Author Topic: How do you manage cash flow if you don't use a budget?  (Read 25798 times)

choppingwood

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How do you manage cash flow if you don't use a budget?
« on: March 19, 2015, 09:57:31 PM »
Whenever someone asks how much readers are spending on a given category, there are responses from people who say they don't use a budget, but use minimal intentional spending.

I've always used a budget, but I agree that it can encourage me to spend more than I need to. I also end up short in some categories, and do too much scrambling to make ends meet.

So my question is if you don't use a budget, how to you manage your cash flow? Do you leave your income in your account through a pay period, or do you pay yourself first when you receive your income? And how do you manage paying annual expenses? I pay my property tax, house insurance and car insurance on an annual basis.

Kiwi Mustache

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Re: How do you manage cash flow if you don't use a budget?
« Reply #1 on: March 19, 2015, 10:14:22 PM »
I get paid monthly.

I set up my credit cards monthly cycle to finish the day before my paycheck. I then transfer to pay off the credit card in full, leave $300 for the month in the checking account (for anywhere that doesn't take credit or if I need cash out if places I'm going require cash) and then put the leftover money into savings/investments.

I'm just generally frugal. I tried budgets but never stuck to them so figured as long as I'm conscious not to waste money, I'll be fine in the long run.

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Re: How do you manage cash flow if you don't use a budget?
« Reply #2 on: March 19, 2015, 10:14:41 PM »
Essentially it's "pay yourself first." That means deciding that saving is a priority right behind basic needs of food, clothing and shelter. Once you are saving regularly you'll get past merely "making ends meet" and cash flow won't be a concern.

Cathy

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Re: How do you manage cash flow if you don't use a budget?
« Reply #3 on: March 19, 2015, 10:18:21 PM »
This is actually a good question.

For me, it has varied over the years (especially depending on what kind of income I had at the time), but the moment, as an ordinary employee, I control my cashflow as follows:
  • All income received is immediately (or as soon as practicable) allocated to a productive investment, subject to rule (2).
  • With respect to the last paycheck of the month, I refrain from allocating X+Y dollars of it, where X is my rent payment due on the first of the next month, and Y is the amount required to pay any credit card bills due at the start of the month. The X+Y dollars remain in my checking account until taken away by automatic payments to pay the things described.

That's it, since nothing else is paid out of my checking account. My spending on credit cards in the preceding month determines the value of "Y".

I've actually considered varying this strategy though, and using instead the following:
  • All income received is immediately (or as soon as practicable) allocated to a productive investment.
  • Immediately before a bill is due, sell an amount of investments to cover the bill.

I think this latter strategy might be superior in the long run, but it's also more work. I haven't switched to it yet.
« Last Edit: March 19, 2015, 11:11:46 PM by Cathy »

arebelspy

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Re: How do you manage cash flow if you don't use a budget?
« Reply #4 on: March 19, 2015, 10:23:43 PM »
Two answers.

1) Keep a cash buffer that refills when you get your paycheck.  Never worry about cash flow.  Many of us keep a few months expenses liquid.  See this post: http://forum.mrmoneymustache.com/ask-a-mustachian/your-checking-account-balance/

2) For this answer, I'm gonna post the opposite of the person above me:
It's a "save for yourself last" mentality.  And that means you never need to worry about cash flow.

If you budget every dollar you earn to spend, you have nothing left.  Cash flow is managed, but delicately, cause you could run out, since you're spending every dollar.

If you pay yourself first (take a big chunk out for savings) and then budget the rest, again, same issue, you delicately manage cash flow.

Those of us that don't have a budget don't need to worry about cash flow, because there's always enough.

Say the wife and I net 5k/mo together, and spend 2k/mo.  Money comes in, we spend whatever we want, we flow money out to investments.. more comes in, we spend, etc.  We're constantly overflowing with money, not having to worry about a budget because we LBYM.

And then we pay ourselves last.  Once we buy whatever we want, we save the rest.

The key is to minimize what you want.  But essentially you get your spending to as little as possible, and save the rest.  Instead of saving a fixed X up front, you spend as little as you want, and save all the rest, at the end.  And then you never have to worry about cash flow.  Cash flow concerns are for people who budget.

(And people with irregular incomes, who either have to budget out of necessity, or keep a cash buffer).

If you budget, you worry about cash flow much more than those of us who budget, IMO.
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Will

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Re: How do you manage cash flow if you don't use a budget?
« Reply #5 on: March 19, 2015, 10:59:26 PM »
Budgeting every dollar does NOT mean spending every dollar.  How can having a budget cause you to spend more than you need to?

I have had a budget for years now.  I never have a worry about cash flow, ever.  Why don't I worry about cash flow?  Because I know I have enough.  There always is. 

Another thing I don't worry about is my budget.  Why would I?  I spend less than I earn (way way less than I earn).  Again, just because I decided I could spend $150 on groceries this month does not mean I will run out to the store on the last day of the month to spend whatever is left in that category.  If one is foolish enough to think that a budget forces one to spend whatever is budgeted, then there are bigger issues to deal with than how much money one spends.

So when I budget, I am basically figuring out "What is the most I might possibly need to spend in this category?  How much in this one?" and so on.  I make sure that they all total less than I bring in.  And you know what?  It works.  I don't spend whatever I want, I spend whatever I need, knowing that I do not need much.  No worries.


MDM

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Re: How do you manage cash flow if you don't use a budget?
« Reply #6 on: March 19, 2015, 11:11:55 PM »
So my question is if you don't use a budget, how to you manage your cash flow? Do you leave your income in your account through a pay period, or do you pay yourself first when you receive your income?
A combination of what Cathy and arebelspy do:
1) Pay ourselves first with pre-tax (e.g. 401k) payroll deductions.  The pre-tax amounts (and payroll W-4s) have been chosen so we either
     a) have "enough" coming in post-tax each month to cover expected (annual expenses / 12), or
     b) are the maximum allowed
2) Spend what we need to spend.  We spend below our means.
3) Invest what is left over

Quote
And how do you manage paying annual expenses? I pay my property tax, house insurance and car insurance on an annual basis.
Those are exactly our big annual payments as well.  As implied above we try to come out ~$0 for the April IRS bill.  We keep an "emergency" fund that gets used for the taxes & insurance, and then we replenish it over the year.

Taran Wanderer

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Re: How do you manage cash flow if you don't use a budget?
« Reply #7 on: March 20, 2015, 12:53:08 AM »
401K investment comes out of my paycheck pretax, and another 10% goes directly from my employer into my emergency/car replacement/big trip fund. What's left of my paycheck goes into a savings account, along with all other income - rent received, business expense reimbursements, and a couple other small streams.  Monthly expenses come out of checking, including a few more investment contributions.  On the last day of each month, I move money from savings to checking to bring the checking balance back to my target amount to start the month. With this one transfer a month, I can easily see my spending level.

