How do you manage your budget?

Discussion in 'Chez Ziggy' started by Monique, Jul 24, 2018.

  1. Monique

    Monique bounceswoosh Skier

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    I realized that my tire thread is less about tires, and more about figuring out how to budget generally.

    My financial situation has changed drastically in the last few months. Also, I now have a financial advisor who has actually given me a monthly budget to accomplish my retirement goals. In a practical sense, this means I am attempting to actually stick to a budget for the first time in my life. (Rather than, at best, ensuring that my checking account doesn't fall too low.) My budget is far from draconian, but it involves spending a lot less than I once did, and paying attention to what things cost.

    My aunt, who is in a similar position due to retirement, gave me a basic spreadsheet that I've embellished. It tracks just enough to see if I'm overspending, without keeping track of so many details that I start agonizing. (I don't really want to track if I spent this much on entertainment vs food - all I care about is how much I'm spending overall. And when I do try to track things at a fine grain detail, like budget categories, I tend to fall into decision paralysis. Is fancy cheese entertainment or groceries? Where does it end?)

    So, anyway, I have this spreadsheet. Everything that happens on a periodic basis is broken down into monthly payments - frex, car insurance is actually paid twice a year, but I take a chunk out of my budget every month to account for it. I have a section for "KTLO" (necessary) expenses. A section for optional, but regular, expenses (Pandora, Hulu, etc). So I subtract those mandatory and periodic payments from my monthly budget, and that's what's left to spend.

    It's dead simple, but it makes sense to me. I don't have to put any thought into entering expenses, like choosing a category. It really makes me pay attention to the cost of things.

    I realize there are tools like Mint to manage this sort of thing, but it's overly complex and gives me choices that lead to paralysis (is massage health or entertainment? Is wine food or self care?? How do I account for a single bill that represents multiple categories??? *runs screaming*) Three columns (what, how much, and when) are easy to enter and review.

    How do you account for those large "known unknowns" in your budget? Like: a new roof. A new car, or major maintenance. A ski trip. What tricks do you use to keep yourself on track?

    I'm starting this thread with the hope that it might help others, so any suggestion is welcome, even if I'm already doing it.
     
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  2. graham418

    graham418 Out on the slopes Skier

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    I have to admit, I am awful with a budget. Although I am a cheapskate on some things, apparently I'm not on others, and money flows like water through my fingers. Maybe you will inspire me to keep a closer eye on where it goes. I would like to retire sometime before the penultimate retiring, but currently seem to be stuck on the Freedom 85 path..
    What spreadsheet are you using? I need something simple as well.
     
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  3. Philpug

    Philpug Enjoying being back on two wheels. Admin Pugski Ski Tester

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    Paging @Bobalooski to the green Pugski Courtesy Phone.
     
  4. Philpug

    Philpug Enjoying being back on two wheels. Admin Pugski Ski Tester

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    Basic economic rule, if your outgo is greater than your income, then your upkeep is your downfall. I know it is simple but it is also true. Start by putting 10% right off the top aside, then back into the rest with yoru daily bills..when in doubt, round up.

    Honestly, by just asking the question puts you ahead of 75% of the people out there.
     
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  5. cantunamunch

    cantunamunch Meh Skier

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    Your biggest look-out here, once you have a workable budget, is cost-creep.

    For example, online service charges are likely to cost creep. Luxury food items are likely to cost-creep. The best way to fight cost creep is to ask 'how much time do I actually spend enjoying this and is it really fun time?'.

    And so french cheese killed Hulu :D , for me at least.
     
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  6. Wilhelmson

    Wilhelmson Getting off the lift Skier

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    There are a lot of templates available online, but the best way might be to keep track of your expenses for a while and create a custom one yourself. That way by the time you're done most of the information will be stuck in your head. It's sort of like healthy eating and exercise, we all know what's basically right or wrong but then might use false logic to justify transgressions, at least until we go in for a doctor visit or worse.
     
