Living on a budget and the MISCELLANEOUS COLUMN

[modhatter]

The subject of living on a certain budget in RETIREMENT frequently comes up and a list is prepared such as the one below to see where the money is going and how much it's going to take to live when retired.
Example:
RE Taxes
Home Insurance
Medical Insurance
Car Insurance
Electric
Phone
Water
TV
DSL
Propane
Gardner
Maid
Gas for car
Food (in)
Food (out)
AND HERE IT COMES: MISCELLANEOUS

What that covers is all the other things like clothing, Xmas presants and birthday presants, accountant fees, Visa permit fees, tolls for road, repairs for the home, repairs for the car, new appliances and other purchases for the home, new flowers and pots for the garden, new sheets, entertainment and travel. etc etc etc.

Do you really think you can put a figure on this catagory and stick to it? What kind of figure do you put down for Miscellaneous. When I do my mock new monthly budget for retireing in Mexico, I have added $800 to the miscellaneous column, but I havn't a clue if that would cover it or not. What say all of you there now. Do you try and put a figure on this stuff and live by it?

 

[Cut-Throat]

I have a lot more categories than you do. Most of the items you listed under Misc., I have separate categories for. Auto Maint, Home furnishing, My clothing, Spouse Clothing, Travel, Gifts, Linens and Bedding, Postage, Xmas, Gardening, Theaters and shows,

When Misc Gets to big, just chop it up. - You're already on your way.

 

[Lusitan]

Not really - what I have found works better is to track expenses over a long period of time. Doing so gives me a pretty good idea of how much those MISC expenses will be on average every month, even if I can never pin down exactly what they will be for.

 

[chinaco]

This can be fairly easily tracked using quicken or MS Money. All electronic pruchases can be categorized. The cash purchases are a bit more difficult and would require a little discipline (habit) to track.

Misc spending is regulated at the point of purchase. For planning pruposes, it won't hurt to allocate $ for those expenditures. This is useful for planning. Once you get some actuals, you can make adjustments. It really depends on how rigorously you need to stick to a budget. We tend to LBYM... It seems to stay in line.

 

[Joss]

You can look at it in less detail too.

Lump electricity, gas, water, sewer, etc into "utilities".
Lump all non-vacation travel costs into "transportation".
Phones, DSL, Cable, etc are "communications".

I don't catagorize our charge-card spending further than "credit cards".

The replacement of high dollar items such as cars, roofs or repainting the house should come out of a "capital" budget from replenishable savings.

Regardless, it is exceedingly difficult to make a budget without your own "spending history". Any measurable budget change is just a shot in the dark without it. Unless you already know what you are spending, there's little way to know what more or less will feel like.

The converse of that is that if you DO know, and have the resources to maintain that bottom-line standard, "budgeting" is not really necessary beyond the "overview" level. Certainly not at the "OH MY GOD CAN WE AFFORD AN EXTRA BOOK THIS MONTH?" level.

I feel fortunate that I had already moved my checkbook accounting to LOTUS some years ago. Because of this I have every expenditure we make, year by year, and "sortable" by type, date, amount - whatever. This is extremely comforting when "guessing" what the future will bring.

I can look at the last four years of expenditures and see that our "core" expenditures hover around $43,000 to $46,000 annually. "Core" is defined as what we currently spend - reduced by what we won't in retirement (eg: own the house free and clear so no mortgage P&I, pull charities lower, self-lawn care, etc, etc.)

I seriously believe that a content retirement is NOT constructing a budget and sticking to it ("Do you really think you can put a figure on this catagory and stick to it?"). That is penny pinching and makes everyone short tempered and anxious. To me, is like "dieting" and countng calories.

What retirement contentment is to me is finding out how we live NOW, dollar-wise at the bottom line, and meeting what that takes, also at the bottom line, to continue that standard with some "safety factor" built in.

 

[SecondCor521]

I have found my expenses to be lumpy from day to day and month to month -- I spend more money at some times than others. Also, my expenses are lumpy from category to category from month to month -- I spend more on Auto some months than others. But I have also observed that my expenses are really quite smooth if I look at the total amount spent over the last six months. That six month total rarely varies by more than a few percent. In my simple mind I think this represents a real world example of the law of large numbers (http://en.wikipedia.org/wiki/Law_of_large_numbers).