As for managing the spending, I just buy what I need.  My wife is cheap. She does the same. Anything more than $100 or so we talk about first. Anything more than $500 we think about for a long time. If we see a luxury item we want, and we still want it 6 months later, we might actually buy it.

If the savings pots get too big, we move additional money into investments or toward mortgage debt. Mortgage debt is our only debt. It wasn't always this way, but we are fairly established at this point, so there isn't a lot we want. I wasn't always able to keep money from burning a hole in my pocket, so in the past I was more careful about limiting money in my checking account, but I find that tiring now. The new system works pretty well.

dhlogic

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Re: How do you manage cash flow if you don't use a budget?
« Reply #8 on: March 20, 2015, 12:58:15 AM »
Again, just because I decided I could spend $150 on groceries this month does not mean I will run out to the store on the last day of the month to spend whatever is left in that category.

Why even bother taking the time to come up with the "$150" number in the first place? Why focus on the maximum you could spend? Why not focus on the minimum you could spend?

When purchasing items in a particular category, do people who budget go home after buying the items, file away the receipts, pull them out at the end of the month and then surprise themselves good or bad when comparing it to some arbitrary number they came up with?

Or do they keep a running tally in their head by regularly reminding themselves from a site like mint.com for instance to see how they are doing?

Why compare amounts spent in a particular category only on a monthly basis when you can look at every individual purchase as separate event?

In the $150 example, do people forget until the end of the month that spending $450 on groceries is not in line with their goals? Then what? It’s too late to anything about it anyways.

My ideal "budget" would be to save 100% of my income. In the various budgeting programs where you assign a job to every dollar, I would simply assign 100% to savings and then live my life to keep that percentage high enough to FIRE in a particular time frame after subtracting needs and wants. When I see YNAB mentioned, I truly do not understand how some people view it as life changing. I would find it to be a futile exercise.
« Last Edit: March 20, 2015, 01:00:06 AM by dhlogic »

Bjorn

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Re: How do you manage cash flow if you don't use a budget?
« Reply #9 on: March 20, 2015, 05:59:58 AM »
The reason for budgeting is for the sake of forecasting and goal setting. Yes I do budget my spending beforehand, I lowball the numbers to mentally be in "savings mode". On payday I transfer to savings and bills accounts, and leave a small, budgeted sum for spending. Sometimes I end up needing more than I budgeted for because I lowballed the numbers, and simply transfer back a small sum from the savings. On other occations I "succeed" and spend less than budgeted, which is a good reason to adjust the budget and lowball even more the next month. Hence, budgeting (and tracking) is a form of goal setting and a tool to improve your savings rate.

Budgeting is also a nice tool to justify unnecessary expenses that comes up once in a while. If I budget for a night out I can go out with a clean conscience. With no budget I would feel bad for every dollar spent.

I keep a running tally in my head for the different expense categories and check my account weekly to see whether I'm on track.

I could of course wait until the end of the month and transfer whatever is left for savings, but in that scenario I am always having a lot of money available to spend, and that is not a good idea. If I have less, I spend less.

Quote
My ideal "budget" would be to save 100% of my income. In the various budgeting programs where you assign a job to every dollar, I would simply assign 100% to savings and then live my life to keep that percentage high enough to FIRE in a particular time frame after subtracting needs and wants
I like the idea of having a mindset like this.

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Re: How do you manage cash flow if you don't use a budget?
« Reply #10 on: March 20, 2015, 07:10:14 AM »
We don't use a budget.

Our paychecks, minus the amount that goes into 401k/403b come into our checking account, our bills - mortgage, electric, gas, water, credit cards, etc come out of it including "saving bills" like monthly contributions to IRA.  When an annual bill, like car registration, comes, it comes out of there too, although property taxes are paid monthly into escrow with the mortgage, so we don't have that massive bill. If we want to go on vacation or buy a car, the money is there- whatever.  Our generally strategy is "don't spend money on unnecessary shit".    We make more than enough to cover our regular expenses and the various things we want, and don't live paycheck to paycheck, so there is nothing to manage.

Maybe we just keep more in cash than some people?
If the checking account is over $X, money gets moved to a savings account. If that gets over $Y, we put more into our taxable accounts.
« Last Edit: March 20, 2015, 07:12:36 AM by iowajes »

driftwood

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Re: How do you manage cash flow if you don't use a budget?
« Reply #11 on: March 20, 2015, 07:56:30 AM »
I don't use a budget either.  After I got married and had kids I couldn't figure out how to make it work.  Or I didn't want to commit.  If I get to the end of the month and need food/gas, I'll buy them.  Though I'm willing to switch to eating ramen the last week of the month to make it work, it's not really a family-friendly plan.  99.99% of my driving is places I need to go.  I won't park the car towards the end of the month if I go over my gas budget.  Irregularities between months also made it difficult to follow.  We bought $250 of meat from a local butcher recently.  It obvously jacked up that month's food costs, but it will be used over the next few months.  Part of it is the mentality... If I was including that meat in my budget, then I would have to track a small amount added to each month, but somehow kept separate.  Too much work.

I get paid once a month, pay investments/savings/retirements/bills the first week of the month as well.  Then I make a game out of trying to have the most of the remainder leftover at the end of the month.  That money goes into debt/investments/savings and I start fresh the next month.  We also use that cushion to cover irregular expenses.  Some months I'll have close to zero at the end, some months hundreds of dollars. 

Every few months I take a look at how much has been left over and decide if I want to increase the savings at the beginning of the month.  All raises go into the debt/savings categories.  If we can stick to this method (living on the exact same dollar amount each month), we will be forced to live on a smaller percentage of our pay as years go by due to inflation. 

I'm just glad I've found something that works for my wife an I.

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Re: How do you manage cash flow if you don't use a budget?
« Reply #12 on: March 20, 2015, 08:04:00 AM »
i dont really understand worrying about cash flow i guess.  similar to arebalspy.  whats there to worry about i know how much money i have if something big happens and i come up short one month b/c say i need a new dishwasher i just back off my taxable savings some.  i keep enough liquid capital around that i'm comfy i can have acess to it in emergency. 

thd7t

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Re: How do you manage cash flow if you don't use a budget?
« Reply #13 on: March 20, 2015, 08:11:50 AM »
I don't budget, but we've set things up such that I have an artificially restricted cash flow.  We have an emergency fund and a small sinking fund (1k), but they don't stay in a checking account.  Not having money visible reminds me throughout the month to try not to spend money.

zurich78

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Re: How do you manage cash flow if you don't use a budget?
« Reply #14 on: March 20, 2015, 08:14:47 AM »
I automatically save X amount every paycheck.  X is essentially the most I'm comfortable pulling out of the checking account and it goes right in to a savings account at the same back as my checking which I use as a placeholder.  It leaves me enough room to cover variable costs like water, electricity, gas, gas for the car, household expenses, etc.

