I think there should be some distinction or recognition of “budget” not needing to mean you are frugal or rarely splurge. People who make $30K/year can budget as well as people who make $300K. You don’t win the budget process by never spending beyond the necessities
You MANAGE the budget process when you plan for those necessities (including whatever are your standards for saving if you can) and also enjoy the simple pleasures of life that your budget allows - like ice cream or Starbucks now and then, a trip to the movie or a weekend getaway, or whatever!
I live in a walkable city… and I think you actually spend less (having lived in a bunch of different places). The evening “splurge” is a walk after dinner to pick out a nice piece of fruit for dessert… vs. my friends in places where you can’t walk, where everything involves a credit card/pricey indulgence/entertainment.
Priorities are the key. Ours was always put in maximum allowed in the retirement account. You would be surprised how many people do not do this with even the matching from the company. Then mortgage and tuition.
Always try to get fresh good quality food and cook ourselves, even if it is putting a big salad together. We save our fun spending when traveling and visiting family.
That was me, too. I kept a tight rein on our expenses, especially after I left the workforce. But in retirement I guess I feel like there’s less room for “error” so I want to see where it’s all going, even if for just a few months.
Years ago a young couple we knew did an interesting kickoff to such an an endeavor. They declared one month to ONLY spend on necessities, no extras / wants. It was actually the frugal husband’s idea, LOL - his request for his birthday gift that month. The wife was NOT happy about it, but she complied
We have a rewards credit card that we pay-off once a month. Since spending is the one thing we have the most control over, the monthly bill is good accountability. And Wells Fargo has a good tracking website. For us, debit cards were the worst. They’re like a “bottomless” checking account, and we don’t notice it until the account goes negative after Christmas. When big expenses hit, the credit card solves that problem by allowing us to adjust our cash in advance so we can keep the card paid-off every month. It takes a little discipline to do that. It’s very tempting to pay off part of the balance to save money and let the balance grow for a bit. But the interest will bury you alive.
I just know my set expenses and review my checking/debit account each month so I can see where my $ are going. For instance, my grocery spending had gone through the roof so after freaking out about how much I was spending I started shopping at Lidl and being very disciplined about going through what’s in the pantry & freezer. Convenience tends to blow my budget. Also $ go automatically into savings each month so I feel like what’s left is mine to do what I will.
We have done variations of all! When we were young low-earning folks: one in med school on the most minimal med loans for expenses&tuition, and one on a resident salary ($30k per year in the early 2000s), it was set a strict budget and don’t go over, because we couldn’t! We lived paycheck to paycheck (or loan disbursement). When both of us were residents we had just started a family and at least we both had (low) resident salaries. We started paying off interest on both of our med loans so we didnt expand the personal budget much. With the first real job we moved more toward plan the monthly budget and track it but if we went over our goal we had extra to cover it so no more paycheck- to paycheck—we just saved less each month, so we tried not to do that. That’s been our plan ever since we both had “real” post-residency jobs, or about 2007. Our big expenses were med loans and private k-12. Our tight budgeting during the lean years allowed us to be able to do private school, and we have been done with med school debt for almost 10 years. When that finished we reset the monthly and yearly budget goals again with an eye on college and retirement, but also a reasonable expansion on personal spending and some fun spending (nice but not nuts vacations). Prepping to have two in private college for overlapping years has been another overhaul and reset and definitely the first significant “cutbacks” on our personal spending since the med loan payoff years.
Planning it out ahead, based on all bills and all actual “needs”, then cutting the wants as much as needed to get the monthly savings where you want. Tracking it keeps you honest with yourself, and helps you see the unexpected needs that arise, to more adequately prepare for those going forward.
I think you got great answers, but I’ll chime in just for another POV.
I used Quicken for years until they stopped supporting it on MAC OS. Then I switched to MoneyDance. It does the same thing, attaches to banks and sucks down all the transactions. After a while it learns categories (So sees SAFEWAY and auto fills the GROCERY category.) So I just look at hit enter over and over.
Didn’t used to do investments well, but has improved a lot. Which is nice because we are living on investments in retirement.
When I took over Mom’s finances, it was very helpful to have a year to see when bigger expenses were coming (insurance!!) And when I first did it, I saw the 7 or 8 different $2/mo subscriptions to wallet protection… it really added up to get those stopped. Just looking and seeing where the money went.
I appreciated banks that let me download going back 18 months so I knew where she was likely to spend going forward.
Back in the day, I paid the bills and tracked Quicken, DH balanced the checkbook so we both knew where money went pretty well. Now he doesn’t look and I have all the AMAZON transactions not categorized… if it is $7.99 or less, it is books and over that it is household. DH spent a lot on household when we moved! LOL.
I also use MoneyDance for our farm partnership reports. There are not a lot of things to track … 2 yearly rent payments, insurance, taxes and a few repairs. But it super simplifies the reports (they look SO official!!) and makes the tax guy happy (and cheaper).
Just tracking seems to do a lot of auto corrections. I run it monthly and do quarterly comparisons to last year to see inflation and trends. Just good to know I think.
