Enforcing a budget

[twaddle]

I'm overwhelmed by the sympathy I'm getting.

So, the take-home message is that nobody really sets, tracks or enforces their budgets?

 

[justin]

So, the take-home message is that nobody really sets, tracks or enforces their budgets?

I've realized establishing and closely following a budget month to month doesn't fit my lifestyle. Some months we spend a lot, some months we spend very little. I save a lot and whatever is left I feel it is ok to spend. If I see I have more and more money accumulating in my savings account, I feel a little more able to give to charity, give larger gifts or splurge on purchases. Similarly, if I know I have a big expense coming up soon (vacation, xmas gifts, insurance bill, etc) I'll try to let the savings balance grow a little to accommodate this expense.

 

[Martha]

What we do is have a notepad in the kitchen and write down everything we spend. Later on, I am supposed to enter it into quicken, but I only made it through January. My plan is to enter the rest now that winter is here. Then we will see if we have to enforce a budget.

Right now we do not have a budget, this is the first time we have tracked our expenses. We do limit our spending by limiting the amount of money that is readily available.

So your exercise is interesting to me. But I am of no help to you.

 

[Texas Proud]

I'm overwhelmed by the sympathy I'm getting.

So, the take-home message is that nobody really sets, tracks or enforces their budgets?

Well, for me there is no budget... and I used to track my spending, but stopped a long time ago... I just don't spend money on something I do not want or need... "budget" problem solved.

 

[W2R]

I budget for three types of expenses:

(1) the usual, recurring expenses like utilities, cable TV, gym membership, food, and so on.

(2) padding to cover unexpected expenses such as major A/C work, a root canal, a broken TV.

(3) Fun stuff.

I allow $800/mo for (1). That was $600/mo before Katrina, but inflation has been rampant here what with carpetbaggers and opportunists. If I don't use the allotted amount on (1), I will consider something in category (3) or else save the extra.

Category (2) has been running about $650/mo historically, so I allot that much for it. If nothing occurs, I let that pile up. If too much occurs, then any excess from the $800/mo for (1) goes to this fund rather than to (3).

After many years of credit card use, I decided that I prefer to have none.

Every morning over coffee I log into my online bank account. All my bills are on automatic bill pay, so I check them, check the amounts, and think about any that are excessive ("hmm, wonder if I should nudge the thermostat a little?" and so on). I check to see how I am doing at meeting that $800 goal, both for this month and in the long term. If I am behind, guess what? Cut back on (3). I just tell myself that I can get whatever-it-is later, when I have the slack in my budget. Waiting a month or two is no big deal and just allows me to anticipate the desired purchase much more. If the problem continues in the long term, I have to check price increases and consider increasing my budget as I did after Katrina.

Actually, this is all kind of fun for me. I get a big charge out of making a plan and watching it actually happen right before my eyes!!

I agree so much with those who say the recurring expenses make more difference than you might think.

 

[dex]

Both DW and I have multiple credit cards with absurd limits, and we use them for almost all of our purchases, so I don't really see an effective way to enforce a monthly or even annual budget.

Have you thought about putting the credit cards in a drawer and using cash - most people overspend when they use cc.

 

[FIREd]

I'm overwhelmed by the sympathy I'm getting.

So, the take-home message is that nobody really sets, tracks or enforces their budgets?

I do and as I said before I use the allowance system, but I use the same credit cards to pay to food, gas, and all discretionary expenses covered by my allowance.
I don't nickel and dime every spending category, but I know my credit card bill has to remain under a certain amount each month (My wife has her own card with identical rules).
So for example if I budgeted about $1000 a month for mandatory expenses that I charge to my card (I am in charge of grocery shopping for example and I use my card to pay for it) and $500 a month for my allowance, I would make sure that my credit card bill does not come above $1500 at the end of the month. Now it also means that if in any given month I spent only $900 on mandatory expenses, I could spend up to $600 on frivolous stuff, nobody would ever know . The important thing is that each month the total does not go beyond $1500. That way you can include that fixed amount in your budget and not have to worry about tracking every cent.

So our budget categories look like that:
Mortgage, phone bill, insurance, my credit card bill, her credit card bill, Electric bill...

instead of:
Mortgage, phone bill, insurance, groceries, gas, clothes, entertainment, fun money, Electric bill...

groceries, gas, clothes, entertainment and fun money for example are all grouped under my credit card bill and her credit card bill.

 

[FinanceDude]

I budget for three types of expenses:

(1) the usual, recurring expenses like utilities, cable TV, gym membership, food, and so on.