If, after about a month or so, I still have a little extra in my checking, I move that extra in to that placeholder savings as well.  I allocate all of my investments from that savings account and then always leave a minimum balance of $2,000 in it to cover for larger unexpected expenses.

I know this might seem silly to some, but it works for me because if I have too much in my checking, I have a tendency to spend it, sort of like when I have cash in my wallet.  This is my method of protecting me from myself =)

mak1277

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Re: How do you manage cash flow if you don't use a budget?
« Reply #15 on: March 20, 2015, 08:26:02 AM »
If you have a high savings rate, I don't see how it really matters.

I keep a buffer of cash on hand in checking, and 90% of my non-mortgage related expenses each month go on a credit card.  Credit card gets paid out of checking account...done and done.  Each month I monitor total cash outflow.  If something looks unusually high, I will go back and investigate.  By in large, though, I don't really bother myself with a fluctuation of 10-15% each month because I know I have some bills that are quarterly, some that are ad hoc, etc.  I honestly don't care what categories the money comes out of as long as the total cash outflow is within my projection.

All that said, I am not trying to whittle my spending to the bone.  I buy what I want, when I want it while still maintaining a savings rate I'm more than happy with.  Spending a couple hundred bucks extra (or even a couple thousand extra, really) one month is irrelevant at this point.

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Re: How do you manage cash flow if you don't use a budget?
« Reply #16 on: March 20, 2015, 08:47:50 AM »
Quote
I buy what I want, when I want it while still maintaining a savings rate I'm more than happy with.  Spending a couple hundred bucks extra (or even a couple thousand extra, really) one month is irrelevant at this point.

This is basically the situation we are in.

We have a good, but not extremely high, income and we've had a high savings rate for long enough- that we have plenty of money.  There really isn't much to manage.

Will

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Re: How do you manage cash flow if you don't use a budget?
« Reply #17 on: March 20, 2015, 08:55:37 AM »
Again, just because I decided I could spend $150 on groceries this month does not mean I will run out to the store on the last day of the month to spend whatever is left in that category.

Why even bother taking the time to come up with the "$150" number in the first place? Why focus on the maximum you could spend? Why not focus on the minimum you could spend?

Because coming up with a number is reality.  It certainly is not "focusing on the maximum."  It is addressing a limit.  Why are there speed limits?  Why not focus on how slow you could drive?  Why drive at all?  Why move from off the couch, or leave the house?  Because one HAS to!  It is not realistic to think "I am not going to spend anything on food this month." 

When purchasing items in a particular category, do people who budget go home after buying the items, file away the receipts, pull them out at the end of the month and then surprise themselves good or bad when comparing it to some arbitrary number they came up with?

I suppose people that have no clue about budgeting would do that.  In my example, $150 for groceries isn't "arbitrary."  Deciding I could probably spend, on average, $5/day on food is reasonable. 


Or do they keep a running tally in their head by regularly reminding themselves from a site like mint.com for instance to see how they are doing?


I suppose some people do that.  A lot of people keep track with YNAB, using both the program on their computer at home and using the mobile app on their phones.


Why compare amounts spent in a particular category only on a monthly basis when you can look at every individual purchase as separate event?

In the $150 example, do people forget until the end of the month that spending $450 on groceries is not in line with their goals? Then what? Itís too late to anything about it anyways.


Have you ever set any kind of goal or limit on anything? 

These people you mention who are "comparing amounts on a monthly basis" are using a spend tracker like Mint.  That is not budgeting.  I was talking about using something useful, like YNAB, to budget with, not something like Mint which has nothing to do with budgeting at all. 

I don't know about you, but I am not so clueless that if I was spending 3x what I decided was reasonable I would "forget until the end of the month" that I was doing so.  In cases like that, I'm not sure YNAB or Mint (or MMM or anything else) would clue that person in.

I really don't understand how or why so many on this forum have this idea that people who use budgets slap random numbers on things and then are completely unable to think about what they are spending on.


My ideal "budget" would be to save 100% of my income. In the various budgeting programs where you assign a job to every dollar, I would simply assign 100% to savings and then live my life to keep that percentage high enough to FIRE in a particular time frame after subtracting needs and wants. When I see YNAB mentioned, I truly do not understand how some people view it as life changing. I would find it to be a futile exercise.


Why even bother coming up with saving 100% of your income?  Why not save 150% or 200%?  They are all equally unrealistic, unless you are living at home or have some kind of sugar mama or daddy.  If you are subtracting for needs and wants, you are NOT simply assigning 100% to savings.  How much are your needs and wants?  $150 perhaps on groceries?  $450?

YNAB or any other budget is not difficult to understand.  It is reality.  We know we will have to spend some of our money, so we plan for it.  We make sure the plan keeps spending under what we bring in.  Planning is not a bad thing.  It doesn't create worry.  It doesn't make things a "game" where you spend and hope.  It makes us deal with reality, since we know the likelihood of spending $0 and saving every penny we've earned is about as likely as finding a unicorn that will fart glitter rainbows for us.

Joshin

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Re: How do you manage cash flow if you don't use a budget?
« Reply #18 on: March 20, 2015, 08:58:28 AM »
Our situation is a bit different than a W-2 employees. We both earn all of our income from freelancing, which means we don't earn a guaranteed amount each month. For years, we have lived off of last month's earnings, which I recently learned was how YNAB was set up. Note: We don't use YNAB.

We don't operate on a budget, per se. If we earn $7000 in March, we have $7000 to spend in April. If we only earn $4,000 in April, we have $4,000 available for May. I pay out all the "must" bills (mortgage, etc) at the beginning of the month, guestimate how much we need for the extras, then transfer the leftover chunk to a savings vehicle. If there's still some left at the end of the month in the extras category, it gets transferred to savings at the end of the month.

I do track every cent we spend, though. I don't have to, I've just done in since I was in college and it's a hard habit to break. It comes in handy, though. For example, I have a rough average of how much we spend monthly on groceries, so I notice quite quickly when lifestyle creep occurs so I can cut it back. Since I record every evening, I catch creep immediately and can change course long before the end of the month. It also gives me a quick clue of what we need to cut for a month if we have a low-earning month, so we don't have to compromise our savings goals. We'd much rather eat vegetarian and cut the grocery bill in half for a short 30 day period instead of putting less in savings just because we had a "bad" month.

After awhile you get pretty good at knowing how much you really need to live comfortably, especially if you have developed your mindset to be a high saver/low spender.

arebelspy

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Re: How do you manage cash flow if you don't use a budget?
« Reply #19 on: March 20, 2015, 09:06:43 AM »
Again, just because I decided I could spend $150 on groceries this month does not mean I will run out to the store on the last day of the month to spend whatever is left in that category.

Why even bother taking the time to come up with the "$150" number in the first place? Why focus on the maximum you could spend? Why not focus on the minimum you could spend?

Because coming up with a number is reality.  It certainly is not "focusing on the maximum."  It is addressing a limit.  Why are there speed limits?  Why not focus on how slow you could drive?  Why drive at all?  Why move from off the couch, or leave the house?  Because one HAS to!  It is not realistic to think "I am not going to spend anything on food this month." 

