Budgeting

Do you keep to a budget?
Have you found it helpful when planning purchases?
Do you think budgeting is over-rated?

Tell me about the process you go through to determine your personal/family budget.


A friend told me once his method of budgeting involved simply not spending money if he had none to spend. Sounds reasonable enough, but doesn't really bode well for long-term savings.

I kept tight records of my finances in my late teens through mid 20's. I made spreadsheets with every penny spent, carefully balancing by hand. I also worked hard to shave off a little more every month to save for later. Most of my expenses were housing and food at that time. I dealt mainly with cash because I felt it was easier for me to keep track of how much I had to spend for any given purchase. It was a game to see how cheaply I could scrape by while having a full belly. To say I developed habits of frugality would be an understatement. I deferred all pleasure to take on extra work and have a bit more money to squirrel away. Since I married, I have forced myself to become much more loose with my finances. My husband is frugal as well, but he tends to be more willing to splurge on big-ticket items more often than me. I would forgo a TV and netflix, for example, and never purchase alcohol or other things that don't satisfy some basic nutritional need. I would live in the least expensive accomodations, not accounting for safety. But I like the comfortable way he has encouraged me to live our lives and when push comes to shove, he understands and respects my desire to live inexpensively.

I find that while my husband appreciates the concept of a budget, he has a difficult time sticking to one. I list our monthly expenses, make suggestions on how to live cheaper, and he says "great!" But by the end of the month he has thrown that plan away. That's fine though, because at the end of the month we are still debt-free... Just not as much saved as I might prefer.

I'm curious if maybe there is some other way I can present my plans that would make it easier for him to follow a budget. Maybe if I just sneak more money into our joint savings at the start of each month he will see less and therefore spend less?

We'd like to purchase a home in the near future, and I don't see how we can manage the purchase without some substantial effort to budget.

 

I approach budgeting the same way I approach most things in my life: set goals, be realistic, let the details work themselves out. I also kind of figure that money's only really good for what it gets you, so I'm not interested in saving just for the sake of having a big account balance.

I tend to think there's a balance between spending and saving. Everyone has a different tolerance for this I imagine. As for me, I consistently spend less money than I make. I have no debt. I've got a nice little cushion in my savings account and a retirement fund. So, all things considered, I feel like I'm doing okay. I don't think I need to freak out over the details at this point. If I find myself at a point where money out is greater than money in, I'll reassess.

 

We sort of budget. I don't really budget food expenses; I spend what I need to, and I know I'm pretty good at making my dollar stretch to stock our pantry. I do keep track of our fixed expenses. We recently started budgeting for entertainment more than we have in the past; on payday, I take $50 out of the bank in cash for both of us, and that's our "fun money." We can spend it on whatever we want. We usually pool our money somewhat to pay for larger entertainment expenses we have, as we both love attending beer-related events. Even with this scheme, we don't have a lot of money left over at the end of the month due to debt payments (college was expensive), so very little is going into savings when I'm not working.

This makes for some hard conversations sometimes. My MIL expects that we are saving for a home. We're not. I have other savings priorities first--we need an emergency fund, we need to pay down debt, and we would like to take a vacation to Maui. I'd like my husband to spend at least a year in his current position and I'd like to secure a job before I start seriously saving for a down payment. Plus, a 20% down payment in our area is going to be 50k. That's a lot to save!

 

Hmmmm.

Sounds like I should just enjoy life more and take a chill pill when it comes to budgeting.

 

One of my financial "gurus" is radio guy Dave Ramsey. @snowy, it seems like you are mostly in agreement with him as far as debt and savings and the order of things financial. The emergency fund priority is what allows a budget to survive the unforeseen. Otherwise something unexpected can just blow whatever budget you have right out of the water. And paying down debt (what Ramsey calls the debt snowball) is next. As far as savings go, the important thing is to "just do it." Worry about the allocation later. Who knows. Three years from now you may have completely lost interest in the Maui vacation. Cash in the bank makes a great "fuck you!" fund for many situations.

I am fortunate enough to be in a position that I don't need to budget. I do it anyway to help give me financial discipline. Discipline gives me more money to invest. I have an emergency fund, and keep a substantial "opportunity" fund for when the proverbial "to good to pass up" deal comes along. The two are different. A great deal is not an emergency.
Another financial guru is my great-uncle Don, whose main mantra was to never borrow to buy a depreciating asset. Like clothing, vehicles, and vacations. I follow that religiously.

 

Yeah, unfortunately, in the United States, that does not apply to university-level education for most people.

 

I need to budget better. We've went through times when we were very tight, and we budgeted well to get through them. I know I'm capable, but I have a bad habit of spending on a whim. The good news is that I have several automated savings plans in place, a couple for retirement that never get touched, a couple for investment that I occasionally play with but haven't (so far) pulled anything from, and a couple shorter term ones that we use for major purchases and such.

 

Yeah, we've got our 401k pretty locked in. It's the other stuff I'm working on.

 

This works for us too.

The thing is we'd like to see some other goals happen and without measurements we can't see goals happen. We've started doing a zero sum budget via YNAB. It's simple, it works for us. It makes us give each dollar a job very month. While we knew we didn't live paycheck to paycheck we could never see it so following how YNAB works, we were able to see it happen over the course of 2-3 months by just following their instructions to the letter.

 

Does anyone else have experience with YNAB? Other personal finance programs/apps? I'm interested in getting more serious about our budget.

 

I looked at it but it won't work for me. It makes everything out monthly, and my income doesn't come in in a steady stream like that. So I try to think of things on an annual basis rather than monthly.

So it cost about $2200 to heat, cool, and light our house last year. $326 for garbage. $2800 property tax. $442 for landline and I use a prepaid cell. $1400 for cable and internet. $560 to insure 2 older cars. About $6000 on travel, most of that work related business expenses. Etc.

Annual gives me a better handle on comparing what things cost versus their benefit. I try to avoid those monthly things that depreciate to zero by the end of the month. That's why I don't have a smart phone.

I'd rather invest that money in assets that grow, than enjoy playing with what is, essentially, a toy. High tech is great, but I don't really care to watch a movie on a screen the size of my American Express card.