligible (and financially able) to retire. His last couple years were among the best and least stressful he had there, partially because he knew he could leave if the BS became too much and partially because his bosses withheld a lot of BS because they knew he could retire and they didn't want to lose him. Of course, after a couple years of that he received an early retirement incentive that my generation and those younger can only dream about.

This is my experience, too. I figured I could "get by" if I got fired anytime after 55. That removed a lot of stress. I finally gave my boss 3 months notice when I was 58. It took him longer to replace me than either of us expected, so I ended up working an extra 3 months. W*rking was much more enjoyable then.

 

[Amethyst]

I never used to do a lot of number tracking, other than keeping the online checking up to date and making sure the bills are paid on time. Always seemed to have an intuitive "feel" for what we should and should not be spending. Well, since browsing the forums, I have gone in for spreadsheets that track income and outgo. I gathered all the paper and online records from last year and started comparing them with the same time period in 2009. The biggest surprise has not been what we spend (turns out my "feel" was fairly trustworthy), but:

1)How much more specific services, taxes, insurance cost than they did last year;

2)How much our unearned income has dropped. We are getting less than 1/2 last year's investment income for the same time period, and we weren't even investing for income in the first place. We had a good chunk in the money market, which of course isn't paying anything now, but dividends and CGs are way down, too.

Anyway, while I will never really enjoy tracking numbers, I've become sold on it as a FI-management tool. Some of the forum members have given me specific advice about setting up spreadsheets and I've gotten a whole new attitude about what can be done. Plus we are trying to pay down the mortgage, and it's more of an incentive to see the balances march steadily lower on the spreadsheet

 

[FIREd]

I started tracking our expenses in 2006 with Quicken. I found out that there was a sizable gap between what I thought we spent and what we actually spent in a year. Since then, I have retroactively entered all transactions for 2005 and 2004. It was tedious work, but it gives me 2 valuable extra data points. Tracking our expenses has allowed us to be more realistic about our FIRE planning and to identify superfluous expenses that could be eliminated.

According to Quicken, we are right on track with our budget YTD.

 

[audreyh1]

We started tracking expenses early on in using Quicken because it was so easy to assign categories to transactions (and Quicken already had a bunch of sensible ones set up I think) - so why not do it? That was in 1993. By retirement in 1999 we had a huge amount of data to show our spending patterns.

We've really been tracking it since retiring - just to know. I do a thorough review each January. We have "sort of" a budget - a general outline of what is typical for us and that is well within our means. The tracking is really to show how we might have deviated from our budget (i.e. established patterns) and how our spending is evolving over time.

But the great thing is that we don't make any assumptions about how we spend. We can get whatever data we need in very short order.

Audrey

 

[bbbamI]

According to Quicken, we are right on track with our budget YTD.

In the first quarter we were $700 under budget. I wonder what we'll do with all that money.....

 

[Notmuchlonger]

Just updated through April. Spending a lot less than last year. Big savings in groceries. I need to figure out what to blow some cash on.

 

[NW-Bound]

For many years now, my wife has been reconciling the checking account, taking care of the monthly bills, and paying off the credit cards at the end of the month. Ever since we were married, well actually perhaps 3-4 years into it, we always had a big balance in the checking account. We are such LBYM'ers.

Every so often, when the checking balance got into a nice high sum, I would transfer some out to our brokerage accounts to go shopping for stocks. Of course that was when we were still both working. In fact, even when only one of us was working, we could still cover the expenses and then some.

Last year, for the first time, when I ran out of work, the transfer of money was going the other way. It was such an unusual feeling that I guess I need to get accustomed to. So, I looked into my wife spreadsheets to see where the money went. She got the expenses tabulated going back several years. Surely, there were travel and toy expenses that were totally discretionary. The rest is tough to cut, as it would mean a reduction in our lifestyle, which is reasonably frugal already.

Our base expense shows us that we would be OK at the current reduced portfolio size, if my part-time income should go to zero. However, I have not conditioned myself to drawing from my savings to live on. It just feels wrong! I am so conditioned to having an income to at least cover my expenses. If I cannot get over this, I will not be able to retire.

 

[Bestwifeever]

Just updated through April. Spending a lot less than last year. Big savings in groceries. I need to figure out what to blow some cash on.

Maybe some nice arugula?