(2) padding to cover unexpected expenses such as major A/C work, a root canal, a broken TV.

(3) Fun stuff.

I allow $800/mo for (1). That was $600/mo before Katrina, but inflation has been rampant here what with carpetbaggers and opportunists. If I don't use the allotted amount on (1), I will consider something in category (3) or else save the extra.

Category (2) has been running about $650/mo historically, so I allot that much for it. If nothing occurs, I let that pile up. If too much occurs, then any excess from the $800/mo for (1) goes to this fund rather than to (3).

After many years of credit card use, I decided that I prefer to have none.

Every morning over coffee I log into my online bank account. All my bills are on automatic bill pay, so I check them, check the amounts, and think about any that are excessive ("hmm, wonder if I should nudge the thermostat a little?" and so on). I check to see how I am doing at meeting that $800 goal, both for this month and in the long term. If I am behind, guess what? Cut back on (3). I just tell myself that I can get whatever-it-is later, when I have the slack in my budget. Waiting a month or two is no big deal and just allows me to anticipate the desired purchase much more. If the problem continues in the long term, I have to check price increases and consider increasing my budget as I did after Katrina.

Actually, this is all kind of fun for me. I get a big charge out of making a plan and watching it actually happen right before my eyes!!

I agree so much with those who say the recurring expenses make more difference than you might think.

I like your system, simple yet powerful.............. And, it worked in a Katrina affected area, proving that it can work anywhere..........

 

[sailor]

set and track, but do not enforce

I'm overwhelmed by the sympathy I'm getting.
So, the take-home message is that nobody really sets, tracks or enforces their budgets?

We do set and track, but do not enforce.
Both DWs and my discretionary purchases are below our allowances.
Nevertheless we already blew our original 2007 budget in several categories.
As long as we are not in red we do not make a big deal out of it, just chalk it up to "we'll do a better budget next year".
Examples of budget overruns:
1. Little sailor school requires payment upfront ( Children:Tuition 50% overrun)
2. DW took a normal vs. online class at a University 35 miles away twice a week - ( Transportation:Fuel ~ 30% overrun)
3. Groceries:FoodStuff is about 30% over, but I like DWs cooking so no complains from me

 

[Milton]

So, the take-home message is that nobody really sets, tracks or enforces their budgets?

We don't set a budget, so there is nothing to "enforce". We do track spending.

As described in The Millionaire Next Door, we live in a self-created environment of "artificial scarcity":

What about those millionaires who don't budget? How did they become millionaires? How do they control spending? They create an artificial economic environment of scarcity for themselves and the other members of their household. More than half of the nonbudgeters invest first and spend the balance of their income. Many call this the "pay yourself first" strategy. These people invest a minimum of 15% of their annual realized income before they pay the sellers of their food, clothes, homes, credit and the like.

 

[NinjaPigeon]

We don't set a budget, so there is nothing to "enforce". We do track spending.

As described in The Millionaire Next Door, we live in a self-created environment of "artificial scarcity":

This is the approach I attempt. Some months I get it wrong and end up over spending out of my safety net

 

[twaddle]

In fact, that's exactly what I'm trying to do -- create an environment of artificial scarcity. We're already retired, and we're living on well below 4% of the nest egg.

So, setting an annual budget and "imagining" that it reflects a real spending limit helps a bunch.

But here's the deal. The breadth and depth of stuff you can buy over the net has increased a bunch. And it's only one click away. I see an increasing number of boxes arriving at our door.

We could nip this in the bud if we tossed out our credit cards, but that's not an option. So, I'm trying to create a negative feedback loop in the face of this large internet buffet laid out before us.

 

[Texas Proud]

In fact, that's exactly what I'm trying to do -- create an environment of artificial scarcity. We're already retired, and we're living on well below 4% of the nest egg.

So, setting an annual budget and "imagining" that it reflects a real spending limit helps a bunch.

But here's the deal. The breadth and depth of stuff you can buy over the net has increased a bunch. And it's only one click away. I see an increasing number of boxes arriving at our door.

We could nip this in the bud if we tossed out our credit cards, but that's not an option. So, I'm trying to create a negative feedback loop in the face of this large internet buffet laid out before us.

Well, heck, if you know where it is happening... then you can turn it off...

OR, put in a certain amount of money into a paypal account and you can ONLY buy stuff online if you have money in the paypal... no money, no buyey

 

[twaddle]

Well, heck, if you know where it is happening... then you can turn it off...

OK, I'll spill the beans.

