Author Topic: Budgets and expense tracking  (Read 1644 times)

Ron Scott

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Budgets and expense tracking
« on: September 07, 2021, 06:37:22 AM »
I have never set a budget and I’ve never tracked how much money I spent in a year. My wife and I were always natural savers but have only set one savings “goal” in our lives; for our daughter’s education.

Had my number in my 40s but I had a great job and retired around my 61st. Never felt money was the problem or the solution.

This spring my wife asked me how much we spent in the past year, “just curious”. I had no idea. Didn’t take too long as we have one checking account used for most outflows.

We each took a guess before starting work on the effort and were shocked by how little we were spending. I overestimated by about a third and she was off by more. (So much for SWR!)

I don’t recommend my approach to others but for us I think having a budget would have just encouraged unnecessary spending. We prefer to evaluate each expense on its own merits.

Do you budget and track spending regularly?

2sk22

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Re: Budgets and expense tracking
« Reply #1 on: September 07, 2021, 06:48:46 AM »
We don't budget but I do track expenses very closely using Quicken. The reason we don't budget is that we have been relatively disciplined spenders in our household so we have never felt the need to set strict boundaries. Knowing our expenses has been very useful in the long term - looking at trends and understanding how much safety margin we have in retirement.

reeshau

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Re: Budgets and expense tracking
« Reply #2 on: September 07, 2021, 07:53:00 AM »
DW and have been long-time Quicken users.  The reasons why have changed over the years.  When we were first starting out, budgeting and expense tracking was very important because money was tight.  Our budgeting has become looser, with broader categories, as we got to know our spending habits.  I also tend to use budgeting for forecasting and planning:  buying a house, having  kid, moving overseas.  While Quicken's budget tool is pretty obtuse, it was handy to not only have a new budget target, but also the baseline of our then-current situation, to get a feel for what would be more and what would/needed to be less.

Now, Quicken comes in most handy for managing investments and around tax time.  We will still have some investments homed internationally for a few years, so It's always good to have an overview, when you know not all your accounts will be sending 1099's.  We are also tracking our sales tax spend, since TX doesn't have a state income tax.  I don't think we will be regularly itemizing any more, but we have made big purchases in the last year as we settle in, and could add some money to a refund if we ever have a year with big medical expenses.
« Last Edit: September 07, 2021, 07:55:49 AM by reeshau »

soulpatchmike

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Re: Budgets and expense tracking
« Reply #3 on: September 07, 2021, 07:54:29 AM »
No formal budget here, but track high-level spending in excel. I run a net-zero system.  Not sure that is the right word for it, but we everything that comes into my home checking account and then some.  All monies are saved, maintained or invested from other accounts and all money earmarked for spending goes into the home account.  The rental property account never crosses with our home account.  Deficits to make up at the end of each year have been resolved using a number of different solutions depending on the current situation.  We have 4 kids at home(plus one married and gone) so our spending habits would likely make singles or dinks cringe, but on a per-person basis, it is reasonable.  We have never been surprised to find extra in our account at the end of a year, but quite likely might after the kids are gone and we FIRE.

I always research and plan a singular spend of over $500.  Most of the time for more than a month if not multiple months to find and analyze the best deal for the occasion.  There have been rare occasions of over $500 spending such as a well pressure tank leaking in the laundry room that needed a replacement immediately, but I can count on one or two hands how many of those have happened in the last 25 years.

ender

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Re: Budgets and expense tracking
« Reply #4 on: September 07, 2021, 08:09:31 AM »
We have a google spreadsheet we use to track each year's budget and then use tools to track monthly spending.

Personally, even though we've used a variety of tools now for monthly spending (YNAB, tiller, Mint) none of them give a good yearly planning view.

So we have a spreadsheet that has columns for each month and one of the rows is our monthly spending for misc spending. Bigger items like mortgage have their own rows.

Paycheck is broken out too here showing taxes, 401k, etc. Other rows are 401k, IRA, HSA, car, mortgage, insurance. We also have rows for the account balances in checking/savings so we can easily check if our tracked spending matches actuality (if the amounts in our accounts doesn't match the formula estimates, we missed something).

