Does budgeting change how you spend money?

[retire48in2018]

A few years ago, we budgeted intensely. For more discretionary accounts, we pulled cash out weekly from bank in specified denomination and then, into envelopes that we each managed.

Therefore, if we had cash in envelope, we could spend. That included a personal spending account for each. We would commonly pool our spending money if we ran out of cash from a specific account.

If we had unexpected issues, we’d decide where to pull it out from other accounts.

It was very strict. But, we had a goal of getting to X dollars saved, and getting out of debt, etc

Now that we hit those, we have relaxed, a little. We’ll use debit card - track how spending and then adjust behavior or plan if going/went over. Perhaps cut vacation, change a project from contracted out to DIY, cut streaming or other discretionary items to compensate, etc.

We have not had the flip side yet (went under expenses)

We have a large, “capital” account for large projects that we can adjust as well.

We set an annual budget, and have a target, but will adjust with market conditions. We also have some longer term sinking fund accounts.

We actually feel better with these controls, it actually provides a sense of financial peace - as we know we have a plan, and we will make it happen.

Retiring at 51, with no pensions, just our own savings has caused us to be initially more conservative in our annual spending budget plan.

 

[Dtail]

I do have a detailed budget with many line items. Love numbers and like keeping track of stuff like expenses.
If I am near the YTD number for an individual line item, I won't change my spending per se, but am aware of it as it relates to overall spending and next years' budget.

 

[COcheesehead]

I track our spending to stay on course. The categories are broad and easy, like utilities, credit card (which captures almost everything). We buy what we want, travel, etc. I have yet to hit our max allocated for a year.

 

[Smilinggirl]

I've kept a monthly budget for years with the exception of the occasional months when life gets the best of me and I can't keep up with recording expenses. Some categories are pretty specific, such as IRA deposits, car insurance, house insurance, house taxes. I break those yearly bills down into 12 monthly amounts and I round up to the nearest 5$ amount just to make things easier. Other categories such as groceries and eating out can borrow from one another depending on how often I get together with friends vs eating at home and so forth. I also have multiple sinking fund items such as landscaping and home maintenance. I'm not rigid and things sometimes come up unexpectedly, but I like that it gives me a sense of where my money is going.

 

[Teacher Terry]

I have always budgeted and recorded expenses. I like doing it and keeps me on track.

 

[Dreamer]

We have never really budgeted or kept track. Most everything goes through our checking account or credit cards, so I can look at those if I want to look something up.

I have started tracking amounts spent in the past, but I do not keep up with it.

 

[Midpack]

We have tracked spending v budget for as long as I can remember. Helps that I’ve always been a spreadsheet nerd.

We’ve always LBYM (I’m naturally frugal, DW even more so lucky me), so we had the luxury of reining in spending or upping our budget - but that does not mean we just resorted to upping our budget. While we were working, we tried to rein in spending first, only upping the budget as a last resort. We honestly got much more satisfaction from how much we were saving and watching our net worth grow versus what we spent - we saved mind boggling amounts, over 70% of income in our best year. We’ve never been driven by fancier homes-cars-vacations-stuff, but we haven’t deprived ourselves either.

So budgets have always been a very helpful discipline for us, wouldn’t have ER’d otherwise. We still track detailed spending v budget every month, just a lifelong habit now. Fortunately our NW has doubled since I retired over 11 years ago, so we’re cautiously trying to increase spending - admittedly first world problems.

If budgets don’t work for you, fine. They’ve been crucial for our financial plans.

 

[Car-Guy]

I never really had a formal budget and I haven't tracked my spending since I retired over a decade ago. I do look at my NW on an annual basis but that's about it. No sense in making a budget or tracking where my money goes, since I know I'm not going to change my spending habits.

 

[daylatedollarshort]

I enjoy making multiple budgets and spreadsheets for overall spending plus a few by category as well as tracking my spending. I like looking for bargains and playing beat the budget. I track all my spending and bargains each month. Like this month so far I have made or saved around $400 from using coupons, rewards points, gift cards, free meals on your birthday, happy hour specials, etc. I've also lowered the overhead in the annual budget by $120 from cutting out a couple of memberships we weren't using. I'm thinking about buying a state parks pass with the money instead. Free entry into 112 parks and beaches for $125 a year seems like a good deal. I enjoy going over our numbers and optimizing all our expenses that way.

 

[TheWizard]

I'm ten years retired and have decent retirement income without having to withdraw from investments. I don't budget, never have.
I probably could have flown business class here to Australia but I didn't. Cuz I'm frugal ...

 

[racy]

During our accumulation years we never budgeted: just had automatic deductions to 401ks from our paychecks. And increased the amount I invested each year at my annual salary increase. We always paid off the monthly credit card bill and then spent the rest.
I do track spending because I need a reason to use Excel.

 

[Northforker]

We have a budget, it's primary purpose is to illustrate categorically where we are spending our money and act as a reminder/motivator to price shop a regular expense that is rising more than expected or that seems to be gouging us.

Our budget is less than our SS/div/int income and it's nice to see what the "cushion" is. Brings a certain peace of mind that we aren't living on the edge!!

 

[Surewhitey]

I'm up to 7 years of spending data for my own analysis. I pass on the cliff notes to DW as she really doesn't care much about the details. I like the yoy comparisons and the only things that move the needle are travel & remodeling. Everything else is pretty standard, every year.

We went up 11% mainly due to travel and possibly food inflation in 2022. 2021 & 2020 were identical.

We are such creatures of habit who like to eat good and cook our own... Everything else is "as needed".

