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

[easysurfer]

Quote:

Originally Posted by Meadbh If you gift yourself a new shirt, do you call it a gift, or clothing?

I save my gift $ for a real gift like electronic toys.

A shirt is something I get when the old one wear out .

Of course, someone else may consider a shirt a gift and electronics as something that wears out. The beauty of budget categories....in the eye of the budgeter.

[Independent]

We tracked our actual spending for many years before retirement.

Our "budget" was to continue our historic spending, with a few adjustments for predictable changes (e.g. health insurance premiums).

Sure, we had toys, clothes, etc. in both history and projected.

[gerntz]

If you LBYM, you are by default budgeting.

[RobbieB]

I agree, that's what I've done!

Never kept a budget and never tracked expenses other than look at the monthly bank statement to see that my ending balance was larger than my starting balance.

Never balanced a checkbook either and never bounced a check.

Best of all, I'm retired -

[W2R]

Quote:

Originally Posted by gerntz If you LBYM, you are by default budgeting.

But suppose I have budgeted $300/month for food, and $300/month for entertainment.

Then, suppose it is the last day of the month, and I want to spend $20 on a steak and lobster to grill at home for dinner but I have already spent $295 on food that month, although I have spent only $100 on entertainment.

The LBYM person would spend some of that entertainment money on the steak and lobster dinner, and still be LBYM because the total spending is less than what he can afford. But this would violate the budget because more than $300 was spent on food that month. So to stick with the budget, it's hamburger for dinner instead of steak and lobster.

[RobbieB]

Yup, that's why a "strict" budget is no good. Just doesn't make sense.

You have the dough, but you won't spend it on what you want and what would make you happy because that "catagory" was full?

So eat a burger and go see a $200 play that you hate too?

[braumeister]

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

Quote:

A budget is an estimation of revenue and expenses over a specified future period of time; it is compiled and re-evaluated on a periodic basis. -- Investopedia

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.

[gerntz]

Quote:

Originally Posted by W2R But suppose I have budgeted $300/month for food, and $300/month for entertainment. Then, suppose it is the last day of the month, and I want to spend $20 on a steak and lobster to grill at home for dinner but I have already spent $295 on food that month, although I have spent only $100 on entertainment. The LBYM person would spend some of that entertainment money on the steak and lobster dinner, and still be LBYM because the total spending is less than what he can afford. But this would violate the budget because more than $300 was spent on food that month. So to stick with the budget, it's hamburger for dinner instead of steak and lobster.

Not really. When a buy at $30K car, it's above my means that day if that's what I spent everyday, but when I think long-term vs. short-term - like this month - it's immaterial as it fits in 5 years of LBYM.

[Meadbh]

Quote:

Originally Posted by W2R But suppose I have budgeted $300/month for food, and $300/month for entertainment. Then, suppose it is the last day of the month, and I want to spend $20 on a steak and lobster to grill at home for dinner but I have already spent $295 on food that month, although I have spent only $100 on entertainment. The LBYM person would spend some of that entertainment money on the steak and lobster dinner, and still be LBYM because the total spending is less than what he can afford. But this would violate the budget because more than $300 was spent on food that month. So to stick with the budget, it's hamburger for dinner instead of steak and lobster.

The above scenario assumes a monthly budget with rigid enforcement. Some common sense and flexibility is required. I think it makes more sense to look at the year as a whole. Who cares if spending on food exceeds the total budget for the month? That number is simply 1/12 of the expected annual expenditure on food. There may be other months when food expenditure is lower, like when you harvest the vegetables in the garden for salads. And there may be spikes, like when you buy in bulk. Furthermore, food and entertainment are not independent. If you stay home to cook the steak and lobster, you won't be spending money on tickets for the ballgame that night. At the end of the year, if annual spending has increased, it may be due to inflation in food prices or changes in what, and how much, you eat. By looking at patterns, you can get a good sense of the underlying causes. That's when you can decide how much to budget for the following year.

[RetiredGypsy]

The fixed expenses get tracked, and once or twice a year reviewed to see if I want to make any changes (like drop Netflix, look at a lesser phone plan or internet package, spend less on groceries).

Everything else is fluid, because it's so sporadic. Every few years I'll buy motorcycle gear, I'm sure I buy at least a couple articles of clothing every year, couldn't even tell you how often I pick up games on sale. At some points the car needs oil changed and tires and mileage services.

Nothing comes at a fixed time that isn't a fixed cost, it's rarely anything that can't just come out of excess funds in any given month, and I've found it's a lot easier for me to just invest every dollar that comes after those fixed expenses, until there's something I want or need.

[RunningBum]

Quote:

Originally Posted by Shabby I only buy cars for cash and they don't last forever. So budgeting cost of car/life expectancy seemed normal. Ex) $40k/8 Years is 5k a year.

