Retirement budget: Do you budget clothes, gifts, etc?

[sengsational]

Do you then put that depreciation amount into savings to fund eventual purchase of a new vehicle?

I include depreciation in the expenses I use in assessing whether we have enough but I do not necessarily include them in our withdrawals

When you work a non-cash transaction into your budget, isn't that called an accrual?

 

[UtahSkier]

I use the budgeting feature Quicken lifetime planner and more than 75 categories. For clothing, I have 3 subcategories; dw, mine and jewelry.

Most transactions are made with a credit card and are automatically entered.

As for deprecation, I treat the purchase amount as part of spending from the portfolio. I then have an asset like my motor home that is part of my net worth, but not my portfolio. I have a monthly automated entry that depreciates that item $1000.

 

[pb4uski]

An accrual is typically where you post an expense for an incurred but unpaid expense... for example, if one was anal about accounting then you would accrue for electricity that you have used from your last billing date to the end of the accounting period that has not been billed. Also, unpaid bills for past services or goods received would be accrued... like accounts payable, unpaid credit card charges, etc. Typically, an accrual results in a charge to expense and the establishment of a liability.

Depreciation is not an accrual since it does not result in a liability, but rather in reduction of an asset.... it is more accretion then accrual.

Depreciation is simply reflecting in expenses the cost of an asset over the periods benefitted by the use of the asset.... but you are correct that depreciaiton is a non-cash charge.

 

[pb4uski]

I use the budgeting feature Quicken lifetime planner and more than 75 categories. For clothing, I have 3 subcategories; dw, mine and jewelry.

Most transactions are made with a credit card and are automatically entered.

As for deprecation, I treat the purchase amount as part of spending from the portfolio. I then have an asset like my motor home that is part of my net worth, but not my portfolio. I have a monthly automated entry that depreciates that item $1000.

Very similar here but I have fewer categories, but I do have automatic entries for car, boat, jet-ski and snowmobile depreciation. I don't consider depreciation part of my spending technically since it isn't cash out the door, more like a proxy for the ultimate replacement of that asset.... as if I had a separate side kitty for replacement.

 

[Bir48die]

I have four accounts:

Travel
Everyday (normal bills, charity, gas, health insurance, etc)
Taxes & Insurance
Other (co-pays, auto repair, home projects/furniture, unforseen spend)

In my budget all the sub groups are estimated. I tracked for about a year and lost interest. I love having a bucket for projects/repairs because when the unexpected happens it is generally covered. I will dip into taxable if it a huge project.

 

[karen1972]

well I've used Quicken since 1997, sometime in the last 10 years they updated their categories and updated them accordingly.

• For fixed items I set them as fixed. ie HOA fee is $135/month.
• For discretionary where I have no idea what month I may spend what, I set a $ at the beginning of the year and it rolls over, ie. I expect to spend $5K on vacations and travel this year.
• For variable items such as utilities, I also use rollover but set an average each month, so its only showing the delta. ie water/waste is $58, but last month it was only $48 so I'm +$10

Then at the end of the quarter,/year I only actually look at the total, see how far off I am, and if I overspent, then go back and see what the big hitters were and see if I have to re-adjust..

ie my father passed this last month and we spent $2500 extra in travel but it fits in our $5k allowance, just means we will have to cut one of our fall trips short.
I've already used 75% of the car repair budget, but thats ok because I had the 90k service done so likely only 1 oil change for the rest of the year and we'll be under for the year.​

My goal is just to ensure expenses are under my 3.5% WR.

Categories are by major (minor):

• Travel (food/lodging/transport)
• Food&Dining (Grocery/Dining/Liquor)
• Utilities (Water&Waste/Electric/Gas/Cable(which I include netflix, etc)/Cell)
• Health/Fitness (Health Insurance/doctor bills/dentist/eye/pharmacy/chiro/gym/etc)
• Homeowner (HOA/Repairs/Property Tax/Mortgage/Home Insurance)
• Auto (Insurance/Repairs/DMV fees/Fuel/Tolls)
• Pets
• Shopping (generally only split out clothing,furniture,electronics,other)
• Entertainment
• Gifts and Donations

 

[UtahSkier]

Very similar here but I have fewer categories, but I do have automatic entries for car, boat, jet-ski and snowmobile depreciation. I don't consider depreciation part of my spending technically since it isn't cash out the door, more like a proxy for the ultimate replacement of that asset.... as if I had a separate side kitty for replacement.

I don't consider depreciation an expense at all as the amount did not affect the portfolio. Depreciation only affects Networth.