Last I heard, both kids used MINT.
Edit to add: We don’t typically “budget” but we transfer from investing accounts to checking a fixed amount every month which covers living expenses. If we have bigger expenses (taxes, big vacations), then we transfer more to cover that expense. We are not living paycheck to paycheck as such, but sort of feels as if we are. Retirement is a different feeling money wise.
I have never done a must spend no more than X a month on groceries or Y on some other category. Neither ShawWife nor I are particularly good in that way. We have been pretty frugal relative to our colleagues with comparable incomes and thus have focused until the last few years on saving.
I always start by maxing out pre-tax savings (originally 403b and then 401k then 415i and now 401k). In the earliest years, I think after-tax income covered tax-deferred saving and living expenses but as income grew, we were able to save more than that. After my first two jobs, I went out as a solo consultant and then created a consulting firm and then a couple of other firms, each with partners. It is often a bit difficult to separate my personal expenses from the firm’s expenses from ShawWife’s solo practitioner business expenses, which makes fixed budgets hard. And, we have an account in Canada where ShawWife is from and house there. So, my assistant tracks every expense in Quicken.
We look over the spending every quarter roughly and every year certainly to understand a) where we are spending money; b) whether we should try to cut back in a category; and c) if the purchase is properly categorized for tax purposes. (For example, I have a business trip to Iceland. My client will pay my expenses for my work there. But, ShawWife will join me but will use the time to do things quite relevant to her work. Which expenses are business (and will be reimbursed by our client) and which are legitimate tax deductions for ShawWife’s business? Given that we didn’t know about this trip until earlier this year, we could not have budgeted for it.) And, we won’t know our incomes until year-end.
So, we are just trying to make sure that things are not out of whack and we haven’t gotten used to an unsustainable level of spending generally or in a particular category.
Shaw you are good contributor here, but living a bit of a different life than many.
In our earliest years our after tax income we just hoped we could pay all the bills and loans and then our big decision was if we should go to a movie or dinner, but both was out of the question. Luckily we haven’t had to deal with whether our Iceland trip was going to be a business expense on my business/practice or if it was going to be split with my wife’s.
@gpo613 absolutely. Our first few years were much tighter, and we were pretty frugal in our choices. Even then, I found it hard to budget. I’ve been very fortunate in that the skills and reputation I developed in the earlier years seem to be in demand and the globalization of the economy was very good for me. Now, budgeting is more complex because of the demands of a complex economic life. A first world problem for sure.
We aren’t so good with categories. We did try it a bit early in our marriage. I found if easier to just be as frugal as possible than trying to stick expenses into categories.
Paying cash helps visualize the money going more than other means of payment. When the funds are gone, that’s it!
If your transfers are in nice round numbers, that can make it easier to track overall spending, assuming that all income enters in savings and investment accounts.
Note that income taxes are a special category, in that they vary based on income, not spending habits.
@ucbalumnus
I wasn’t thinking of income taxes as we must pay estimated quarterly. I was thinking of the big November property taxes, which I know are coming but always gag me.
So agree with this, abasket! For my H, “budgeting” had (it seemed) a distasteful limiting, controlling, forced-frugality component. I’d suggest developing a joint budget and he’d say: “We don’t spend that much! We aren’t frivolous!”
But to me the point of budgeting is to give yourself the opportunity to be intentional with your money and be furthering your true goals. We are getting there, now!
For me, it is useful to know how much we are spending and in what categories. As mentioned above, I was never very good at putting a limit each month on individual categories, but if our spending in a particular category was creeping up over time, I would discuss with ShawWife and we’d cut back in that category if that made sense.
When we have done house renovations, we would set a cap with the contractor and if he came up with something we should do that wasn’t in the bid (e.g., took off this wall and now we need to redo the floor in the closet), I would ask him to come up with a few things to cut so that we could stay within the budget and we would choose. I didn’t hold to the cap in our most recent renovation but did so in several others. The first time we did it, the contractor didn’t believe that we would hold to it until we pushed for tradeoffs several times. Very useful discipline.
My budget has evolved over time. As a graduate student and young professional it was very much of the spending limits sort. Fixed expenses had to be covered before there was any discretionary spending. One summer I had $5 a week for groceries (equal to $13-$14 today) because rent, utilities, and school expenses took the bulk of my stipend.
Now my family’s budget is more about priorities. We can cover all of our needs and some wants. We just need to determine which wants are the most important. For example, do we want to eat out more frequently or would we rather save that money toward a family vacation? Each payday money is allocated according to our plan. We don’t worry about going slightly (sometimes significantly) over budget in a category in any given month. Some expenses ebb and flow. But if we are consistently overspending in a particular category, we need to determine whether to cut back in that category, or to cut back in another area to allow more funds for that category. We have an annual meeting where we look at the past year’s expenses and savings and make preliminary allocations for the coming year. These are tweaked as needed throughout the year.
One thing important to us is that our budget includes personal spending money for each family member. This money may be spent as the family member pleases. So the family member who likes eating out can have lunch out with workmates, the family member who likes video games buys Steam cards, the reader buys kindle books, …