Author Topic: What is your budget process?  (Read 6415 times)

KBecks2

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What is your budget process?
« on: July 09, 2014, 03:54:53 PM »
I would like to ask you how you work through your budgets, so that I might get better at it.

Right now, I have a budget document in Google docs that I can put together each month with income and expenses.  I have just roughed out numbers for July and August.

Then I will run these by my husband.

After that, I am lacking a way of tracking.  I am considering the cash envelope system.  However my husband enjoys his credit card (bonus points), but cash keeps you really, really honest about when you need to stop.

How did you get good at working within your budget?

Thanks!


Beric01

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Re: What is your budget process?
« Reply #1 on: July 09, 2014, 04:18:57 PM »
Honestly, budgeting for me is mainly at point of purchase. I've very hesitant to buy things in general, and delay purchases as long as possible. If the money doesn't go out in the first place, then you don't have issues with budgeting. Whenever you are about to buy something, think the following:
1. Do I really need this?
2. Is there a way I use a cheaper substitute?
3. Is there a way I can get this particular item cheaper (or perhaps used)?

But as far as tracking, I use a site similar to Mint.com to keep track of my spending in various categories. Periodically I look at that spending and see if there's anything else I can cut, or if a category is unusually high.

Perhaps others are more meticulous about keeping track of their exact spending to the cent. For me, I just try to minimize all unnecessary spending. I'm not awesome with repetitive budgeting habits, I just recognize that every dollar less I spend gets me to my financial goals sooner.

Using mental tricks like cash instead credit are kind of pointless IMO. The point is to spend less. If you're actively out to spend less, why wouldn't you also want at least 1% back on everything you do need to spend?

KBecks2

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Re: What is your budget process?
« Reply #2 on: July 09, 2014, 04:31:43 PM »
OK, right, there are many purchases that can be delayed, but some cannot -- food, gasoline, etc.

Let's start with food -- do any form readers manage a food budget and cut yourselves off at the end of the month?  I would like to practice that, and I'm thinking that if I have a cash envelope for food, it would be a very interesting experiment, and more tangible than looking at my Mint balances.

Same thing for "fun money".  I am supposed to have fun money every month.  I think it might be fun to physically hold that to keep track of it better.  Same thing for restaurants, etc.


fiscalphile

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Re: What is your budget process?
« Reply #3 on: July 09, 2014, 05:25:08 PM »
My boyfriend and I also use a Google Doc (excel) that we have shared (finances are shared), and we update it daily if we made purchases into the correct category.  It helps me not spend- because I personally don't want to update that doc at the end of the day :)

Also in terms of tricking your brain- I spend cash more flippantly than card.  The card has history, I will have to look at the purchases again later (also useful for budgeting- in case I forget to include something), where the cash purchase "disappears" and it's easier for me to pretend that it did not happen.

darkadams00

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Re: What is your budget process?
« Reply #4 on: July 09, 2014, 05:55:55 PM »
1) Card--I don't care if we use debit or credit, but a card is great for keeping a record at the time of transaction. We sometimes forget if it's cash.

2) Google Spreadsheet--1 sheet for monthly budget, 1 sheet for data entry, 1 sheet for monthly/annual progress reports, and a separate sheet for every budget category. The only sheets I actually enter numbers into are the first two--monthly budget and data entry. I've automated all of the others, so I don't have to touch them at all. Wife and I share the doc and update a few times each week. Takes minutes to update and is fully customizable. Heck, I spend much more time in front the bathroom sink in the morning than I do on my budget/spending, but I can see my history and track my progress toward goals in just a few clicks.

3) Inventory--(a) Food inventory of items we should always have on hand. After years of marriage, our list is very accurate. (b) Non-food inventory of items we should always have on hand, e.g. cleaning supplies, light bulbs, HVAC filters, printer paper, etc. Again, experience is a great teacher. Keep a record of your household items, and you'll figure out your list within a year. We shop once a month for the items on the non-food list and the non-perishable items on the food list. We shop bi-weekly for a handful of semi-perishable items on the food list. We shop weekly for the perishable food and for food items not on the list.