That is why I have the 2Cor521 "Rule of 50" -- once my FIRE net worth is 50 times my last six months' expense, I quit.

2Cor521

 

[SteveR]

How much detail you choose to track over time and use for budget lines is a personal thing. It is also related to how much $$$ you will have to spend. More $$$ may make it easier to lump up stuff into larger piles and forget about "micro-budgeting." If you are tight on the cash flow then "finer" lines with the pencil might be in order.

Do what works for you.

We track some pretty deep details but budget in larger buckets.
We budget utilities by individual accounts...natural gas, electricity, water, sewer, garbage, satellite dish (tv), and internet ISP are all under Bills but each has a historic trend over time and a projected budget amount. Clothing is also divided up by person. Gifts the same way...X mas in one account vs other stuff. Cars are one big item with gas, repairs, insurance and a replacement "kitty" to create a budget for replacement cars in the future. Same for appliances and furniture.
Travel is one big item with smaller line items for car rental, lodging, food, gifts, attractions and misc. Likewise, we track and budget medical, home upkeep, decorations, food, Etc. Etc.

I run a report each quarter to see if we are on budget for the year and if not; why not. The report is very large but is broken down into smaller categories. Once I retire, we will continue the process to make sure the ship is on course. Later on I can see not doing it so often as long as I just keep the checking account full.

 

[modhatter]

Well, I have spent the afternoon going back over my 2005 expendatures in Quicken (Have not done entriies for 2006 taxes yet) I broke down many catagories that I had lumped together in to finer detail. The one thing that is not accurate is my CASH. When I need cash, I am usually making a deposit and I do a cash deduction from my deposit. I am going to stop doing that and write a check from now on, so I will be able to see how much I spend in misc. cash dispursments. Also, to get an accurate picture, I am going to have to force myself to do a complete breakdown of my charge card expenses.

It looks for 2005, my Misc. Columun was a little over $13,000 for the year, but I know it's higher than that cause of the CASH, I take out of deposits. Overall higher than I thought. But isn't it always. When I do my taxes this year I will do more detail entries so I will be able to better see.

 

[FinallyRetired]

It really depends on your objective. I tried to track categories in Quicken for several years and, like you, was left with a lot of "Miscellaneous." I refined my categories but then was constantly creating new subcategories and it was driving me crazy.

I asked myself, why am I doing this? Was it to create a budget, or was it to figure out how much money I needed to live on? Since it was the latter, I went to higher categories, ie, "store" for anything I bought that involved walking into a store and coming out with something. I couldn't tell if the expense was for clothing or a steak, but it didn't matter. In the end I knew how much I had spent during the year that would be continuing expenses versus those, like a home improvement, that were optional.

This allowed me to run retirement calculators using actual expenses and not worry about the categories of expenditures. I can worry about those if and when I need to analze and adjust budget items.

 

[LOL!]

In the early days, we had a budget. I resolved then and there to never have a "miscellaneous" category which is a true black-hole budget buster. Instead we gave ourselves monthly allowances to spend any way we wanted. If you wanted to buy a new stereo and didn't have enough money, you had to save up your monthly allowances. OTOH, you didn't have to keep track of what you spent it on. My spouse balked a little bit about "gifts", but if she wanted to give nice gifts, they had to come out of her allowance.

Now we really don't keep a budget. When we download our bank statement into MSMoney, our categories are the utilitity bills and "creditcard". Yep, that covers it.

 

[aenlighten]

I don't budget, but I have tracked my expenses since my first job. I prepare annual financial statements for myself. Some of the categories have had to accommodate changes but for the most part, they are still the same after decades. I know what I spent on food in 1980. I don't have a misc. I know where every dollar goes using the receipts in envelopes technique. I only have to total things up once a year. What I haven't yet done is compile a long term capital budget. That would help a lot with long term planning.

 

[deserat]

The Kaderli's cost per day is a good one - if you have a large amount of data over time, you can see how constant that one variable is and track it - can give you a personal rate of inflation, too.

Deserat