But why do it ahead of time?  Spend what you want on food, but make it as optimized as possible.

Afterwards you can look at what you spent.

I check my (past) spending every few months in Mint, out of curiosity's sake, so I can make future approximates for FIRE spending.

But setting a "I spend $300 on groceries, so I should spend that this month" is irrelevant -- if I spend 350, fine.  If I spend $200, okay.  I'll spend what I want.  What does setting a dollar amount of $300 in a budget do for me?
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TN_Steve

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Re: How do you manage cash flow if you don't use a budget?
« Reply #20 on: March 20, 2015, 09:09:23 AM »
Quote
I buy what I want, when I want it while still maintaining a savings rate I'm more than happy with.  Spending a couple hundred bucks extra (or even a couple thousand extra, really) one month is irrelevant at this point.

This is basically the situation we are in.

We have a good, but not extremely high, income and we've had a high savings rate for long enough- that we have plenty of money.  There really isn't much to manage.

This is what we do as well.  I wrote (and deleted) a response to the OP earlier; the deletion was out of concern that I was seeing things from the other side of a mountain range.

I believe there is a break here between the typical 20ish or so person/couple starting out and those of us who are older and/or well established (arebelspy, for example, is not "old," but seems to fit the latter category).  I can see the attractiveness, indeed, the need, for a prospective budget if you are freshly out of school (or just starting into a "sharing checkbook" relationship) and on a more-or-less average payscale; so too, if a major life/financial change just whacked you over the head.  However, once you get the hang of your present spending and earning patterns, the process seems to become a bit redundant--although we do track spending and categories quite closely on a retrospective basis via Quicken daily updates, just in case we are backsliding too much.  So too, high income DINKS (which we were in the 1980s, and now are again) probably find it easier to not worry about the nickels and dimes, as long as they keep an eye on the Lincolns and Hamiltons.

This is a bit of a recurring theme to me on this site--I delete a lot of my prospective posts after reading "one last time," because my position is so tangential to the question being asked.

Or maybe I am just overthinking things.  :-)
« Last Edit: March 20, 2015, 09:11:41 AM by TN_Steve »

Will

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Re: How do you manage cash flow if you don't use a budget?
« Reply #21 on: March 20, 2015, 09:24:02 AM »
Again, just because I decided I could spend $150 on groceries this month does not mean I will run out to the store on the last day of the month to spend whatever is left in that category.

Why even bother taking the time to come up with the "$150" number in the first place? Why focus on the maximum you could spend? Why not focus on the minimum you could spend?

Because coming up with a number is reality.  It certainly is not "focusing on the maximum."  It is addressing a limit.  Why are there speed limits?  Why not focus on how slow you could drive?  Why drive at all?  Why move from off the couch, or leave the house?  Because one HAS to!  It is not realistic to think "I am not going to spend anything on food this month." 

But why do it ahead of time?  Spend what you want on food, but make it as optimized as possible.

Afterwards you can look at what you spent.

I check my (past) spending every few months in Mint, out of curiosity's sake, so I can make future approximates for FIRE spending.

But setting a "I spend $300 on groceries, so I should spend that this month" is irrelevant -- if I spend 350, fine.  If I spend $200, okay.  I'll spend what I want.  What does setting a dollar amount of $300 in a budget do for me?

I have never set a budget amount and then thought "I should spend that much this month."  Never ever.  A budget amount is not a target where you see how close you can get to it.  Like I said, it is more like a limit. Is it possible to go over a limit?  I suppose; have you ever driven faster than you're supposed to? 

Why do it ahead of time? Because that's what you have to do when you plan.  Yeah, you can spend what you want, but to optimize you should try to get closer to spending what you need.  When you set a budget amount, you are choosing a realistic number somewhere in-between need and want. 

What is wrong with planning/budgeting?  Do you not make plans for your retirement?  "I will invest in what I want.  No limits!  Then I will look back and (*fingers crossed*) hope that I maximized it in a few months when I check out of curiosity."

minimalist

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Re: How do you manage cash flow if you don't use a budget?
« Reply #22 on: March 20, 2015, 09:28:34 AM »
I spend just about the same amount every month without a budget, so my investment accounts and credit cards are auto-debited from my checking account. When there is excess cash or not enough for whatever reason (bonus paid, vacation, etc.), I transfer money around.

FLBiker

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Re: How do you manage cash flow if you don't use a budget?
« Reply #23 on: March 20, 2015, 09:31:49 AM »
If you have a high savings rate, I don't see how it really matters.

I keep a buffer of cash on hand in checking, and 90% of my non-mortgage related expenses each month go on a credit card.  Credit card gets paid out of checking account...done and done.  Each month I monitor total cash outflow.  If something looks unusually high, I will go back and investigate.

This is basically what we do.  We max out 403b's first.  I set credit cards to autopay in full each month.

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Re: How do you manage cash flow if you don't use a budget?
« Reply #24 on: March 20, 2015, 09:34:54 AM »

I believe there is a break here between the typical 20ish or so person/couple starting out and those of us who are older and/or well established (arebelspy, for example, is not "old," but seems to fit the latter category).  I can see the attractiveness, indeed, the need, for a prospective budget if you are freshly out of school (or just starting into a "sharing checkbook" relationship) and on a more-or-less average payscale;

I'm 33, so I guess compared to MMM, I should be retired :)
For the record though, I've NEVER had a budget. Not even when I was 23, just out of college, with an income of 30k. I just didn't buy stuff I didn't need.

I mean, I had a general idea that my income would be less than my expenses, but I've never sat down and added it up.  I have no idea what my monthly spending is.  I determine my savings rate at the end of the year by adding up how much money we contributed to 403b, roth IRA, taxable accounts, and the savings account vs. gross salary.  So the way I would determine the annual spending would be the opposite of that- I don't really keep track of what it is spent on.

When I lost my job, I was careful to cut expenses further, but I still didn't categorize and budget. 

Being able to function like this, though, to me, is FI.  I'm not at the point where I never have to work again.  But I could go quite awhile without a job if I needed to.  And I don't have to worry about my money. It all takes care of itself.

As for people who do use a budget- I have no problem with that either. I'm just not interested in it.
« Last Edit: March 20, 2015, 09:36:44 AM by iowajes »

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Re: How do you manage cash flow if you don't use a budget?
« Reply #25 on: March 20, 2015, 09:37:09 AM »
So my question is if you don't use a budget, how to you manage your cash flow?

I invoice my client(s) at the end of the month and get paid within 2-3 days. I deposit the cheque(s) into my business bank account. I calculate taxes I need to pay later and move the rest to my personal accounts.

In my personal accounts I pay off my credit card [I put 98% of purchases through my CC], pay any bills [utilities, cell phone, etc...] I also keep aside a float to deal with my automatic mortgage payments.