As to the grocery budget overrun question, we can easily eat an entire week on the monthly staples that we buy because we never run out of all of those items at the same time in the same month. If we're over budget, we just skip or minimize the last week's shopping. Pretty easy once you've worked this way for a while.

And in the spirit of the Mustachian forum, you'll do better financially if you don't blindly budget dollars for "fun money" and restaurants. You might fall into the trap of getting to the end of the month with $X.00 in a category and looking for a way to have fun with it over the weekend. Instead, when a good time with friends presents itself, enjoy it without reservation. A good motto that sums up the idea--"Let your spending match your living." Most folks follow the "Let your living match your spending" approach.
 


KBecks2

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Re: What is your budget process?
« Reply #5 on: July 10, 2014, 06:11:48 AM »
Your idea of inventory and regular shopping is really nice.  Do you keep a larger pantry, or smaller?   

Do you and your spouse have regular budget or planning meetings to review finances?   I would like to do that with my husband, but I don't want it to be a drag.

For us, I think that having some "fun money" will honestly help us stay on track with the other things, otherwise the budget may feel too oppressive.  I don't want to never go out for coffee or lunch with a friend, and if I don't spend that, then I might like to save it up for something special -- maybe date night, or maybe something I'd enjoy that isn't very basic.

Right now, our budget is focusing on the VERY basics.  We are trying to up our savings rate to be more Mustachian.   Right now our % is not anywhere where we would like it to be.

I should post our budget here, but I'm a little scared!! 

matchewed

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Re: What is your budget process?
« Reply #6 on: July 10, 2014, 06:17:56 AM »
Your idea of inventory and regular shopping is really nice.  Do you keep a larger pantry, or smaller?   

Do you and your spouse have regular budget or planning meetings to review finances?   I would like to do that with my husband, but I don't want it to be a drag.

For us, I think that having some "fun money" will honestly help us stay on track with the other things, otherwise the budget may feel too oppressive.  I don't want to never go out for coffee or lunch with a friend, and if I don't spend that, then I might like to save it up for something special -- maybe date night, or maybe something I'd enjoy that isn't very basic.

Right now, our budget is focusing on the VERY basics.  We are trying to up our savings rate to be more Mustachian.   Right now our % is not anywhere where we would like it to be.

I should post our budget here, but I'm a little scared!!

Oh we'll tear your budget apart like a pack of tiger sharks over chum... but don't let it scare you. They're just words. You can take what helps and safely ignore the rest.

As for my budget process. I don't have one anymore really but when I did I linked everything to a Mint account and just let it do the "measuring" (read counting) for me. Then after a few months of that I started looking at what I bought, how much it cost me, and then started throwing out or consciously reducing those things that weren't adding value but costing me. Once I got rid of the low hanging fruit I started consciously reducing the other things. Putting an arbitrary cap never really worked for me. I just wanted to see marked improvements overall. So I improved.

Gray Matter

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Re: What is your budget process?
« Reply #7 on: July 10, 2014, 06:24:11 AM »
I think people who are naturally frugal don't necessarily need budgets.  That is not me!  (or my husband)

I use mvelopes . com which is connected to our bank accounts and credit cards and does a nightly sweep of transactions, and then I drag them into the appropriate envelope(s) and it counts down from the monthly budgeted amount for that envelope.  I've used this for probably four or five years and really like it.

We do tend to spend more early in the month and slow down as the envelopes get smaller.  When I have about $100 left in the grocery budget, I stop spending except for basics like milk, eggs, bread and we eat out of the freezer and pantry.

