Clearly there are a lot of varieties of budgeting!
Colorado_mom - I struggle with the concept of “tracking spending” because (to me) it has a bit of a retrospective component. And H does track (via spreadsheets) what has been spent. The switch (preferred approach) for me is actually projecting goals for max spending in each category going forward - that reflect our values.
I did a recent fine tooth comb review of my own recent spending (thinking I was in the ballpark of my own category limits).
Um…nope! The amount of nonsense (unnecessary) on Amazon was not in furtherance of our goals and way over categories. So thankfully I’ve cut back on that stuff…
It actually can be revealing when looking at trends. Sometimes, it’s hard to spot items that can be improved by looking at a snapshot - but by categorizing expenses with Quicken or similar tools, one can spot patterns over (past) time that can be addressed.
Sounds like you found a method that works for you. In your example Amazon insight did come from retroactive analysis of tracked spending, but it can be helpful to use that knowledge to set new budget category goals to shoot for as you move forward.
Financial planners often suggest to determine retirement income needs (after tax) by building a bottoms-up list of categories/amounts. I feel like that method has too much risk of undercounting some necessities and also undercounting discretionary spending that would be missed. We have quite a swing month to month, but after years of monthly tracking (cash + checks + Visa + autopays) and annual Visa category analysis I understand the drivers of the high months. No surprise that it is largely due to vacations and visits to family (airfare and hotels etc).
Along the way I did make a spreadsheet of regular (monthly and annual) expenses. It was a good reminder that our paid-off house does cost us a lot, even though we have not yethad any major renovations or dreaded big-ticket repairs.
We have never budgeted or tracked expenses but we have always been careful with our expenses and lived below our means compared with people of similar net worth. We have been extremely lucky with our investments so we are spending much more freely in our retirement. We have set aside trusts to pay for all the education for our 4 grandsons (oldest is only 7) plus help them with down payments on houses if needed in the future. We concentrate on spending for comfort and convenience and family vacations (son, daughter, inlaws and grandchildren.)
Advantage of sorting expenditures monthly… just this week I saw a recurring charge for $20 that neither my DH nor I knew why it happened. Getting it cancelled was a pain, but those kinds of leaks can add up fast if you are not looking.
I do review every credit card charges and every transaction on my checking account each month. So, there are no surprise charges (or recurring charges that I don’t know about).
This is why having the phone notifications every time any of our credit cards gets charged is a godsend. I always know what’s going on in real time. I always get a heart attack anytime a recurring charge goes through because I know I or H didn’t swipe/order anything. Then I see what it is and go “oh yeah.”
Colorado_mom - oh definitely, the painstaking (like ‘took all weekend’ ) retroactive analysis of spending has been insightful (and a wake up call!). I just know going forward I work better with goals/prospective limits on spending.
I know some folks are able to kind of do that ongoing math in their ahead till end of month. I seem to need continual visuals lol.
I’ve heard Quicken might be able to free me from these awful Excel spreadsheets…? Pretty much never used Excel until trying to figure out our spending now pulling hair out in frustration lol
Friend just had unnecessarily canceled one credit card after (falsely) assuming a (forgotten) recurring charge had been a fraudulent use.
I was “well on my way” doing the same last year, started changing the logon and passwords with one vendor, and checking where the same password might have also been used with other vendors/sites/services - before I eventually realized that it had been a justified recurring charge.
But, now at least I have unique passwords for good number of accounts – although, the crinkling of the longer paper list under my pillow keeps me awake at night.
Maybe call it loosely-goosey” “feel-good” accounting. I suspect that’s one reason places offer sales, coupons and similar enticements, so your purchases aren’t as expensive as they are less than total retail prices.
“Met” with the Vanguard personal adviser today to see whether we wanted to hire him. He said something off-handedly, and now – four hours later, when dh and I are sitting down with this #$^&^! YNAB app – I see a HUGE error we were making. We double-counted our insurance premiums, which are taken from dh’s pension check. We were using the final check amount with the medical premiums deducted as our income AND THEN also counting premiums as an expense. In other words, we had doubled our premiums cost. That’s almost a $10k mistake.
I have to tell you that I was feeling SO down on myself for not having a handle on our money and thinking that we were way overspending. We really aren’t. But I literally was missing sleep wondering how I could’ve been so wrong.
Dh is committed to keeping up with YNAB so I told him have at it. Tonight we sat down and reconciled all the receipts we collected for the month of September and compared them to what we had budgeted and that’s when it dawned on me our mistake, because our receipts showed us at more than $1k less than we had budgeted. I knew there was a big discrepancy.
I decided to try something novel recently. My wife is a teacher, so I do most the cooking, Before, I was planning meals and shopping at Kroger. Everything was hit or miss…mostly miss and we end-up getting pizza. Well, that wasn’t working, so I decided to empty out the freezer, then I went to Costco and filled it up with stuff we eat. Now, I just pull out whatever we’re in the mood for and just cook it. It saves a ton of money.
This is the kind of thing that only has to be figured out once (setup)… but critical to the big picture. Another situation that might be similar for you or other couples is federal/state income taxes - sometimes covered by pension deduction, sometimes done as quarterly payments, or a combo of both. No right or wrong way… you just don’t want to double-count (or not count).
As mentioned upthread, I like to track monthly “outflow” at a high level (checks + autopay + VISA + cash). I don’t include categories like my medical innsurance, tat do not need to get paid from the checking account.
That gap-coverage amount is auto-transferred monthly from IRA/investments account into the checking account. We call it the “Schwab paycheck”, coordinated with our financial planner. Some of my friends also do it this way, to keep things more like they used to be when paycheck was auto0deposited and we ensured that we lived within our means. (Admittedly there is some special stuff, including future car purchase, that needs to be handled separately.)
We set the initial gap-coverage amount with the financial planner when I retired in 2020, based on a decade “outflow” monthly tracking (omitting college bills etc). At our quarterly reviews, they check if it needs adjustment. So far we’ve kept the same, though we sometimes raid other sources to supplement for non-regular spending (like this year, with son’s wedding).
I should also mention that our checking account is in credit union, where we do also have plenty of cash in savings. Sometimes we’ve needed to do a transfer after a high-spend month.
Im interested in why keeping “plenty of cash in savings” makes sense. Unless you only take the required minimum distribution from retirement accounts, why do you choose to keep savings in taxable accounts, as opposed to running down those savings and leaving more in the tax-deferred retirement accounts? Or using some of those savings to pay the taxes on a Roth conversion?