I keep $200 cash in my wallet and replenish at the start of the month when it gets low, but normally that's only once every 2-3 months. If people owe me money and I get cash I keep it in my wallet unless it's over $200.

Everything else gets dumped into ETFs.

If I have a spendy month I invest less. If I have some big unplanned expenses I use my $30K LOC to absorb them and pay the LOC back with any spare $$ before I invest. I rarely have to do this, but it's a nice source of low cost liquidity.

My monthly COL stays pretty much the same unless there is a big trip or a capital purchase. I find the time spent budgeting and tracking costs is a waste of my life so I don't do it.

If I was not able to meet my saving/spending goals I would probably see things differently.

-- Vik
« Last Edit: March 20, 2015, 09:45:50 AM by Vikb »

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Re: How do you manage cash flow if you don't use a budget?
« Reply #26 on: March 20, 2015, 09:47:09 AM »
I don't use a "budget" in the sense that  I don't allocate a hard limit on each category of expenses.  My 401(k) gets deducted from the paycheck (cheque, if you are Canadian/Brit :P) automatically. I get paid twice a month and my investing goal is to completely invest one of the two paychecks (typically the one that shows up mid-month) and live on the other. For many months in a year we wind up with more left on the second paycheck (the one that shows up towards the end of each month) also, and that goes into investments as well, resulting in 60-70% of take home pay going to investing. The Roth accounts get maxed out first, followed by the taxed investment accounts. In that sense, you could theoretically argue that it's a budget because a certain % goes to saving/investing and the rest gets spent. If we are down to semantics, yes, that's a budget, but a low maintenance one.

Oh and I am one of those who keeps under $1000 (usually $500-$600) in my checking account at any given time as well. Most expenses gets put on the high-rewards credit card which gets paid in full each month with the second pay check. I rarely even look at the balance on my card, it just so happens to be less than or equal to the second paycheck.
« Last Edit: March 20, 2015, 09:50:12 AM by medusa »

arebelspy

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Re: How do you manage cash flow if you don't use a budget?
« Reply #27 on: March 20, 2015, 09:57:46 AM »
Again, just because I decided I could spend $150 on groceries this month does not mean I will run out to the store on the last day of the month to spend whatever is left in that category.

Why even bother taking the time to come up with the "$150" number in the first place? Why focus on the maximum you could spend? Why not focus on the minimum you could spend?

Because coming up with a number is reality.  It certainly is not "focusing on the maximum."  It is addressing a limit.  Why are there speed limits?  Why not focus on how slow you could drive?  Why drive at all?  Why move from off the couch, or leave the house?  Because one HAS to!  It is not realistic to think "I am not going to spend anything on food this month." 

But why do it ahead of time?  Spend what you want on food, but make it as optimized as possible.

Afterwards you can look at what you spent.

I check my (past) spending every few months in Mint, out of curiosity's sake, so I can make future approximates for FIRE spending.

But setting a "I spend $300 on groceries, so I should spend that this month" is irrelevant -- if I spend 350, fine.  If I spend $200, okay.  I'll spend what I want.  What does setting a dollar amount of $300 in a budget do for me?

I have never set a budget amount and then thought "I should spend that much this month."  Never ever.  A budget amount is not a target where you see how close you can get to it.  Like I said, it is more like a limit. Is it possible to go over a limit?  I suppose; have you ever driven faster than you're supposed to? 

Why do it ahead of time? Because that's what you have to do when you plan.  Yeah, you can spend what you want, but to optimize you should try to get closer to spending what you need.  When you set a budget amount, you are choosing a realistic number somewhere in-between need and want. 

Why would I ever limit myself on purpose?  That just seems odd.  Of course I have to obey laws (re: speed limit), but there's no law on how much I can spend on groceries.  So I spend the amount that gives me maximum satisfaction. 

Saying I have to stop spending when I reach a certain arbitrary point when I still have way more money than I'll need is crazy.  If it's worth it to me, I'll get it.  What does some made up limit have to do with anything?

I bolded the sentence above where we diverge.  Want and need should be the same level.  Then you never need to worry about spending - you spend all you want, you want all you have, everything is perfect.

What is wrong with planning/budgeting?  Do you not make plans for your retirement?

I do project outwards based on past numbers, but I don't change present numbers.

"I will invest in what I want.  No limits!  Then I will look back and (*fingers crossed*) hope that I maximized it in a few months when I check out of curiosity."

That's exactly what I do, minus the fingers crossed.  I invest everything left over after spending whatever I want.  Then I know for sure it's maximized.  And yeah, I check net worth every month, out of curiosity, to see what it's worth.  But I don't ever set a limit on what I invest.  That would be ridiculous.  You really limit what you invest?!
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DoNorth

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Re: How do you manage cash flow if you don't use a budget?
« Reply #28 on: March 20, 2015, 10:14:37 AM »
We never ever budget; about $15000 comes in each month after taxes and $2500 in 401k contributions.  About $5K goes to living expenses...for awhile, the other $8K-$10K went to the mortgage until it was paid off and now the difference goes straight to the 'stache.  Like clockwork, each and every month.  I use personal capital so I understand general trends, but I'm definitely not drilling down into each and every spent dollar.  I do, however, scrutinize every potential purchase and prefer to focus my efforts on the front end rather than doing than doing a post-mortem every month.

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Re: How do you manage cash flow if you don't use a budget?
« Reply #29 on: March 20, 2015, 10:44:52 AM »
Why would I ever limit myself on purpose?  That just seems odd.  Of course I have to obey laws (re: speed limit), but there's no law on how much I can spend on groceries.  So I spend the amount that gives me maximum satisfaction. 

Saying I have to stop spending when I reach a certain arbitrary point when I still have way more money than I'll need is crazy.  If it's worth it to me, I'll get it.  What does some made up limit have to do with anything?

I bolded the sentence above where we diverge.  Want and need should be the same level.  Then you never need to worry about spending - you spend all you want, you want all you have, everything is perfect.


This is kind of my thought on a budget. I don't set limits, because I don't want limits.  Because what happens if I reach them? What if I want more? If I want more, I'm going to get more, and then I "busted my budget" and all that happens is I feel guilty.

If I don't have a budget I can spend whatever the hell I want without feeling guilty about something that was arbitrary to begin with.  Who cares if my groceries are $100 or $300 or even $500 this month?  If that's what I wanted, that is what I wanted.  Luckily for me, I don't WANT a $30k car. And while I WANT a trip to Antartica, at least not more than I want to retire comfortably, so I don't buy it- even though the money is technically there.

I'm CERTAINLY not  going to budget what I'm going to invest. That should be without a doubt limit free, and as endless as I can make it.

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Re: How do you manage cash flow if you don't use a budget?
« Reply #30 on: March 20, 2015, 11:23:25 AM »
No budget here. I've tried tracking in categories and realized it was pointless. If I know what I spend on groceries, or not, I'll still buy more groceries when I'm hungry. Same with everything else; I'm going to buy stuff regardless of an arbitrary budget amount.