I like this because the yearly view makes it way easier to see the bigger financial picture but the monthly spending, via tiller now, makes it easy to break down spending by category/etc.

Each row is then added up for easy yearly viewing and analysis.

Steeze

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Re: Budgets and expense tracking
« Reply #5 on: September 07, 2021, 08:21:34 AM »
I have a budget / networth tracking google sheet & track expenses monthly with Mint.

I use the budget so I can estimate my maximum automatic investments each pay period.

The budget is about 30% higher than my TTM spend, as the budget has sinking funds for replacing car / cell phone / PC etc., and I try to be slightly over in my estimate than risk underestimating. In reality I just sweep the extra funds to taxable every couple of months and cashflow the expenses when they come up since I am still working. My FI# is based on the budget though, not my current TTM, because of those large expenses that only occur every 5-10 years.

I should say that the purpose of the budget isn't to justify that "you can spend 'X' on this category" - it is more to model the actual spending in each category, and to estimate future expenses for the purpose of targeting an FI#. If I get a $5k raise, the spreadsheet spits out home much my paycheck will increase and I can increase my contributions accordingly - that kind of thing. I am never thinking, "Oh, I have 30$ left to spend on eating out this month" -- that isn't my style, just spend what you want when you want and plan accordingly.

Greystache

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Re: Budgets and expense tracking
« Reply #6 on: September 07, 2021, 08:44:45 AM »
During our accumulation phase, we were much like you, we lived below our means and saved and invested what was left over, but we never had a budget or tracked expenses. When we were getting close to our retirement date (age 55) we started tracking our expenses to see what we really needed for a retirement budget. Like you, our estimated spending was higher than actual spending. We also assumed that what we spent money on would change in retirement (more travel, no work related expenses) so I set up detailed budget for retirement.  For the first two years, I tracked spending against our budget and updated every month. We had no problem sticking to the overall budget, but I did refine the budget allocations between categories a little.  After the first two years, we were confident that we were on track and only checked our spending at the end of each year.  We have never been over budget and we really don't think about spending at all these days.

Just Joe

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Re: Budgets and expense tracking
« Reply #7 on: September 07, 2021, 09:24:51 AM »
Used Mint very early on and had that eye opening moment when we realized how sloppy our spending was. Used it regularly as we learned to optimize our spending and eliminate our debt.

Rarely look at anything now often except our bank accounts b/c most everything is on auto-pilot. Neither DW nor I spend any great amounts that doesn't offer some utility to the household - groceries, repairs, maintenance, etc. We review the accounts to make sure no one has sneaked into our accounts somehow. Usually our bank notices before we do that we supposedly bought a pile of electronics from a mall across the continent.

TLDR: everything is on autopilot. We review our accounts from time to time to make sure everything is consistent and expected.

FI45RE

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Re: Budgets and expense tracking
« Reply #8 on: September 07, 2021, 02:38:51 PM »
We have a google spreadsheet we use to track each year's budget and then use tools to track monthly spending.

Personally, even though we've used a variety of tools now for monthly spending (YNAB, tiller, Mint) none of them give a good yearly planning view.

So we have a spreadsheet that has columns for each month and one of the rows is our monthly spending for misc spending. Bigger items like mortgage have their own rows.

Paycheck is broken out too here showing taxes, 401k, etc. Other rows are 401k, IRA, HSA, car, mortgage, insurance. We also have rows for the account balances in checking/savings so we can easily check if our tracked spending matches actuality (if the amounts in our accounts doesn't match the formula estimates, we missed something).

I like this because the yearly view makes it way easier to see the bigger financial picture but the monthly spending, via tiller now, makes it easy to break down spending by category/etc.

Each row is then added up for easy yearly viewing and analysis.

This is more or less exactly what we do as well. It allows for more flexibility than some of the tools (Mint, YNAB, etc).

seemsright

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Re: Budgets and expense tracking
« Reply #9 on: September 07, 2021, 03:58:32 PM »
Budget...meh we have a list of what we want to spend on things. Come in close most times. But we really don't try either. We track expenses and put effort into cutting where we have gotten a bit high.