I was thinking that depreciating is odd, but I suppose it's as good of a way as any, as long as you are paying about the same for the next car. With inflation you'll probably pay a bit more unless you downgrade. And it makes sense if you are following a true depreciation schedule, since if you sold after 3 years you'd probably have to take more out of pocket to replace it. Anyway, "close enough" is probably fine. I guess the other point is that at some point you'll be on your last car, but then you can stop depreciating it.

Before ER I used my past few years of expenses as a guide, categorizing them however they made sense to me. For example, I don't spend much on everyday clothes so they fell into a misc category with other stuff I bought in stores or online. But I have a couple of hobbies that I budget for that wouldn't show up for most people. I also looked at big ticket/repair items to see what was missing and had to be accounted for, and what I had spent on but probably wouldn't again for many years. And finally looked at new expenses I'd have in ER, like extra for health care, and more travel. My guideline would probably be to budget for anything you average $50 or $100 or more per month, and lump other stuff as miscellaneous, as long as you have a good idea of whether you have 5 or 25 miscellaneous items.

Once I came up with a budget, and saw in my first couple years that I was doing fine, I stopped worry about it, and only check my bottom line, what is coming out of my checking account, since everything (including paying CC bills) comes out of there. I do it by month, with a 12 month rolling average, just so I can see trends and note big ticket irregular items. Some day I may not even bother with this, but I sleep a little better knowing I'm not letting things get out of control. I've got buffer, but it's not unlimited.

Point is, do whatever works for you.

[Doingitwrong]

Quote:

Originally Posted by Shabby 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,

I have an ATF category-too many trips to the gun range will cut into my drinking and smoking
Giving and clothing are under HOUSEHOLD (too many categories doesnt work for us)
ATM? What did you spend the cash on?
Healthcare is complicated (heard this on TV)
Three autos and two people at the moment so we only budget REPAIRS (auto, home, etc) in one line item
We call it TRAVEL (day trips or vacation all in one category)

[bobandsherry]

I find the first grouping is too much detail and I couldn't reasonably plan at that level. I aggregate those and other into "other", I then manage to that spend level. If I need to go over one month I'll cut back another or otherwise find offset

[FIREd]

We have 3 large categories in our budget:

Monthly expenses (food, home/car/health insurance, utilities, gas, etc...) - those come right out of our checking account every month.

Irregular expenses (medical co-pays, home & car repairs, vet bills, car replacement, etc...) - we save money towards those expenses every year and withdraw money as needed.

Discretionary expenses (travel, gifts, home improvement, clothes, hobbies, etc...). We decide at the beginning of the year how much to budget for those expenses as a whole and the money is placed in a savings account to be spent as we see fit throughout the year. We do not budget for each subcategory ($X for gifts, $Y for travel, $Z for clothes, etc...).

[braumeister]

Obviously, there have been many threads here on "what budget categories do you use?" and they mostly seem to show ... nothing.

We all do it differently, whatever we think works.

[foxfirev5]

As some have stated it's not that hard. We've lived off our varying income for 40years. Why is it any different in retirement?
That's why i take my monthly self generated paycheck live accordingly.

[Koolau]

Never budgeted and only tracked expenses (carefully) once. I keep an eye on the check book balance and the NW. Pretty much the only number I'm concerned with on a yearly basis is how much of a draw from my stash I need to take. If the stash is okay, and the draw is okay, I'm okay. If I found myself taking more from the stash than I planned, I would find a way to cut expenses. So far, it hasn't happened. Don't know if it's built in or if I just live a predictable life. In any case, I find budgeting and tracking way too much like w*rk. Since I don't seem to need to do it, I don't.

In a situation like this, it's critical to know yourself, so YMMV.

[iloveyoga]

I don't do a budget and have not for quite a few years. I know what we spend on our regular expenses and travel is our biggest added expense. Overall, I watch out total assets and make sure that everything is in the right place. I have automated as many of our regular expenses as possible. It's interesting to read what others do in the area.

[EastWest Gal]

I analyzed our spending over a 3 year period to figure out a retirement budget. I went to I-orp and Firecalc. Both said we could spend about $50K more and be just fine. That ended my effort at creating a budget. With the exception of health insurance premiums and travel we are way under budget anyway. So, not wanting to waste time in front of a spreadsheet, I mostly don't bother.

[athena53]

I focus on the withdrawal rate, which averaged 3.7% annually in the 3 years since retirement and will be 3% this year. I do track spending by category because I find it interesting and it will give me ideas of where to cut back if I need to. Nothing rigid, though- I don't abruptly stop spending in a category if I'm over budget as long as my overall spending is within expectations.

I accrue reserves for some categories such as out-of-pocket medical, home maintenance and taxes. My checking account spreadsheet is something only a numbers person could love- starts with the actual balance, shows each of the reserve account balances, and subtracts them all to get the "spendable" balance.