To make it work I keep around $1000 in my account. For the last few weeks I've only had $480 as a buffer, it'll come back in time. Annual expenses will knock it down, random extra money builds it up. If there's too much cash I toss it at savings.

I think what works depends more on personality than method.

robbyho

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Re: How do you manage cash flow if you don't use a budget?
« Reply #31 on: March 20, 2015, 12:40:55 PM »
Best thing I ever did when I started to get serious about FI is I set up my direct deposit to deposit 65% into one account and 35% into another account. I do my best to only use the 35% account to live on including all bills and all luxuries. If I ever have to dip into the other account, I know I've done something wrong. Fortunately that is rare.

dunhamjr

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Re: How do you manage cash flow if you don't use a budget?
« Reply #32 on: March 20, 2015, 12:44:34 PM »
i just pay everything off monthly.
we make more than enough to cover expenses, so a 'budget' would only be there to tell me i am paying everything that i already know i am paying.

beyond that i have been sending extra $ in as payments on the student loans (paid mine off last month, wifes will be gone in less than a year).

we have nearly everything on autopilot anyways.
HSA, DCFSA, 401k, 457, soon to add back in the 403b.

utilities, monthly bills, etc... all just happens.

zurich78

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Re: How do you manage cash flow if you don't use a budget?
« Reply #33 on: March 20, 2015, 02:44:16 PM »
Again, just because I decided I could spend $150 on groceries this month does not mean I will run out to the store on the last day of the month to spend whatever is left in that category.

Why even bother taking the time to come up with the "$150" number in the first place? Why focus on the maximum you could spend? Why not focus on the minimum you could spend?

Because coming up with a number is reality.  It certainly is not "focusing on the maximum."  It is addressing a limit.  Why are there speed limits?  Why not focus on how slow you could drive?  Why drive at all?  Why move from off the couch, or leave the house?  Because one HAS to!  It is not realistic to think "I am not going to spend anything on food this month." 

But why do it ahead of time?  Spend what you want on food, but make it as optimized as possible.

Afterwards you can look at what you spent.

I check my (past) spending every few months in Mint, out of curiosity's sake, so I can make future approximates for FIRE spending.

But setting a "I spend $300 on groceries, so I should spend that this month" is irrelevant -- if I spend 350, fine.  If I spend $200, okay.  I'll spend what I want.  What does setting a dollar amount of $300 in a budget do for me?

I have never set a budget amount and then thought "I should spend that much this month."  Never ever.  A budget amount is not a target where you see how close you can get to it.  Like I said, it is more like a limit. Is it possible to go over a limit?  I suppose; have you ever driven faster than you're supposed to? 

Why do it ahead of time? Because that's what you have to do when you plan.  Yeah, you can spend what you want, but to optimize you should try to get closer to spending what you need.  When you set a budget amount, you are choosing a realistic number somewhere in-between need and want. 

Why would I ever limit myself on purpose?  That just seems odd.  Of course I have to obey laws (re: speed limit), but there's no law on how much I can spend on groceries.  So I spend the amount that gives me maximum satisfaction. 

Saying I have to stop spending when I reach a certain arbitrary point when I still have way more money than I'll need is crazy.  If it's worth it to me, I'll get it.  What does some made up limit have to do with anything?

I bolded the sentence above where we diverge.  Want and need should be the same level.  Then you never need to worry about spending - you spend all you want, you want all you have, everything is perfect.

I don't think it's odd, and for some people, I think limiting oneself to a maximum for even something like groceries makes a lot of sense.  Especially because groceries are the kind of thing that can quickly add up before you know it.  Here's an example of why one would limit themselves on purpose:  If you couldn't afford not to.  I know a lot of people who live paycheck to paycheck and unless they want to take on debt to eat, they keep to a very strict food budget to ensure they can pay for the other requirements of living.  Why would that be odd?

Some people also need a little more structure to stay disciplined.

Zikoris

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Re: How do you manage cash flow if you don't use a budget?
« Reply #34 on: March 20, 2015, 02:50:39 PM »
I put all my spending on credit cards. When I get paid, I pay them off in full and put the rest of the money into investments.

I can't pay rent by credit card, so I leave enough money in my checking account to cover that.

We don't budget per se, but do prefer to keep our monthly groceries under $230 and yearly travel under $8000.

arebelspy

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Re: How do you manage cash flow if you don't use a budget?
« Reply #35 on: March 20, 2015, 03:10:16 PM »
I don't think it's odd, and for some people, I think limiting oneself to a maximum for even something like groceries makes a lot of sense.  Especially because groceries are the kind of thing that can quickly add up before you know it.  Here's an example of why one would limit themselves on purpose:  If you couldn't afford not to.  I know a lot of people who live paycheck to paycheck and unless they want to take on debt to eat, they keep to a very strict food budget to ensure they can pay for the other requirements of living.  Why would that be odd?

Some people also need a little more structure to stay disciplined.

I totally agree.  I think budgets are great for beginners.

Advanced Mustachians, though, I think move past needing them.
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zinethstache

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Re: How do you manage cash flow if you don't use a budget?
« Reply #36 on: March 20, 2015, 03:26:32 PM »
We have one "regular" day job and rental income. The day job income is divided out upon payout. It gives us our base for living expenses which most are charged on a Cash back card and paid off monthly. All other monies start their lives in Savings, with the goal of keeping them in savings. When Property Tax time comes up we pull from savings, and its no biggie we always have extra there. Our current investment vehicle are rental properties, which are purchased once a year and are a big dip in savings which is all planned out.

We used a budget when we decided to crack down on our FI efforts, but over the years we have relaxed our spending and use Mint tracking for historical purposes. We do sometimes forget when we last went to dinner and will use Mint to determine if we should go out one more time that month, or wait until the first of the next month.

I am happy with our natural savings rate. We are high wage earners living well below our means. I still love to watch our NW in Mint and do a total savings rate each month.

Sometimes I will bug DH to go buy some clothes or shoes, he never does and Mint shows him with a big clothing surplus... He still never buys anything:)

We don't think of budgeting / Mint as a ball and chain, it is a fun tool and tracker. Love to watch those $$$ working for us!

These days we have 0 consumer debt, and lots of mortgages... so there isn't a sense of a funding drive to get that debt paid off. We have 30 year mortgages and will not likely pay any down early.

zurich78

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Re: How do you manage cash flow if you don't use a budget?
« Reply #37 on: March 20, 2015, 03:34:42 PM »
I don't think it's odd, and for some people, I think limiting oneself to a maximum for even something like groceries makes a lot of sense.  Especially because groceries are the kind of thing that can quickly add up before you know it.  Here's an example of why one would limit themselves on purpose:  If you couldn't afford not to.  I know a lot of people who live paycheck to paycheck and unless they want to take on debt to eat, they keep to a very strict food budget to ensure they can pay for the other requirements of living.  Why would that be odd?