Item replacement (new car) has nothing to do with the existing asset or depreciation. It is just a future expense. In quicken, I use the 1 time expense feature and withdraw money from the portfolio on a date ($40K on 1/1/2025).

This kind of major expense is not a part of the budget. Having an accruing budget for such an expense would be technically more correct (I actually do this for pets), but I get good results with my strategy.

 

[pb4uski]

....but I get good results with my strategy.

As do I with mine.

 

[scrabbler1]

I split my spending into 3 broad categories: car & housing, medical, and everything else. Car & housing includes easily quantifiable regular expenses such as my monthly co-op maintenance, home and auto insurance, car maintenance, cable TV, internet, landline phone, and electric. Medical includes health insurance, medical copays, and other medical stuff such as my diabetes testing equipment. Everything else is.......anything not mentioned.

 

[GravitySucks]

I do have spending categories for clothing - but it is for a family of four... This category started to creep up when DS suddenly developed awareness of fashion... then I introduced him to goodwill and it dropped down again. LOL.

With two daughters I didn't even realize what DW was paying for new clothes out of her pay check until my girls were talking about how much they appreciated all she did at the wake.
When I was a teen boy I had no care about clothes and fashion and found it odd when the other guys started talking about shirts and stuff. (other than I wanted Levi jeans and Converse All Stars.)

 

[Katsmeow]

I am constantly revising my retirement budget as I am super close to pulling the trigger. I am wondering how you account for things like:

Toy/Fun Purchases
Gifts
Clothes
ATM/Other

Also, I assume I should have these:
Healthcare
Car Depreciation
Trips

Thanks,

For toy/fun purchases. DH and I assign to each of us $X amount of spending money each year (this varies somewhat each year due to overall budget). Also, the cash back we get back from Amex goes to this category. We each do those kinds of purchases from our respective spending money. This is great since it reduces any possibility of someone thinking the other is spending too much money on X. If DH wants to buy a $200 piece of software that I have no interest in -- fine. It comes out of his spending money. If I spend $50 on the new expansion of Hearthstone, that is fine with him since it comes out of my spending money. Typically the things that come out of spending money are the fun things and our personal computers/electronics.

Occasionally there is something like this that we will equally use and we split it between us.

Gifts - Yes, of course those are budgeted.

Clothes- Budgeted. As are other personal care items.

ATM/Other - ATM isn't a category. The form something is spent in doesn't matter. That is if I spend it in cash or by check or by credit card is irrelevant to the category. We do have a cash miscellaneous category where we end up budgeting any unaccounted for cash (we count cash at beginning and end of each month). Our unaccounted for cash spending is usually less than $5 per month.

Everything is budgeted and accounted for (I use YNAB).

Healthcare - Yes, of course. We have separate categories for premiums versus healthcare spending itself.

Trips - Yes, of course.

Car Depreciation - No. I don't budget during the year for anything that will not be spent during that year. I do pro forma budgets for several years out, however, and I do budget for those kinds of items in my pro forma budget for the year I expect to buy the item. I am aware of these things and when they are likely to come out. That said, it is certainly a valid choice to budget something monthly for the car purchase that will occur in a future year.

 

[Zorba]

We are Quicken users from way back. For the last 17 years we also have a simplified pre-RE spreadsheet. It leaves out expenses that I will not be paying in RE like SS taxes and college education (covered by 529 plans). It is not perfect. For example I know that taxes will drop in RE but medical will go up about the same amount. However, rather then making educated guesses, this gives me a rough guide of what to expect in RE based on past years data.

I've listed the simplified categories below.

Taxes:

• Income (US+State)
• Property

Mandatory Expenses:

• Food (dining and groceries)
• Insurance (home, liability)
• Utilities
• Home Maintenance
• Medical & Dental
• Auto
• Personal Care
• Clothing

Discretionary Expenses:

• Travel
• Household
• Gifts & Charity
• Recreation
• Hobbies
• Miscellaneous

 

[Badger]

I stopped doing a budget not long after retirement. The house is paid off. Medical is taken care of through Medicare and Tricare. Plenty of clothes as long as they continue to fit and t-shirts and jeans are cheap. Wife doesn't care for jewlery, make-up, drinking, smoking, or cut flowers. Although after 30 years I finally found a diamond ring to buy her that she loves. We have SS and small pensions that take care of food, insurance, taxes, etc. The money we saved is more than enough to buy cars, take trips when we want, and fund our hobbies way beyond our expiration date. With that being said we have always been happy with simple things in life. Wife has her tennis and I have my bicycle, motorcycle, vegetable garden, and pottery. I enjoy volunteering a radio show at the local PBS, a cat rescue facility, and the local zoo. Life is full and good. It's nice not having to worry about budgets anymore. I had enough of that for the years leading up to retirement and saved to make sure it would no longer be an issue.