  7. fatbob

    fatbob Out on the slopes Skier Inactive

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    It's fairly simple - minimise the spend on "stuff" then use the savings on ski trips.

    Actually more pragmatically if you can get to a stage where you can keep 2-3 months salary in liquid savings you have cover for big one off expenses. Then you don't worry about budgeting for them you just try to replenish your rainy day fund ASAP.

    One other common tip is that people spend a hell of a lot on overinsuring themselves on insurance that has poor payback. You probably don't need extended warranties on domestic appliances and electronics etc. Even car extended warranties can be poor value when you look at the exclusions.
     
  8. Seldomski

    Seldomski Paralysis by analysis Skier

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    I think the key is really to just understand where your money is going every month to get a big picture view. Once you have all of the information together along with your income, you can understand where the trade offs are. You also will get to know how big your emergency fund needs to be to cover ~6 months unemployed. And if that unemployment stretches, what are the most reasonable things you can cut cost on temporarily. These may also be things you can cut cost on for sudden unexpected expenses - like new car, new roof, etc.

    If for example, you pay to have yardwork done and pay to go to the gym, you could instead pay yourself to do the yardwork and get a workout.

    I think if you look at your budget on a daily or even weekly basis, you will drive yourself crazy. It's something to review monthly at most, maybe 1-2x a year.

    I don't have any experience with retirement expenses planning... all I know is that you can expect healthcare costs and rent to increase considerably more than inflation if you expect to maintain an independent lifestyle.
     
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  9. scott43

    scott43 Making fresh tracks Skier

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    We basically ask the question of everything we buy: do we really need to spend this? Cuz pensions aren't guaranteed. We save a lot. And we don't have a lot of stuff. I think smart food shopping and not eating out are big savers. You can chart your fixed costs easy enough. Those really can't go away. It's the discretionary spending that you have to justify.
     
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  10. Doug Briggs

    Doug Briggs Making fresh tracks Pugski Ski Tester Industry Insider

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    I have no budget to speak of. That said, I don't dine out much at all. I work at a ski shop which allows me to get gear cheap. I camped out to get my mt bike at almost half price. I don't subscribe to cable TV. I drive a truck that I own outright; that it's a Toyota makes maintenance quite affordable.

    I ask myself: will this be in next year's garage sale? before I buy anything that isn't strictly necessary.
     
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  11. fatbob

    fatbob Out on the slopes Skier Inactive

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    /\

    Yeah was going to come back and say that. Easiest to track your monthly outgoings for a month from bank and cc statements including cash withdrawals then roughly allocate to "bins" from essential (utility bills, mortgage payments home and car insurance etc, basic food ) through lifestyle essential to nice to have to luxuries. Add in your monthly allocation of annual bills and you know how much you have to play with. Leave out big capital items. Once you know what is in your least essential bins you conceptually know what you can turn off and/ or trade down on to increase your savings or if you have a crisis like unexpected unemployment. Dedicate a bit of your savings pot to your capital expenditure needs so say $20k over 5 years for next car change $2k over 5 years for home appliance replacements etc.

    And be honest. Daily coffee drivethru may be lifestyle essential for one person or simply a nice luxury for another. It doesn't really matter whether something is food, entertainment or say a nicer shampoo or a luxury good. Some things genuinely enhance your quality of life and some are just habitual decisions or things you do to impress other people and can be traded down or eliminated if you choose.

    Fortunately I have no need for luxury shampoo or otherwise so that pays for a few tanks of gas on vacation annually.
     
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  12. Guy in Shorts

    Guy in Shorts Tree Psycho Skier

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    When all else fails hit up the heli skiing account.
     
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  13. VickiK

    VickiK Getting on the lift Skier

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    What a good thread idea.
     