Some people also need a little more structure to stay disciplined.

I totally agree.  I think budgets are great for beginners.

Advanced Mustachians, though, I think move past needing them.

Perhaps.  Though, a true Mustachian would never buy wants, only needs, right?  Can one really be Mustchian if they're buying a $500 bottle of wine?

arebelspy

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Re: How do you manage cash flow if you don't use a budget?
« Reply #38 on: March 20, 2015, 04:20:26 PM »
I don't think it's odd, and for some people, I think limiting oneself to a maximum for even something like groceries makes a lot of sense.  Especially because groceries are the kind of thing that can quickly add up before you know it.  Here's an example of why one would limit themselves on purpose:  If you couldn't afford not to.  I know a lot of people who live paycheck to paycheck and unless they want to take on debt to eat, they keep to a very strict food budget to ensure they can pay for the other requirements of living.  Why would that be odd?

Some people also need a little more structure to stay disciplined.

I totally agree.  I think budgets are great for beginners.

Advanced Mustachians, though, I think move past needing them.

Perhaps.  Though, a true Mustachian would never buy wants, only needs, right?  Can one really be Mustchian if they're buying a $500 bottle of wine?

The ideal (you can all it a "true Mustachian" -- whatever that means), IMO, is one who doesn't need to distinguish between needs and wants; all spending is aligned with their values.  So the answer to the last question is of course they can.
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JLee

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Re: How do you manage cash flow if you don't use a budget?
« Reply #39 on: March 20, 2015, 04:25:48 PM »
I don't think it's odd, and for some people, I think limiting oneself to a maximum for even something like groceries makes a lot of sense.  Especially because groceries are the kind of thing that can quickly add up before you know it.  Here's an example of why one would limit themselves on purpose:  If you couldn't afford not to.  I know a lot of people who live paycheck to paycheck and unless they want to take on debt to eat, they keep to a very strict food budget to ensure they can pay for the other requirements of living.  Why would that be odd?

Some people also need a little more structure to stay disciplined.

I totally agree.  I think budgets are great for beginners.

Advanced Mustachians, though, I think move past needing them.

Perhaps.  Though, a true Mustachian would never buy wants, only needs, right?  Can one really be Mustchian if they're buying a $500 bottle of wine?
I would say the biggest distinction that would make someone "mustachian" is to be aware of what you are spending and why.

I have a weekend car that would make most people here cringe. But...cars are my passion/hobby. I refuse to give it up, and I know what it costs. Why won't I give it up? Because I'd rather work a bit longer and have fun than retire and miss what I love.

choppingwood

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Re: How do you manage cash flow if you don't use a budget?
« Reply #40 on: March 20, 2015, 05:41:12 PM »
These posts have been terrific for explaining the mechanics of different approaches, as well as the thinking behind them. Thanks to everyone for taking the time to explain your approach.

I think what would work for me is:

1. To continue to pay myself first;

2. Have a float balance in my checking account;

3. In addition, each pay period (or month) put enough in checking to cover my normal spending for the period;

4. Be absolutely consistent about asking myself if I need an item or if it contributes in any significant way to my goals (I do this most days, but not all days);

5. Top up the checking account balance once a pay period (or month);

6. Keep a $200 float in my wallet to cover cash transactions where only cash can be used, topping it up from time to time.

I appreciate the point that when we are further along in our saving and investments and when our income rises, there is enough, and tight budgeting by line item isn't as necessary. Also because of that, I've moved to handling "emergencies" from current income and from a general collector fund for planned spending on large items. That is how I have been handling annual expenses too.

Following 1-6 will all prevent a lot of scurrying around (some physical, some electronic) and reduce my stress.

To those who have argued the merits of budgets, they have often worked well for me. I am FI (though not early), have a home I love, where I want to live, and am nearing retirement without any significant unrequited travel urges. At this point, though I want a simpler financial system to manage and think about. I don't find tracking and planning nearly as soothing as I used to.

I'm sure there will be more posts, and look forward to reading them.

boarder42

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Re: How do you manage cash flow if you don't use a budget?
« Reply #41 on: March 20, 2015, 06:44:34 PM »
Where do you live that you need to carry 200 in cash around to pay for things.

zinnie

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Re: How do you manage cash flow if you don't use a budget?
« Reply #42 on: March 20, 2015, 06:59:21 PM »
I also pay myself last. Property taxes get transferred to a savings account every month to pay at the end of the year. In my mind this helps us invest more because instead of saying we will invest exactly $4000 per month from checking, the rule is that we have to invest at least that much. Whatever is left after the credit card and mortgage are paid gets invested. We are usually over our target. Every so often we are slightly under our target, and then we just wait another pay period for that month investment. It has worked great so far and helped invest more than our target every year.

Good luck with your new plan!

dhlogic

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Re: How do you manage cash flow if you don't use a budget?
« Reply #43 on: March 20, 2015, 07:00:49 PM »
Especially because groceries are the kind of thing that can quickly add up before you know it.

I guess this is part of the point I was trying to make with my previous post. When buying things, when do people check they are exceeding their budget? At the end of the month when they can't do anything about it? Or when they are putting each individual item in their cart and maintaining a mental tally of how much they've spent so far.

I'd say that the latter is the only strategy that could be effective. Thus if one is looking at each purchase and keeping a running total, they know pretty damn well where they stand at any given moment. I mean how many things do people really buy? If you are buying so much you can't keep track of it all, I think you are doing it wrong.

As of today I have 28 transactions for the month of March across all my accounts. It takes about 5 seconds to see how much I've spent on groceries this month, $114.11, which was in the second week of March. I'm going to go to the store again before March is over. I know how much I've spent and know I'll roughly spend the same amount next time. When I'm there I might think about putting a $10 case of beer in my cart, and question if spending this $10 is worth it to me. And then I'll remember I don't really like beer that much anyways and won't buy it, freeing that $10 to be invested instead.

I don't need some limit written down someplace or in an app to remind me in my situation that spending $250ish a month in groceries is what I should be doing and spending $500 is not in line with my goals, unless if I decide the extra $250 that month is worth postponing FIRE for.
« Last Edit: March 20, 2015, 07:02:54 PM by dhlogic »

Prepube

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Re: How do you manage cash flow if you don't use a budget?
« Reply #44 on: March 20, 2015, 07:21:33 PM »
Its all the same thing.  You who say you are not "on a budget" are definitely on a budget of your own design.  Mentally you determine which things are important and you spend the money on that.  If that "spending" happens to be on a rental home (arebelspy) and the things that go with it, you have just allocated a portion of your budget to your income producing activities.  You don't spend money you don't have (rule number one) and you buy only the shit you need (shit = food, electricity, etc).  That's budgeting.  Whether YNAB or Mint is used doesn't matter.  It's awareness of what you are spending that's the key to all this.  You have a budget regardless of how you quantify it and track it.  If it is not in your head OR on paper, then you probably overspend and owe a lot of money and need a series of facepunches til you understand it.  I don't see a distinction between "budgeters" and "non-budgeters" except that the non-budgeters are lieing to themselves.  You are very aware, but you don't spend time thinking about categories, you are, perhaps, one half-step more evolved than the "budgeters" in that the philosophy drives the behavior which drives the spending (or lack thereof).  Shit, I think this batch of beer i made is causing me to get weirdly philosophical and spiritual.  I am switching to an IPA (if my budget will allow it).   