Easy for me. Maybe not so easy for DW, and I don't want to nag her. She's not easily going to adopt this mindset of artificial scarcity I'm trying to create. But she's willing to work within a budget, so I need an enforcement mechanism.

The paypal thing could work, but I think they require a credit card on file, and some merchants automatically hit the credit card -- bypassing any cash limit you want to impose. I'll look into it, though.

 

[Milton]

In fact, that's exactly what I'm trying to do -- create an environment of artificial scarcity. We're already retired, and we're living on well below 4% of the nest egg.

Given the above, I wouldn't worry about your wife's purchases. There's no apparent reason why she shouldn't enjoy herself, free of artificial restrictions. It doesn't sound like there is any real danger that your future financial wellbeing is in any jeopardy, and there's no point in accumulating more savings just for the sake of a bigger number.

Simply monitor the situation and, if your overall expenses begin to exceed a reasonable annual amount (4% of liquid assets, or whatever other rule of thumb you wish to use), that would be the time to consider economic restrictions.

 

[cute fuzzy bunny]

Hmm, we're not tracking our spending, which is higher than we expect.

This is all sounding familiar...

I think you oughta nag the wife until she develops a tic as well. Then you might get to experience some different budgeting problems

 

[haha]

How do you enforce a budget?

Easy! Just tell her no more whoopee until she gets her spending under control.

Ha

 

[twaddle]

Hmm, we're not tracking our spending, which is higher than we expect.

This is all sounding familiar...

I think you oughta nag the wife until she develops a tic as well. Then you might get to experience some different budgeting problems

C'mon, CFB, share some insight with me. You're a reformed fatwallet addict, aren't you? Or are you still consuming at full force?

Everything is getting so much cheaper, we can't resist the bargains. Bargains are everywhere! Must resist.....

 

[toofrugalformycat]

OK, as a wife with an online spending habit, I control it with limiting what I have in Paypal and the bank account to which it is linked. I did tell Paypal about a credit card but it was not required and has never been hit by Paypal, and it is a credit card that is mine alone (not DH's). I have the Paypal linked to a bank account at a bank that I only use for Paypal, just in case my Paypal gets hacked. It works for me.
BTW I fund my Paypal with what I make selling my junk on Ebay. That limits me even more.

 

[CuppaJoe]

...

So, the take-home message is that nobody really sets, tracks or enforces their budgets?

Yeah! I’ve never been able to stick to the budgeting paperwork; it really bores me. This is what works now: I simply start with my net income and do the "pay myself first" thing, transferring as much as possible into an on-line savings account. This month I find that I can increase the amount by about 1/3 so I congratulate myself instead of beating myself up for not sticking to a budget; if I have to go back to the old amount, well, good enough!

 

[cute fuzzy bunny]

C'mon, CFB, share some insight with me. You're a reformed fatwallet addict, aren't you? Or are you still consuming at full force?

Everything is getting so much cheaper, we can't resist the bargains. Bargains are everywhere! Must resist.....

Easy. I look at all the crap in my garage, spare room and office and realize I'd only be adding to the pile. So I have a simple rule. Something comes in, something goes out.

My wife doesnt buy much very often. A lexus every now and then. A Coach purse once in a while. Giant honking diamond rings and earrings. Other than that, she's pretty much not a shopper. Heck, she likes budweiser... :

I'm desperately resisting the purchase of a larger compressor. I dont need it. It wouldnt really do anything that my small one wouldnt do. But I could sit in the garage and grunt at it.

 

[HFWR]

Easy! Just tell her no more whoopee until she gets her spending under control.

Ha

See dictionary for "self-fulfilling prophecy"...

 

[twaddle]

So I have a simple rule. Something comes in, something goes out.

Yeah, DW has a similar rule. She periodically takes a load of stuff to goodwill in order to make room for more new stuff. But the stuff that goes to goodwill is perfectly good stuff -- just the "wrong" style or something.

I do the same thing, I guess. Out with the depreciated assets, and in with the newly purchased stuff. Somehow, it doesn't seem like a good long-term solution.

 

[cute fuzzy bunny]

I guess for a long term solution you could seek to find other ways to fill the internal hole you're trying to stuff merchandise into.

 

[twaddle]

I guess for a long term solution you could seek to find other ways to fill the internal hole you're trying to stuff merchandise into.

Well, you fill that hole for me, but you don't post as often as you used to.

I do get a buzz from a bargain, I guess. Walking away is like leaving $100 bills on the ground sometimes. But I will be strong! Thanks for the psychoanalysis, doc.