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  14. Talisman

    Talisman Getting off the lift Team Gathermeister

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    developing a budget is the easy part it is staying on it that is difficult. Think classic triage to stay solvent: Track all expenses ( as others have suggested bank statements & CC statements are easy, Adjust spend to cover unforeseen expenses not tracked in your budget like Doctor's visit or big car repair by foregoing "frills" like dinners out, Starbuck's and cable TV and plan financially for the non annual large capital expenses like a new roof, car/truck or house purchase with set aside a reserve every monh to cover it. Track, adjust spend and capital plan, easier said than done so most people don't.
     
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  15. Thread Starter
    TS
    Monique

    Monique bounceswoosh Skier

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    I'll try to clean it up and put some bogus example data and post it here.


    Yes - that's what I have, a custom spreadsheet. I definitely find that entering the numbers myself makes the reality "stick" more than if I just scroll through a ledger - mint, my bank, whatever.


    Do you keep this separate from your ~6 month savings to buffer against unemployment?

    Sigh. Yeah, that makes sense. Just the sort of concrete step that I was hoping to magically be able to avoid ;-)

    Yes. So far I have switched from a lawn service to doing it myself. I switched from paying to have the house cleaned once every two weeks, to once a month. I HATE cleaning, but I might make that change eventually.

    I've cut out a lot of fat. It's a process. I've dealt with the low hanging fruit; the remaining changes would be either painful (I don't want to give them up) or annoying and involved (web and email hosting to a cheaper provider, that sort of stuff).

    Yes. My FA is dealing with the specifics of how much money I need to retire comfortably. I've been given a budget - $X/month - and need to find a way to stick to it.
     
  16. Philpug

    Philpug Enjoying being back on two wheels. Admin Pugski Ski Tester

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    When in doubt, spend less on food and more on gear.
     
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  17. fatbob

    fatbob Out on the slopes Skier Inactive

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    Another observation - some people who have the most precarious financial situations I know live what seems outwardly to be the "nicest" lifestyle. New car leases, extended mortgages to pay for home upgrades, luxury goods, flashy vacations and big sports or entertainment tickets. But they treat life as if saving is a dirty word and genuinely can't prioritise between wants and needs. They are also the people I no longer ask if they fancy another ski weekend because they genuinely can't afford it after all the other outgoings.
     
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  18. Steve

    Steve Ankler Skier

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    I have a "cushion" account, a savings account attached to my checking account. Every month I put something into it, you can decide on the amount. $500 is good, but you have to decide on that yourself. This is used for unexpected large expenses, like a brake job for example.

    I have an amount that I want it to stay at. So for example it might be $5,000. With a $500/mo. deposit that means it could get used in it's entirety in a year and constantly replenished. So the trick is getting that $5,000 in it (or whatever the amount) to start. Then as you use it there is usually close to that amount there.

    There is a great psychological effect of having a cushion. Instead of "damn I have to put this on a credit card" it's "damn, I have to use the cushion."

    I also like the term "cushion account." Has a good feeling to it. I got this from a great book "How to make one hell of a profit and still get into heaven."
     
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  19. Seldomski

    Seldomski Paralysis by analysis Skier

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    Final tip is to make saving money automatic. Your decisions should instead be about NOT saving. So, set up an automatic deduction such that every month money transfers to the saving account. If you need that money for something, it becomes a conscious act to transfer that money to checking or wherever else it needs to go in order to spend it. Make it so that you never see the money you are saving - it goes directly to an account where accessing it is possible, but requires effort.

    Essentially, it should be more difficult to NOT save, than to save. If you are set up so that spending is easier than saving, then it will be harder to stick to the budget.

    The other benefit to doing savings automatically is that you only have to think about the amount you want to save once. You come up with a plan, make a decision, and you are not required to make more decisions for the plan to execute.
     
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  20. Philpug

    Philpug Enjoying being back on two wheels. Admin Pugski Ski Tester

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    Here is a trick that is tough to do but it can be fun.

    Use coupons and buy stuff on sale. Well, duhogwink. Now, if you used $4.35 at the grocery store in coupons, put that in a savings account. If you buy somethiing for $20.00 that is 20% off, put the $4.00 in the savings account. It is work, but it is rewarding too.
     
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