Melody

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Re: How do you manage cash flow if you don't use a budget?
« Reply #45 on: March 20, 2015, 07:24:21 PM »
I use an expenditure tracking app. I enter all my bills on the first day of the month (forward dated into the dates where the bills will come out of my bank account). Then I track each item as I pay for it. This way I constantly know where I am at and have a goal of $3k month if I have a major bill (Jan, March, June) or a holiday booked (usually in Feb) and $2.5k in a normal month. I do not assign amounts to categories. More of one thing forces me to adjust and buy less of another. As all the "needs" (and ongoing commitments like gym) are already entered all remaining money is either "wants" or stuff like groceries where I have a lot of control on what I spend (too much going out, more rice and beans!) or things I could potentially delay (new work shoes). So it doesn't make sense for me to budget these as precise categories, but rather to make choices about what will give me the greatest level of utility on the fly. I usually try and buy the boring but potentially delay able stuff (like new work shoes) at the start of the month, so they don't get delayed indefinitely.

Will

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Re: How do you manage cash flow if you don't use a budget?
« Reply #46 on: March 20, 2015, 07:42:51 PM »
I don't think it's odd, and for some people, I think limiting oneself to a maximum for even something like groceries makes a lot of sense.  Especially because groceries are the kind of thing that can quickly add up before you know it.  Here's an example of why one would limit themselves on purpose:  If you couldn't afford not to.  I know a lot of people who live paycheck to paycheck and unless they want to take on debt to eat, they keep to a very strict food budget to ensure they can pay for the other requirements of living.  Why would that be odd?

Some people also need a little more structure to stay disciplined.

I totally agree.  I think budgets are great for beginners.

Advanced Mustachians, though, I think move past needing them.

Perhaps.  Though, a true Mustachian would never buy wants, only needs, right?  Can one really be Mustchian if they're buying a $500 bottle of wine?

The ideal (you can all it a "true Mustachian" -- whatever that means), IMO, is one who doesn't need to distinguish between needs and wants; all spending is aligned with their values.  So the answer to the last question is of course they can.

That is bullshit (the bolded part).  Ideally whatever anyone values isn't a want at all but a need?  As far as food goes, to get the nutrition one needs it doesn't really take all that much.  But if someone decided they value chocolate cake, it is now a need because they want it. 

choppingwood

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Re: How do you manage cash flow if you don't use a budget?
« Reply #47 on: March 20, 2015, 08:09:22 PM »
Where do you live that you need to carry 200 in cash around to pay for things.

I don't use credit cards, which limits my options to debit cards and cash. Generally, this works really well for me; however there are situations that is doesn't cover. Some services don't use debit cards; some don't like cash. I buy directly from farmers, and sometimes that uses a $100. I stock up on produce at farmers' markets. I buy some quality items at garage sales. Towing a car to the next town over costs $180.00. I have locked my keys out my car in town, while at a Walmart where the ATM was down. We've had major disasters over the last four years in my province, including a forest fire that wiped out most of a town 1 1/2 hours from my place and major flooding that wiped out hundreds of homes in the south. Although the Red Cross gets you cash once you get to safety, you need money until they show up.

Will

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Re: How do you manage cash flow if you don't use a budget?
« Reply #48 on: March 20, 2015, 08:34:02 PM »

Why would I ever limit myself on purpose?  That just seems odd.  Of course I have to obey laws (re: speed limit), but there's no law on how much I can spend on groceries.  So I spend the amount that gives me maximum satisfaction. 

Saying I have to stop spending when I reach a certain arbitrary point when I still have way more money than I'll need is crazy.  If it's worth it to me, I'll get it.  What does some made up limit have to do with anything?

I bolded the sentence above where we diverge.  Want and need should be the same level.  Then you never need to worry about spending - you spend all you want, you want all you have, everything is perfect.

What is wrong with planning/budgeting?  Do you not make plans for your retirement?

I do project outwards based on past numbers, but I don't change present numbers.

"I will invest in what I want.  No limits!  Then I will look back and (*fingers crossed*) hope that I maximized it in a few months when I check out of curiosity."

That's exactly what I do, minus the fingers crossed.  I invest everything left over after spending whatever I want.  Then I know for sure it's maximized.  And yeah, I check net worth every month, out of curiosity, to see what it's worth.  But I don't ever set a limit on what I invest.  That would be ridiculous.  You really limit what you invest?!

Oh my.  Okay, why limit yourself on purpose?  Because that is how you optimize.  I suppose you could try limiting yourself accidentally and see if that works for you.

Of course there is no law limiting what you can spend on groceries.  I never implied that there was.  How do you know that the amount you spend on groceries is giving you "maximum satisfaction?" Have you tried spending 1/10th as much? 10x as much?  100x?  I doubt it.  How can you say you know?

Another thing I never said that you attribute to me is that you have to stop spending when you reach some arbitrary point when you still have way more money than you need.  We get it.  You are an FI millionaire.  Congratulations!  But deciding what is a reasonable amount to spend on groceries in a month is far from arbitrary.  And like Prepube says, even though you don't call it a "budget" you know damn well that you spend what you deem to be reasonable.

Another misconception which you insist on perpetuating is that a budget "forces you to stop."  I never said that; YOU are the one who says it all the time. 

" Want and need should be the same level.  Then you never need to worry about spending - you spend all you want, you want all you have, everything is perfect."  You will never convince me that every single thing you buy is a need.  Never.  Not even Pete makes that claim.  I don't worry about spending; I don't worry about anything.  Worrying is a pointless task.  Maybe in Utopia people spend all they want because wants and needs are equal, and nobody has anything that they don't need or want.  Everything is not perfect, even in Vegas. 

I don't budget, I have projections based on past numbers.  I feel superior already just by changing the terminology.  Thanks for that!

I never said anything about setting a limit on the amount you invest.  I was referring to what you invest IN.  Because I wouldn't imagine that you would invest in just anything.  Why not?  Because there are certain investments that make more sense than others.  Even if someone has more money than they need, expense ratios are important (or should be).  Your implication that I limit what I invest is ridiculous.  I never said that and you know it.



arebelspy

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Re: How do you manage cash flow if you don't use a budget?
« Reply #49 on: March 20, 2015, 08:48:05 PM »
Whoah there Will, calm down.  We're all friends here.  Do whatever makes you happy.  :)

I won't bother to address your points, we'll just agree to disagree.. agreeably.  :)
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