 

[CRLLS]

When we first started out, we had a budget. 24 of the 26 paydays in any year were used for anticipated expenses. The other 2 were for BTD money. Now, I don't have a budget per se. I do make an annual plan. At the end of the year, I do a rough check with money deposited into the checkbook via DD or by transfers to see if the year's planned expenses were close to being in-line with actual spent money. All outgoing money goes thru the checkbook account. As long as we are close, tracking where each dollar was spent is too much like work.

 

[tmm99]

I do budget. Some things are tracked yearly (travel, auto, medical, etc.), but grocery/living expenses like toiletry are kept track of weekly. Before I retired, I got really good with my spending, so I started keeping track of groceries/living expenses monthly instead of weekly and my expenses went up by a lot, so I went back to keeping track of groceries, etc. weekly again, and I am still doing that. This keeps my spending in check.

 

[brett]

No budget. We do shop on value and we do total up and understand our total monthly and annual after tax spends.

I find that my time is much better spent on our investment portfolio than it is keeping track of how much we spend on groceries, entertainment, gifts or clothing etc. each month/each year or comparing YoY spend category fluctuations.

 

[audreyh1]

Once we were set up in Quicken in the 1990s, transactions downloaded from credit cards/bank accounts pretty much gets automatically categorized, so I spend almost no time organizing it yet it’s there for me whenever I want to look at the data. We pay almost exclusively by credit card or check so this works well for us.

 

[Cobra9777]

When working, we had a budget that we reviewed regularly. Goal back then was to maximize savings with an eye on ER. But we were less concerned about the noise and minutiae of monthly spend, and more concerned about whether the overall trend had us on-track for ER. We never constrained spending based on the budget. Mostly it was a matter of tradeoffs, timing, and agreeing on priorities.

Now after 10 year of retirement, there is no budget per se. I do have a multi-year estimate of spending by category for long-term planning purposes. I also track aggregate spending and monitor balances and overall cashflow. And we still discuss priorities and timing for big-ticket items.

But the market has been kind. We continue to grossly underspend relative to what FIRECalc and other models say we can. Our goal now is to overcome our LBYM tendencies and BTD. It's not easy but we're legitimately trying.

 

[Youngblood]

I find budgeting helpful. It allows me to forecast based on historical information. Just recently, I purchased a new vehicle and will now have a car payment (first time in 15 years). I was able to plug in the car payment into my Excel budget sheet to see how it would impact my expenses.

When my company was doing layoffs, I played around with the budget to make it barebones and see how much I would need at a bare minimum.

In the end, it's up to the individual. I find it very useful and get relief / enjoyment out of the fact I can see where the $ is going. I look at budgeting as if you are driving with a navigation system. Without it, you might be ok...or you might get lost.

 

[brett]

Prior to early retirement I did the same thing as I do now.

I tracked our after tax pre retirement spending for four years. Just the total. It took less than five minutes a month since everything other than autopay goes through our credit card. I wanted to understand the burn rate. Did not, do not care about the categories.

Then I made the adjustments for travel, inflation, ROR, capital spend, etc.

After twelve years of retirement I am still doing the same. It still takes less than five minutes a month. I keep a cumulative total for the year.

Our focus is squarely on cash flow and investment returns. I spend far more time on the latter than I do the former. This is where the real payback is for me.

I screwed up big time. My cash flow predictions at the start of retirement were just about spot on despite significant changes in our lifestyle. Dumb luck.

The big misses, fortunately, were on inflation estimate and investment returns. My very conservative number for our personal inflation at that time was 5 percent a year. Returns, net of inflation were at 2.5-5 percent.

I was far, far out of the ballpark on both. Much less inflation, much higher ROR. The last ten years have been very fruitful in terms of equity growth.

 

[PointBreeze]

We have a slightly lean ER, so I set up a broad budget each December, and I also forecast out the budget for the next 7 years. I use that information to plan my CD and bond ladders, so I won’t have to sell anything each year to meet expenses.

Covid-19 has kept our withdrawal rate below 1.75%. The plan was to stay below 3%. Because I had a serious reaction to my 3rd vaccine shot, I can no longer get vaccines and I am at risk of Covid itself exacerbating the issue. Because of that, we rarely go to restaurants and I am not traveling (DP is traveling once/year to see her kids). That is keeping our WR low. But I must say that I do not feel deprived in the least (monetarily, that is; I do miss draft beer quite a bit, but have found some breweries that are just about empty when they first open, so I can quaff safely once again ).

Having a budget feels freeing to me, not constraining. I know I can spend all the money we’ve budgeted and not risk my future financial well-being, and that feeling is priceless.

 

[Pellice]

I suppose I have less income than many here, so for me, a fairly detailed budget is a reassuring thing. It tells me each month when I review it that I am in good shape, and it allows me to spend without worry. Actually a budget for me is about spending, not cutting back on spending.

 

[wearefinishedworking]

We just finished year one of retirement and I kept pretty detailed monthly spending information to be sure that what we guesstimated was close to reality. It was pretty darn close so going forward will probably review quarterly to stay on track.

 

[big-papa]

I only tried budgeting once and that was when I was between jobs for about 10 months or so. The net result was that even talking about where we were each month stressed out my DW and she's already frugal by nature. I kept it going through that time, but only for myself.

When that period was over, no more budgeting.

During Covid, though, I did monitor our spending as I figured it might be a good representation for what a spending floor might be, worst case, during retirement.

Cheers.

 

[SunGuy]

Yes, conscious spending and taking an account of your personal finances is a key step in planning out your retirement.

I always recommend to people to read the book 'Your Money or Your Life'.

Even simply thinking about a budget, should help you strengthen your resolve over time against impulse spending, and hopefully wean you off the hedonic treadmill of conspicuous consumer consumption over time.