Setting up the budget - how long until real data?

[Le Poisson]

So SWMBO and I have just started using YNAB. (We are on Day 16 of our 30 day trial) Since I suck at all things money related, I am happy to see it making sense.

We set it up using wild-ass-guesses (WAGs) for some line items since we've never tracked spending before. This has resulted in two significant issues.

- First, some columns we really don't know what an appropriate guess is. For instance, the pool we budgeted at $20 a month. I think that's ridiculously low since a jug of chlorine is $8, and we go through 8  a month, but SWMBO insists that we only spend $20 a month on the pool. It will be 6 months before the data rolls in to settle that account.
- second, our budget has come out to $1,000 a month more than our income. Now that sets off red flags, but without item 1 resolved, we are going to be flying by the seat of our pants for a year until we can figure out where all our estimates are off. Deciding where to cut is going to be difficult.

Does anyone have suggestions to set up the budget more realistically without starting in the hole? On the upside - at least now we know why our debt has been accruing the past few years.

[HenryDavid]

"The" pool? What is this pool you speak of?
A private pool, for swimming?

I think you may have found part of the reason your spending exceeds income.
A pool, like a boat, is an empty space into which money is poured.

I expect you will find it very easy to find spending reductions once you start tracking.
Just track for 3 months and don't rush. The feedback alone will start to generate reductions as you ask "is this good value?"

[Retired To Win]

Paper receipts, paper and pencil, my friend.  Throw all the receipts in a (shoe)box and in one month pull them out and organize them by expense category.  Also grab the checkbook register.  Calculate and correct prior estimates.  Rinse and repeat.

If you are game to to the following, use credit card(s) instead to pay for everything.  Sort out the specific items on your card statement at billing time.  Then, pencil, paper and calculator.

Yes, it's not very techie.  But it will work.

Good luck.

[MrFancypants]

Sign up for Mint.  Feedback should occur fairly quickly.

[pagoconcheques]

To the extent that you use credit cards, you can probably print out annual summaries back as far as three years from the card issuer web site.  Challenge some of the default categories, but for the most part it will give you a decent low resolution picture. 

Ask your bank for a way to get 36 months of bank statements if you don't have them in a file folder somewhere (you can probably get 6 months of them online).  If you are withdrawing cash from ATMs a lot, that means you really need something like Mint to track cash expenditures or you just need to shift to credit-card based transactions. 

Try to get a full 12 months of utility bills as they vary seasonally and spring tends to be a low for heating and cooling. 

The story about the pool chlorine cost per jug and number of jugs per month suggests you all have a denial issue as well.  Three months of solid data should put that to rest pretty quickly. 

Good luck!

[RunHappy]

What is SWMBO?

I would say it would take about 2-3 months for certain categories like, food and gas, only because the types of usage may vary depending on lifestyle.  You probably already have some of what you need by combing through your old bank and credit card statements.  From a YNAB perspective though you don't need those.  Their method is about starting fresh today and building the budget as you move forward.

Utilities will take about 12 months. This is something i'm concerned about as well. We are closing on a house this Friday and have no idea what our utilities will look like.

I don't think there is any advice about not starting in the hole. Where you start is where you are.  You are either living a current lifestyle you cannot afford or you aren't.  While it may seem discouraging to realize that you are spending more than you earn, I see it as a positive step forward.  Because until you know where all your money is going, you cannot take the appropriate action to fix it.

[r3dt4rget]

It's not possible to budget more than your income in YNAB, otherwise you get a bunch of bold red ink yelling at you on the screen! It's important to budget only money you currently have. So for example if you have $1500 in your checking account, $1500 is all you can budget. Until you build up a buffer (spending last months income on this months bills) you are going to budget as you get paid. So if in the next 2 weeks before payday you have to pay for groceries and the mortgage, that's what gets budgeted. When you get paid again, you have more available to budget to cover the rest of the bills that month.

Start out with very simple budget categories. Your pool budget is a perfect example. You don't need a pool budget category. Instead, create a home maintenance/repair category and include all those little misc. expenses in that single budget category. Furnace filters, pool supplies, home repairs, etc. all can go here. I set up my master category as "Housing Expenses" and the categories are mortgage, maintenance/repair, taxes, and insurance. Another master category could be "Monthly Utilities/Services" that will include monthly bills like electric, water, gas, cell phone, netflix, etc. I have a shopping/entertainment master category where restaurant spending, shopping, and entertainment spending goes.

You can estimate monthly budgets for things like pool expenses by looking at bank statements and trying to remember your total annual expenses last year. You can at least get a rough estimate, then just divide that into monthly budgets.

[Le Poisson]

Thanks for the feedback guys.

