Money Poll #1: Budgeting
I’m curious to learn more about how all of you think about money, so I thought that I would start running a series of ‘Money Polls‘ on various topics… First up: Budgeting. But before I ask you guys whether or not you make (and stick to!) a budget, I thought I’d say a few words about how we do things. As it turns out, our approach has been more along the lines of what I would call ‘reverse-budgeting’…
Instead of mapping our what we’re going to spend, we focus on what we’re NOT going to spend. That is, we save/invest a predetermined amount (in other words, we pay ourselves first), and then let the chips fall where they may (so to speak). Maybe we’d do incrementally better if we were more compulsive about our budget, but we’re already spread pretty thin time-wise (what with the four boys, and all) so this is how we do it. And when you combine our approach with a generally frugal mentality, it seems to work out pretty well. With that said, let’s get to it…
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Cool idea!
Comment by FMF — Feb 20th 2006 @ 8:31 amI would have to say we take a similar approach. We have monthly saving targets we’d like to meet and consciously try to limit our spending in all areas. At the end of the month we’ll put together a monthly review of our expenses and if something is out-of-whack we mentally concentrate on improving our performance in that area during the following month.
Comment by Brian — Feb 20th 2006 @ 12:54 pmI don’t budget. I simply try to spend as little as I can get away with, and I avoid recurring expenses like the plague. Gotta buy a car, pay cash. Phone bill, try to keep it fixed. Anything that’s not a fixed cost, keep playing limbo to get it lower.
Comment by Aaron — Feb 20th 2006 @ 1:32 pmwe’ve been living on a written budget for the last 7 months and have paid off $15000 in debt (credit cards, personal loan, and vehicle). for those that don’t have one, i highly recommend it. it’s like that saying, “if you fail to plan, you plan to fail”.
cheers
Comment by Emma — Feb 20th 2006 @ 1:49 pmGreat idea!
I budget my expenses over $30.
However, I do not stick with a fixed budget. I just place them into Microsoft Money before I make them and study the effect they may have on my finances — before making an educated decision.
Comment by Jose Anes — Feb 21st 2006 @ 2:25 pmMy family used to do exactly the same thing you do - pay ourselves first and then let the chips fall with what is left. But we found over the course of last year that we were spending about $200 per month more than our income (the shortfall was deducted from our short term savings - we have no debt other than our mortgage). So this year we are trying something new - we pay ourselves first to cover all fixed expenses: mortgage, utilities, cable, taxable investments, Roth IRA, short term savings, etc. Then we spend what is left, not a penny more. Variable expenses is one large category - we don’t break it out in categories such as groceries, eating out, gas, entertainment, etc. I’ve found that trying to budget for specific variable categories is a waste of time. Better to have one pot.
Comment by Colin — Feb 22nd 2006 @ 12:18 pmI’ve tried the “plan the month’s expenses in advance” thing, and it totally doesn’t work for me. I find myself rebelling against my own plans, and thus ultimately fighting myself. (The one sure way to guarantee that you’ll lose is to fight yourself.)
At this point, I simply plan the month’s _recurring_ expenses in advance. (And yes, both short and long term savings and investments count as recurring expenses, for these purposes.) Every recurring transfer of funds out of ready cash (except for my rent, for which I have to write a paper check) is automatically transferred from my checking account or debit card on the 5th of the month. What’s left is working cash for the month.
I have a pretty good notion of when irregularly-recurring expenses are going to happen and how much they’re going to cost, and I simply plan for them by adding contributions to one of my savings accounts. (It’s seperate from long-term savings, since I know in advance that it will often be emptied out, which long-term savings never would be except in an emergency.)
If one adopts the “pay yourself first” (automatic savings/investment at the beginning of every income cycle) methodology, it eliminates most of the need for a detailed budget (and, along with that need, the uncontrolled rage that some of us feel at the prospect of having to _follow_ a detailed budget…even one we write ourselves).
Comment by Matt — Feb 22nd 2006 @ 11:52 pmI live at home, go to school, and work part time. So my budgeting is a lot smaller then everyone else’s. I take home about $250-300 after taxes. I use Quicken and enter all of my recurring debts and whatever left over I pay off my credit cards (most spent on food/groceries). Each month goes something like this:
(I get paid on Wednesday)
February 2006
Wednesday 1st
$100- Stock DRIP
$120- Car Payment
Wednesday 8th
$150- Car Insurance/Cell Phone (Both paid to parents)
$50- Car Payment
Wednesday 15th
$200- Car Payment
$50- Pay Credit Cards
Wednesday 22nd
$250- Car Payment
I never have carried a balance on a credit card and all I want to do right now is to pay off my car. So obviously I am putting most of my paycheck to that. After paying off my car I will be maxing out my Roth IRA.
Comment by Blog Mike — Feb 23rd 2006 @ 3:14 pmWe’re kind of using the envelope method without the envelopes, which kind of comes close to saving first and then letting the chips fall. Our checks are direct deposited, into two checking accounts. One checking account is for groceries and my walking around money. DH gets his WAM in cash. Then money goes into various savings accounts out of the main checking account for large/infrequent bills, Christmas, goals and emergencies. What’s left is for monthly bills. I had to do fiddle with an overall budget to make sure the right amounts are going everywhere. But now that it’s set up, I feel free to spend whatever I have in the “grocery” account because I know it’s not needed for anything else. Until something major happens (like a big increase in property taxes or something) we won’t have to think in terms of budgets for awhile.
Comment by EC — Feb 25th 2006 @ 10:56 am