Cheers!

 

[ls99]

Never budgeted.
Paid all the important stuff first. Like mortgage, (I owned my own homes since age 23, except for a few in between years) utilities, bought used transports, lived cheaply otherwise. No intention of of ever budgeting.

 

[DFA]

We don't budget we just track spending broadly, if there is something that comes up we just deal with it.

 

[daylatedollarshort]

For toy/fun purchases. We each do those kinds of purchases from our respective spending money. This is great since it reduces any possibility of someone thinking the other is spending too much money on X. If DH wants to buy a $200 piece of software that I have no interest in -- fine. It comes out of his spending money. If I spend $50 on the new expansion of Hearthstone, that is fine with him since it comes out of my spending money. Typically the things that come out of spending money are the fun things and our personal computers/electronics.

We have some his and her budget categories, too, but for us it is some of our travel and entertainment spending because those were the areas we tended to disagree on spending priorities. It has also worked out well for us, too, as now we can each spend want as long as we stay in the general budget amount.

 

[Walt34]

We do use Quicken to track spending categories but frankly don't use the reports function often. We use a monthly spreadsheet that has our sources of income (primarily pension and SS) and then subtracts out expected expenses such as utilities, HOA fees, groceries, outstanding cc charges, savings for the month and the like and shows what the remaining discretionary spending is. Except for late summer/early fall when the "lumpy" expenses of property taxes, house insurance, car insurance and umbrella policy all come in within three months if we have a positive cash flow then all is well. During that time cash flow may be neutral or even a bit negative for a while but since it is expected it isn't a big deal.

And running in the background is the expectation of vehicle replacements and major home maintenance items like a new furnace, roof, and the unexpected stuff like the time we had to replace the water line from the meter at the street to the house.

The NW is higher now than at any time in our lives so I guess we're doing something right. Or not, since we're apparently not spending enough.

 

[DrRoy]

I put the first 4 into miscellaneous, and I have the later 3 separate.

 

[Danmar]

Maybe some people just don't understand what a budget is.



So call it a spending estimate instead.

I also find that the fewer categories you have, the easier it is to keep track of spending. No need to get down to unrealistic detail unless your total spending outlay is really tiny.

Agree. I use a spreadsheet. I have changed our categories many times over the 2-3 decades I have been budgeting. Generally, one section for all income items (including income taxes), one section for general expenses (like cash, clothing, eating out gifts, donations, etc), one for travel, one section for each of our four homes,etc. Maybe 40-50 lines in total. If I use "cash" I call it cash as I don't generally try to categorize such as it is a small portion of our expenditures. Maybe 5% and stable. Also, no accruals. Budgetted when paid. Have no debt so it's pretty easy.

Each month I "balance" to my checking account. That is, I take my opening cash balance add all income items, deduct all expenses, and make sure this equals my checking account at month end.

At the beginning of the year we decide if we will include in next years budget amounts for large expenditures like cars, major repairs, extra travel, etc. We have current year plus next two years in the budget although tend to spend more time on current year and into the next year. Most years I go over "budget" and don't try very hard to live within it, That makes it more of a "spending estimate" than an actual budget. Exception was 2008/2009 when I really did put the spending breaks on. But only briefly.

Over the years I have complicated things quite a bit by running two currencies through it using a fixed monthly FX rate, incorporated all savings accounts, included all investment balances in a separate section, etc. Really quite involved. It helps (hinders?) that both of us are CPA's.

I wouldn't recommend my system to others. Use what works for you or don't use anything if you don't need to. Having said that, I would be lost without my "budgie" probably because I need to have control which requires knowledge.

 

[Music Lover]

I don't budget...never have and never will. When I need or want something, I just go out and buy it.

Once, a few years ago I made up an excel spreadsheet to track spending but quickly realized it was a waste of time as my monthly expenses on average were less than my monthly income.

 

[CoolChange]

I don't budget...never have and never will. When I need or want something, I just go out and buy it.

Once, a few years ago I made up an excel spreadsheet to track spending but quickly realized it was a waste of time as my monthly expenses on average were less than my monthly income.

Happy to see someone else with this approach.

I will admit that I have a rough cut retirement budget; but, I cannot see myself agonizing over it. Minimizing spend comes naturally to me.