We also each get a set amount of spending money each month to do whatever we want with.  I rarely buy anything with it, but spend it all on coffees and lunches out with friends/colleagues (this type of socializing is important to me).  I only buy coffee/lunch when I'm socializing, though.  Otherwise I bring from home.  My husband, on the other hand, tends to buy things (books, music) with his.

And I know what you mean about being scared to post your budget!  I still haven't done that.

MandyM

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Re: What is your budget process?
« Reply #8 on: July 10, 2014, 06:42:14 AM »
I really love Mint - I think you should definitely look into a website if your husband prefers a card. Its so easy because it remembers how to categorize different transactions - I pay nearly all of my bills electronically and it knows to put my electric bill under "Utilities" and Kroger under "groceries". You can still enter cash transactions manually or split up a cash withdrawal into different categories for envelopes.




neo von retorch

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Re: What is your budget process?
« Reply #9 on: July 10, 2014, 06:55:53 AM »
Cash vs credit depends on personal behavior.

Personally, I'm hesitant to spend more than $10 or $20 cash at any given moment. So with card or cash, lunch is lunch. And if I need gas or groceries, then I'll pull out a few more $20 bills. But if I go to a restaurant, I'll probably skip a drink that sucks a $5 bill right out of my hand or that $28 entree!

With a credit card, I just "live" without thinking about money. Oh yes, why I would love another beer! I'll get the check. Why not add a 25% tip? Also that $1500 TV looks like it would be beautiful in my living room. Ah, I have ordered it. What have I done? Why, oh why?!

So I've stashed my credit cards away and just withdraw some cash each week to spend on gas, groceries and a little extra.

Is getting 2% back on $2000 spending better than only spending $1000?

catccc

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Re: What is your budget process?
« Reply #10 on: July 10, 2014, 06:57:59 AM »
I've been a longtime spend tracker, but not that great of a budgeter.  I've always lived within my means and managed to naturally adjust spend when my income has been up or down.  But I feel like I've gotten a lot better at it over the years.

For years I used excel and did pretty well, except that my budget was more like an unattainable goal, and I'd always go over budget, but thought "Oh well, whatever!"  It didn't matter because I was saving well and living comfortably, and sometimes seemingly luxuriously.  (Traveled a lot)

A few years ago, I started using Yodlee to track/budget, but again, the budget was something I didn't really look at while spending during the month.

There's a big difference between:
1) setting a budget, recording spend, then looking back at it for analysis.
and
2) setting a budget, using it as a guide to determine if you should spend.

I started using YNAB (You Need A Budget) software in December 2013.  Game changer for me.  At first I really balked at the idea of paying for budgeting software, and manually entering my purchases.  But now I'm a believer.  The software offers great accessibility to my budget.  I enter purchases as I make them, and sometimes even check what is left in the budget amount before making my purchase!  It is also flexible.  I used to just fail at staying within budget all the time.  But now I can move my budget around depending on what is going on.  (It's like a glorified zero-based envelope system, kind of.)  Sorry to sound like such a YNAB commercial, but I really do love it.  DH is off an on with keeping up, but he takes updates from me ("only $x left in restaurants for the month") and usually keeps me posted on his purchases.

I agree to an extent that naturally frugal people don't need to budget, but we've always been around 50%-ish savers, and I want to improve on that, and keep spending creep in check as our income increases.

KBecks2

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Re: What is your budget process?
« Reply #11 on: July 10, 2014, 07:25:05 AM »
Cash vs credit depends on personal behavior.

Personally, I'm hesitant to spend more than $10 or $20 cash at any given moment. So with card or cash, lunch is lunch. And if I need gas or groceries, then I'll pull out a few more $20 bills. But if I go to a restaurant, I'll probably skip a drink that sucks a $5 bill right out of my hand or that $28 entree!

With a credit card, I just "live" without thinking about money. Oh yes, why I would love another beer! I'll get the check. Why not add a 25% tip? Also that $1500 TV looks like it would be beautiful in my living room. Ah, I have ordered it. What have I done? Why, oh why?!