It turns out both hubby and I just suck at spending money.

kanga1622

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Re: Budgets and expense tracking
« Reply #10 on: September 07, 2021, 07:02:01 PM »
I track everything using a Google Sheets monthly budget template that I customized to us. It helps immensely to keep us on track but also to help us learn to plan better for the irregular expenses. We know how much our “base” budget is each month and can make quick decisions about any “extra” income that comes in over that in a given month.

But I’m a math/spreadsheet nerd. And my husband would spend everything without thinking about the future if those parts weren’t designed by me beforehand. He’s a great help in refining an expense plan but crap for setting one up. :) We are a good balance and having a spending plan keeps us both in check.

By the time we are ready to retire we will have decades of budgets and know our spending pattern very well.

englishteacheralex

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Re: Budgets and expense tracking
« Reply #11 on: September 07, 2021, 08:12:42 PM »
Extremely rigorous budgeter and spending tracker here. In our case, tracking/budgeting is not a tool in order to give permission to spend more. Instead, it is an extremely helpful system that helps us to plan more effectively. We have two small children and we live in a VHCOL area. There are many things we have to keep in mind in order to use our money most efficiently.

A budget allows us to have important conversations about our money priorities. We are able to give more generously because we are aware of exactly how our giving will impact our finances. When we splurge, we do so without worrying about it, because we know exactly what we can afford.

To each his own. However, I do not see budgeting as a silly, unnecessary tool for those who are overly persnickety about their money. In my opinion, having years of data and a thorough understanding of one's personal bookkeeping allows for comprehensive planning and does not lead to wanton spending but instead to a mindful, intentional use of one's resources.

Zikoris

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Re: Budgets and expense tracking
« Reply #12 on: September 08, 2021, 09:22:07 AM »
We've used Mint to track for many years and are big fans. We don't really budget, other than on a rough annual basis - it's just not needed when you save 2/3 of your income. I find it really interesting looking at category changes over time, especially with the pandemic and seeing what goes up and what goes down.

WSUCoug1994

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Re: Budgets and expense tracking
« Reply #13 on: September 08, 2021, 10:46:44 AM »
We (I) use Mint/Excel pretty religiously.  We have budgets but more for trend analysis than anything.  Some are up and some are down depending on life/economy/Covid/children/hobbies/travel etc.  We have just become more efficient with our money through this process - I am obsessed with trend analysis and optimization so it fills a need for me as well.

I will use the analysis to calm down spending in real time if we have over indexed on one category or another.  From what I have learned - our baseline expenses are pretty stable - we seem to trade home improvement for auto maintenance or groceries for dining out etc.  As we inch closer to retirement I feel like we are very dialed in to our expenses which brings me additional comfort.

kay02

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Re: Budgets and expense tracking
« Reply #14 on: September 08, 2021, 11:09:21 AM »
Like alot of others I track but don't really budget.  I've tuned my impulses enough to not really need to. :)  My impulse usually goes the other way in my business though, I don't mind spending extra there at all but its probably a good thing in the end since it does make me money.

spartana

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Re: Budgets and expense tracking
« Reply #15 on: September 08, 2021, 11:58:48 AM »
Pre-FIRE I tracked but didn't budget other than "save 50% or more of income and live on the rest". Now long-term FIREd I don't track anymore. I know how much I spend on a monthly and an annual basis as my passive FIRE income goes into one pot (MM savings acct) each month that I use to pay all expenses from and.keep "topped off" at $30k as an EF, and I just subtract the amount at the end of the month and/or year from what I started with.  I have no idea what I spent it on beyond the basic expenses but I know how much I spent. I often spend quit a bit less then my income (especially during covid times) but because my monthly spending is extremely highly variable I just look at my annual number.
« Last Edit: September 08, 2021, 12:17:09 PM by spartana »

iris lily

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Re: Budgets and expense tracking
« Reply #16 on: September 08, 2021, 12:39:22 PM »
We had a discussion here not too long ago about budgets and budgeting. A number number of us do not work with budgets in the conventional  way. I am one of those people.

