Do you budget to control spending or for planning only?

[38Chevy454]

Since still working (projected ER 9 months and counting ), my budget is more of a look-back to track spending and develop an idea of typical expenses. We do not do any specific budgeting, just discuss any big expenditures. Normal expenses are easy to track and control, it is the unexpected bigger ones that cause difficulty. I guess that is the cushion budget expense many of you refer to, which can vary considerably each year. The fixed portion of budget is quite stable, it is the discretionary that is inconsistent.

 

[fritz]

We've adhered to a budget/spending plan for over 30 years, and that continued into retirement. Having a budget lets us know we're on track. If we choose to over or under spend, we do so consciously and there aren't any surprises. Keeping a budget is reassuring to us, not a source of friction in any way...

+1 We've utilized a budget since we married (+42 years now). Over the years this has helped us better understand our spending habits, and put us pretty much in a LBYMs mode. In retirement, it has helped to break down our budget into three areas -

1. Those expenses we have limited control over (HOA, Auto/Home/Health insurance, property taxes, etc.).
2. Those everyday expenses we have total control over (credit card and cash withdrawals).
3. Travel and the little extras that we plan for during the year.

This is all on one simple spreadsheet that automatically totals and adjusts the required income from investments (and how much is needed in investments to cover that income withdrawal. I've set it up so that the wife (who has little interest in finances) can take over when I'm no longer able - she has run it in the distant past. Left side is the limited control expenses. Right side is charges and cash withdrawals. Bottom has area for travel and extras that come up during the year. Fairly simple tracking for all areas as it is important for us to understand what we'll need for the year and where the money is coming from to cover it all.

Our retirement income relies on Social Security and Quarterly taxable account dividends (no pensions or annuity income streams). Our retirement accounts are currently not used for income.

We only write down and keep a running total on credit card charges and cash withdrawals. We've found it's too tedious for us to track cash expenditures, but need to know how much cash is being used monthly. This is the area where writing down/keeping a running total on CC charges and cash withdrawals monthly forces us to evaluate our spending habits. We've allowed enough each month so that it's rare that we go over budget.

The limited control expenses are entered yearly as they renew (different times of the year).

We've added an area for travel and extras with a set yearly amount to play with. This is the wife's SS. We keep it separate from retirement income to remind ourselves that it goes away when one of us does.

 

[Koolau]

This will sound crazy, but we have never really had a budget - all the years we have been married. I was retired for 4 years before we even did a spending "audit" (write down and add up every expenditure for a year.) Neither of us is especially into "toys". We like to spend on the same things at the same time (travel and eating out, for instance.) We are naturally frugal, but are willing to splurge at times. Full disclosure - due to working past FI as explained in other posts, our income flow and stash has made it perhaps easier to skip budgeting than for some of the folks on the forum ("No brag, just fact." from Guns of Will Sonnett.) Having said that, we never budgeted during the accumulation phase either. We "saved first" and spent the rest - I guess that was our budgeting method.

The only thing I watch carefully is our cash draw (from investments) at the first of the year - and if we are "forced" to draw more later in the year. We are able to "titrate" our total expenses within a year by seeing how much is left toward the end of the year. If there is much left over, we can give more to charity or buy a big ticket item or travel. It's about that basic and seems to work so far.

The biggest single factor making this all work is our similar outlook on money, "things", experiences, charity and commitment to each other. If this sounds "pie in the sky", I make no apologies (see quote from Will Sonnett above.)

I don't recommend this approach, I just throw it out to suggest not EVERYONE has to budget to control spending or even to plan. More than most situations, YMMV.