So I've stashed my credit cards away and just withdraw some cash each week to spend on gas, groceries and a little extra.

Is getting 2% back on $2000 spending better than only spending $1000?

This is exactly what I am talking about. Thanks for the great description!

smalllife

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Re: What is your budget process?
« Reply #12 on: July 10, 2014, 07:59:19 AM »
We use YNAB but we don't "budget" in the normal sense of the world.  We get on board with long term goals (FI, maxing IRAs, etc.) and I fill him in at the beginning of the month as to how that will affect the monthly expenditures (hey, we've got X coming up that you want to do but it means we'll probably have to keep groceries tight).  Since we don't spend on much there aren't really any limits except for our personal "fun money".  We both enter expenditures on the mobile apps and I try to reconcile with our bank accounts every pay day to make sure there's no fraud or forgotten expenses.   Overall it's pretty smooth, very flexible, and absolutely non-fudgable due to reconciling with the accounts. 

MelodysMustache

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Re: What is your budget process?
« Reply #13 on: July 10, 2014, 08:09:57 AM »
I used to have the same problem.  I made a nice spreadsheet every month, then it fell apart because I didn't track actual spending against planned.  Also, the periodic expenses like repairs and insurance killed my planning.  After I switched to YNAB those problems were resolved.  YNAB has a free trial and I recommend checking it out.

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Re: What is your budget process?
« Reply #14 on: July 10, 2014, 08:23:09 AM »
I suppose our budgeting process could be described as "retroactive".  Like several posters here, we don't use a budget in the traditional sense of the word.  Instead, we have a basic guiding premise of spending as little as we can and saving everything else.  Mortgage, utilities and a weekly contribution to Vanguard are all automatic, so it's really just the day-to-day things that we need to think about.
Every few months we go back over our spending and look at where our money has gone.  Occasionally things come to light ("huh - spending on food is creeping up.  Better pay closer attention to that") but generally we just keep walking the line.  Whenever I buy something, I ask myself "do I really want this red pepper for $4.99, or would I rather have $4.99 in savings."

our "positive reinforcement" is seeing the balance in our checking accounts grow.  Whenever the balance gets above a certain $ amount we transfer $1k into our investment account at Vanguard.  We get excited every time we make a transfer, and we challenge ourselves to save a little more than we did the previous year.  So far it's worked really, really well.  Our total spending has trickled down while our savings has gone up.

This is just the strategy that's worked for us.  YMMV

KBecks2

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Re: What is your budget process?
« Reply #15 on: July 10, 2014, 10:09:32 AM »
Thanks so  much everybody.  We are not naturally frugal, we need to work at it!!  :-)  While we live within our means, and have no debt, inching up our savings rate is a bit of a challenge. 

I am currently using Mint, but might have to try YNAB. I had previously signed for a free trial and didn't use it -- manual entry???  Yugh!  How much time does that take? 

mxt0133

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Re: What is your budget process?
« Reply #16 on: July 10, 2014, 12:45:35 PM »
I am currently using Mint, but might have to try YNAB. I had previously signed for a free trial and didn't use it -- manual entry???  Yugh!  How much time does that take?

I don't personally you YNAB, I use Mint.  But the advantage of manual entry is the same as writing down a list and not forgetting when you go grocery shopping.  The physical aspect of writing or typing your thoughts ingrains them in our minds.  So by manually entering your line items into a budget it makes you more conscious of where your money is going.  That is why YNAB works so well in my opinion.  You are forced to face where your money is going and gives you the opportunity to inspect.  What's that saying what gets measured gets improved.

catccc

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Re: What is your budget process?
« Reply #17 on: July 10, 2014, 12:55:17 PM »
Thanks so  much everybody.  We are not naturally frugal, we need to work at it!!  :-)  While we live within our means, and have no debt, inching up our savings rate is a bit of a challenge. 