Very simply, I spend money according to my values. In the early decades of my life, I examined every purchase very very carefully for the value it added to my life.

Now in retirement I have plenty of money and I don’t do that, so I’m probably spending a whole lot more than you are. But it’s OK because we have it and we don’t have children we expect to leave any money to.

Yes to your question: we do not budget. I can see where a budget leads to spending more than is necessary.

I wanted to spend only what was necessary back in the days of our wealth accumulation.

 


jsap819

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Re: Budgets and expense tracking
« Reply #17 on: September 08, 2021, 12:59:10 PM »
We've been using Personal Capital to track specific spending categories but also keep an excel spreadsheet that we update monthly but in a more general sense (beginning monthly balances). We don't really have a budget but we do try to hover around our average monthly spend and adjust accordingly if we are under or over.

Zikoris

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Re: Budgets and expense tracking
« Reply #18 on: September 08, 2021, 01:02:22 PM »
Very simply, I spend money according to my values. In the early decades of my life, I examined every purchase very very carefully for the value it added to my life.

Now in retirement I have plenty of money and I don’t do that, so I’m probably spending a whole lot more than you are. But it’s OK because we have it and we don’t have children we expect to leave any money to.

It's always a good idea to think about your values when you buy something, regardless of how much money you have. What conditions was it produced in? How much packaging and garbage does it produce? Could I get this thing secondhand so I can use an already existing thing rather than use up more of the earth's resources to produce a new one?

I actually think this is WAY more important for higher earners to do than anyone else, since those are the people doing to most damage to the planet and humanity through their rampant overconsumption.

habanero

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Re: Budgets and expense tracking
« Reply #19 on: September 08, 2021, 01:19:42 PM »

I don’t recommend my approach to others but for us I think having a budget would have just encouraged unnecessary spending. We prefer to evaluate each expense on its own merits.

Do you budget and track spending regularly?

The problem with a budget (at least for me) is that it would require creating an illusion for there not being plenty of money in the system. I can't fool myself into that and pretending that there isn't room in the budget for something I need/want. I do however track expenses to get a better picture over time and I think it at least for me leads to less purchases, but not sure as I didnt really buy stuff to start with. I do it manually in Excel off the various credit card statements but as it's not completely rigorous there is always some error, but monthly pay less what's left in my checking account after cards paid off is the actual answer to how much was spent. Rarely differ more than 100 bucks or so and that's close enough for me. What's left  goes into the market. If there is some big-ticket item I track the expense, but pay off my savings account.

So I mostly want to get a good picture of how much "life" costs me. The big ticket items are few and far between, but generally related to repairs/maintenance on the house and maybe a car every 10 years or so. These will never go away but will look different if life circumstances should change, like moving to a different house.

coppertop

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Re: Budgets and expense tracking
« Reply #20 on: September 09, 2021, 07:56:25 AM »
Years ago I was married to someone who had grown up very advantaged, although his salary did not reflect his parents' income.  He never caught onto the idea that he couldn't buy whatever he wanted, so I was forced to be the responsible one and I kept a budget on yellow legal tablets (this was back in the 70s to the 90s).  I got into the habit and have kept up tracking and budgeting for all of these years, even though I am now married to someone who can squeeze a penny so hard that Lincoln shoots off into outer space.  I don't think it's a bad idea for anyone to have at least a good idea of where their money goes.

iris lily

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Re: Budgets and expense tracking
« Reply #21 on: September 09, 2021, 09:55:21 AM »
Years ago I was married to someone who had grown up very advantaged, although his salary did not reflect his parents' income.  He never caught onto the idea that he couldn't buy whatever he wanted, so I was forced to be the responsible one and I kept a budget on yellow legal tablets (this was back in the 70s to the 90s).  I got into the habit and have kept up tracking and budgeting for all of these years, even though I am now married to someone who can squeeze a penny so hard that Lincoln shoots off into outer space.  I don't think it's a bad idea for anyone to have at least a good idea of where their money goes.
I think tracking is always a good idea. I have been too lazy to do that, but I see the value in tracking.