1. We don't use credit cards. Ever. I have one, but I don't know its pincode, and the magnetic stripe is worn out. I look at the card churning threads with a mix of horror, disdain and admiration. I understand the suggestion to use them as a way to track expenses since th estatement will outline all the expenses.
2. We do use Debit cards. A lot. Likely so much that we are out of touch with how much things really cost.  But they at least detail where we spent the money if we can't isolate what we spent it on. The bank has a pie chart that does an excellent job of classifying purchases into broad categories that don't necessarily reflect the expenses.
3. SWMBO - Acronym for "She Who Must Be Obeyed". Term of endearment for one's wife/girlfriend (or resignation to the nature of your relationship). Source: Urban Dictionary
4. Cash - we spend very little in cash. Or at least I thought we did. When we set up YNAB, one of the things that came out was that SWMBO has been pulling $150 a week to cover incidentals. We need to start tracking where that is going.
5. We now have a clipboard on the desk where receipts go until they are entered in YNAB.
6. Yes about th epool. Its a big expense once maintenance, heat etc. are factored in.

[Le Poisson]

It's not possible to budget more than your income in YNAB, otherwise you get a bunch of bold red ink yelling at you on the screen! It's important to budget only money you currently have. So for example if you have $1500 in your checking account, $1500 is all you can budget. Until you build up a buffer (spending last months income on this months bills) you are going to budget as you get paid. So if in the next 2 weeks before payday you have to pay for groceries and the mortgage, that's what gets budgeted. When you get paid again, you have more available to budget to cover the rest of the bills that month.

Start out with very simple budget categories. Your pool budget is a perfect example. You don't need a pool budget category. Instead, create a home maintenance/repair category and include all those little misc. expenses in that single budget category. Furnace filters, pool supplies, home repairs, etc. all can go here. I set up my master category as "Housing Expenses" and the categories are mortgage, maintenance/repair, taxes, and insurance. Another master category could be "Monthly Utilities/Services" that will include monthly bills like electric, water, gas, cell phone, netflix, etc. I have a shopping/entertainment master category where restaurant spending, shopping, and entertainment spending goes.

You can estimate monthly budgets for things like pool expenses by looking at bank statements and trying to remember your total annual expenses last year. You can at least get a rough estimate, then just divide that into monthly budgets.

We've done the impossibe!! Actually I think we just set it up backwards. We set up based on expected spending rather than our known income. This means that all the categories show a budgeted amount in the black, but teh total budgeted exceeds the monthly income, forcing us into the red. Once our first month is past, we will see things level out. Using this method, once we get a month ahead, the totals will all be black.

I think you are right though - putting in income and expenses as they happen is a better plan. Unfortunately, that isn't the way we think, and it would be an uphill battle to get there. Since this is only week 2 of our trial, all our reserves are less than anticipated. In another two weeks, we should have a better picture.

[Livewell]

We put everything we can on a couple of cc for points (paid off every month of course) and then track non-cc items like utilities (pg&e won't allow cc payments) and misc petty cash ($200 a month).  You can sort/categorize via mint but I am a spreadsheet guy (I use downloaded csv).  I reconcile every 2-3 months.  Don't sweat the small stuff, saving every receipt is overkill IMO.

[galliver]

I wonder if your SO is spreading the cost of the pool out over the year. $8*8*3/12 = 16. Just a theory. But if that's the case, she's looking at monthly budgets as "year's expenses divided by 12 mos". I've found that when I approach budgeting this way, it's kind of unsettling because I'll vastly overshoot budgets for non-monthly events, e.g. air travel, holidays. I also wonder if you're including (almost) every possible expense for every month...e.g. including pool expenses now even though it's not operational yet. You probably won't be taking care of the pool, starting your vegetable garden, and buying leaf bags all at the same time; so if you include them all (and do this for all categories), you'll be over-budgeting and that's not helpful. Or maybe you regularly are spending more than your income.

As for your "WAGs" I bet there's a lot you can estimate based on either weekly spending (e.g. groceries), known cost&frequency (8 gal chlorine per month @ $8/ea) or by looking back through your statements (past history). Are you signed up for online banking? If your bank is remotely modern, you should be able to get your statements for many months past. Then you can identify the vendors, and probably guess what kind of spending took place there.

[Le Poisson]

I'm not sure how she got the monthly rate for pool chems. I figure she likely summed the reciepts from the pool store and divided by 12. If she did that, then all the pool chems bought at places like Canadian Tire and Rona would be misappropriated to home maintenance/renovation supplies. It is not uncommon for me to grab a jug of chlorine if I see it on sale and I'm getting other stuff.

$20/mo only works out to $240 a year. I don't think we could run our pool for long on that.