I am currently using Mint, but might have to try YNAB. I had previously signed for a free trial and didn't use it -- manual entry???  Yugh!  How much time does that take?

It's really not bad, esp if you have smartphones.  I just enter them as they happen.  It takes 15 seconds, everything cloud syncs.  I think if you don't do is as you go, you are missing the point of the software.  Look into the webinars YNAB has for "training."  They are helpful, and you they give away one copy of the software each time to a lucky attendee.

EscapeVelocity2020

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Re: What is your budget process?
« Reply #18 on: July 10, 2014, 02:05:21 PM »
I posted my budget on this forum just a little earlier today..... but it was a budget from 1997 when I lived with my parents!  Not quite ready to post my lifestyle inflated budget as it stands today at facepunch central... 

Oh we'll tear your budget apart like a pack of tiger sharks over chum... but don't let it scare you. They're just words. You can take what helps and safely ignore the rest.

But I have always had line items in my budget for an amount of cash each month as well as a credit card limit each month.  There are little purchases when I don't have a bunch of change available, and really big ones where I'd need a ridiculous wad, that just beg for a credit card to be whipped out.  Nowadays I seem to carry a small amount of cash for months, just in case I can't use credit, but it's very infrequent.  After a few months, you get a good baseline on the two line items in your budget and track if either one is getting spent too quickly...

If the spouse is struggling with staying on a budget, the envelopes of cash is usually more effective as opposed to using credit cards.

Ynari

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Re: What is your budget process?
« Reply #19 on: July 10, 2014, 02:27:34 PM »
So far, I've been using Mint to sort expenses and keep tabs on monthly things, but a lot of my expenses are every other month or inconsistent.  (i.e. buying food in mega-bulk or two month long passes).  I have an excel sheet filled with projected expenses, which are updated as the expenses are incurred, so I can tally annual spending for each category.

arebelspy

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Re: What is your budget process?
« Reply #20 on: August 11, 2014, 08:49:02 AM »
I think people who are naturally frugal don't necessarily need budgets.  That is not me!  (or my husband)

Agreed. My wife and I rarely think of or talk about budgets as we both are frugal naturally. We would rather figure out the big costs (housing, auto, travel, etc) than sit down and create a budget.

However, I do track our monthly spending and it gives us a good snapshot of where our money is going and how much we are saving. If we are hitting our savings rate goal then we don't worry too much about it.

+1.  If anything I'd track what you're spending, and try and "beat" previous lows, like a game.

But budgeting (or not) is very personal, and different strategies work for different people.  I'd suggest you google and read around on the PF blogs for the different ideas and try them out, and see which you like best.  YNAB seems to be a very popular option.
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BooksAreNerdy

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Re: What is your budget process?
« Reply #21 on: August 11, 2014, 10:04:04 AM »
I love YNAB. We have been using it for over 2 years now. It has a great design and is enjoyable for me to use.I like the time I spend budgeting. Yes, I enter everything manually. I use it to balance my Checking acct, keep track of credit card, and savings acct. I like how it quickly and easily shows me how much I spent in a category last month, over the last quarter, and year just by hovering over the category. This helps me get a real idea on how much we are spending and where we could be doing better.

It also allows me to forecast what our expenses would look like of we made different choices or cut out expenses. I can also forecast our savings since I already know what months are extra check and bonus months.

I don't really use the phone app, but that's just because I actually enjoy sitting in front of YNAB and pecking around on the keyboard.

There have been times, like when we were building s home and had utilities to pay at three locations, that YNAB probably saved us from over extending ourselves.

Also, YNAB has a built in philosophy that gets you to live off of last months pay, Allowing you to budget for the whole month at a time. This also really makes your 3 check months 'extra checks'. When we first started using YNAB, we were living paycheck to paycheck and those extra checks were just money we needed to get by. So, a lot has changed for us since using YNAB.

Yes, it costs $60, but who gives a shit if it completely changes your finances for the better?! :)