But as for budgeting, nope. I have two single female friends who both consider themselves good with money. They both “budget” this way: my monthly income can afford this new purchase on time payments. Voila, I can afford it because it is in my budget.

I say, if you cannot pay for it oitright without making payments, you can’t “afford” it.

One of them has a modest salary, but the other made a lot of money over the years. Her net worth is pretty sad. I blame the budget mentality somewhat for this.


K_in_the_kitchen

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Re: Budgets and expense tracking
« Reply #22 on: September 09, 2021, 10:20:18 AM »
I track spending.  Because I use YNAB, I do allocate income to various categories, but I keep them broad and they aren't monthly "budget" amounts unless it's a fixed expense (gardener, level pay amounts for gas and electric, etc.).  While this does mean I have to move allocated funds around if I spend more than I planned, I really like YNAB, which I've used for 15+ years.  Mostly I allocate funds as a bucket amount.  For example, I keep $2500 in the household maintenance and repair bucket.  If I spend money from that category one month I top it back up when I allocate funds for the next month (I allocate the previous month's income for the current month, meaning what we earn in one month isn't allocated until the following month).  At this point it's mostly arbitrary as the bucket amounts don't determine how much we can spend.  The household maintenance and repair fund covers basic things, and any repair exceeding $2500 would come from general savings.

I do think we may give it up completely once we FIRE, only doing periodic snapshots of spending.

charis

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Re: Budgets and expense tracking
« Reply #23 on: September 09, 2021, 10:28:05 AM »
No budgeting here, but I've tracked everything on Mint for almost 8 years.  We were basically broke for several years (finishing college/grad school) so spending was low and we still live as we did on the first lowish professional salary. Expense have increased a bit, but income has increased greatly and I keep a tight rein on "take home" by adjusting for annual increases via auto savings.

We save 60% consistently and save for large purchases via payroll deposits.

caleb

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Re: Budgets and expense tracking
« Reply #24 on: September 09, 2021, 11:13:44 AM »
TLDR: everything is on autopilot. We review our accounts from time to time to make sure everything is consistent and expected.

Same.  90%+ of our gross is automated (I call it our Money Machine).  We make day-to-day or month-to-month choices about <10% of what comes in.  I'm sure it would be possible to chisel our discretionary spending down further, but it feels like a lot of effort for little gain.  If we need to spend less, I'd rather tweak the knobs on the Money Machine than start breaking down grocery receipts.

Arbitrage

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Re: Budgets and expense tracking
« Reply #25 on: September 22, 2021, 08:45:05 AM »
I budget/track spending and have for close to a decade.  The budget is really just a rolling spending tracker; I adjust it as my spending changes, but it allows me to smooth out the spikes and gives me confidence that various unpredictable or occasional items are accounted for.  Since I know that there's a allocated pot of money accumulating for property taxes, house repairs, insurance payments, medical bills, Christmas presents, vacations, etc, I know how much is above and beyond that amount, and can invest it without a second thought.

Having this tool also clues me in to there might be progress to be made by trimming spending, and it's gratifying to see the tangible progress as the budget is compared over the months and years.  The monthly (or so) checkups to fill in the transactions also keep me honest...no swiping the credit card and forgetting.  It also has proven useful on a number of occasions to have that record to check back on. 

It has, admittedly, gotten a lot more annoying to keep track of using the now-defunct YNAB 4, since they've killed off most of the functionality to entice people to spend $100 per year on their subscription fees.

LateStarter

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Re: Budgets and expense tracking
« Reply #26 on: September 23, 2021, 10:02:43 AM »
I don't budget but I do track. I've never budgeted beyond working out annual spend vs required stash.

My general expenses are quite low and consistent and my frugality muscles are pretty good, so I don't fret over general stuff. I do like to have a record of how much I've spent overall and what the big items were - that laptop, that holiday, new tyres, etc.

Less so these days, but I used to find tracking helpful for managing my spending. That expensive toy will leave a permanent stain on my spreadsheet never letting me forget it, so I'd better be damned sure it's worth it before I buy !