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Post by Deleted on Jul 16, 2019 17:24:45 GMT -5
I get Ric Edelman's newsletter every week, and this week's lead is about not bothering to budget. He argues that people who are successful with money don't use them. This includes people like nurses, etc. so he's not talking just high earners. The key is to figure out how much you need to save and then spend the rest however you please. linkI do try to figure out how much to save, but that's part of my budget. I only get paid once a month, but bills come in throughout the month If I didn't lay the bills out for the month at the very beginning, I wouldn't be able to pay stuff like car insurance, etc. I have $2000 in my checking account right now, but most of it is accounted for. I had to lay out everything to get prepared for the decrease in income that comes with retirement. Otherwise, I would worry that I couldn't make it. I won't call it budgeting in the sense that YNAB talks about budgeting, but it is a close cousin. So do you budget?
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Post by Deleted on Jul 16, 2019 17:40:12 GMT -5
He argues that people who are successful with money don't use them. So, he's saying those that budget AREN'T successful with money? I work for a 2 billion dollar a year company and they budget and we have quarterly all coworker meetings that include slides of how we're doing on the budget. Good enough for them, good enough for me! The problem I always had pre-budgeting was figuring out how much I needed to save. I don't want to spend on X and realize tomorrow I needed it for Y. I also don't want to have this big pot of money just because I'm afraid to spend it on something I want.
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shanendoah
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Post by shanendoah on Jul 16, 2019 17:47:54 GMT -5
I am going to call BS. Or at least say that he has a very narrow definition of budget. People who are successful with money don't just save X amount and spend the rest any way they want. They know how much their bills are, and they make sure those get paid. My guess is more like they don't follow a strict budget. We only have $75/week for groceries. Once we spend $50 in the month on gas, we don't buy gas again this month. We are limited to $20 fun money each week, etc. Yeah, a lot of people who are successful with money don't do that (but some people who are successful with money do do that). But everyone who is successful with money knows roughly how much they spend on things, and they plan around it, regardless of whether or not they call it a budget.
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Knee Deep in Water Chloe
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Post by Knee Deep in Water Chloe on Jul 16, 2019 17:48:55 GMT -5
Well, that's quite the flippant post from Ric Edelman.
There's a difference between budgeting, living within one's means, and being innately good at saving money.
Yes, I budget.However, I believe budgets are flexible; it seems that Ric Edelman does not believe that.
No, I haven't always lived within my means. I'm decent at saving money, but my husband isn't.
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Miss Tequila
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Post by Miss Tequila on Jul 16, 2019 18:37:34 GMT -5
I don’t budget. But I do make sure to invest before I do anything else. I also do have a pretty good estimate of my monthly expenses so I know what I’m shooting for as far as rental and passive income goes. But right now I live so far below my means that I don’t have to worry about what I spend at the grocery store or going out. But if shit hits the fan I do know what my bare bones monthly expenditures are
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countrygirl2
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Post by countrygirl2 on Jul 16, 2019 18:40:30 GMT -5
I know what our fixed expenses are monthly and I know if we can spend extra. I don't do a formal budget each month, maybe I should, but I certainly have an idea and framework. I think you need to budget even if its a loose one.
For rentals I definitely have a budget as we pay a lot of property taxes and insurance on properties so I have to keep track. I have one more prop tax and one more ins to pay this year and then I'm done!
Getting ready to catch the books up again, I do about every 2 or 3 months.
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Post by Deleted on Jul 16, 2019 19:08:48 GMT -5
Yes- in great detail.
My checking account records are in an Excel file and every month I add to specific "buckets" for property taxes, state and federal taxes, insurance, out-of-pocket medical, home repairs and travel. I then project the utilities and other recurring costs, adjusting the utilities based on what I paid a year ago. What's left is what I can spend in that month. If a large expense causes me to blow through what I had saved for the category (e,g, a dental implant), I fund it from the "slush fund", which is the excess of what I withdraw every quarter from the investments over my normal monthly expenses. I'm still keeping the withdrawal rate at 3.5%. If I'm under budget for the month I throw it in the Travel fund. If I don't need all of the slush fund it goes into the grandkids' 529 accounts.
I also track expenses by category so I can see how I'm doing compared to the previous year and what YTD looks like compared to previous years at the same time.
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jelloshots4all
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Post by jelloshots4all on Jul 16, 2019 19:26:32 GMT -5
I budget and forecast at work.
My personal finances I do not. Like Miss T, I know roughly what my monthly expenses are and invest first as much as I can (fully funded 401k, kids college funds, an IRA, then a monthly post tax contribution to my accounts).
I know I am blessed that I do not need to watch my grocery bill, entertainment, etc small expenses. And I understand the struggle some of my friends face with counting every dollar, search grocery ads for the best deal, etc.
I made a conscious decision to save first after college and that strategy has played out nicely.
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resolution
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Post by resolution on Jul 16, 2019 20:24:43 GMT -5
I have a budget, but it reflects what I actually spend, rather than what I should spend. I do have a "lean budget" plan but I don't follow it at all. It is just there as a contingency plan if we lose a job or something.
I think his concept of saving a set amount and then doing what you want with the rest is a good idea, but it doesn't recognize that if a family doesn't have a certain level of income they won't be able to save a set amount without a good budget plan.
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Post by Deleted on Jul 16, 2019 20:47:00 GMT -5
I have kept the same kind of budget/forecast since I was 20 in 2001, the only thing that has changed are some of the buckets and how automated it is, it used to be very manual now I just have to assign categories because everything is calculated using SUMIF. Of course you can blow your budget on some line items, but that history is what I use to adjust the budget and create a forecast of inflows/outflows.
It helped me keep my head slightly above water when my bills were as much as my income, it helped me know how much I could pay extra on my mortgage and car, and now that I am debt free it lets me know how much I can put in taxable savings. If I lost my job, I replace my income with expected unemployment and I have my new plan in a couple minutes.
I think its horrible advice to tell the masses to throw away their budget.
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Gardening Grandma
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Post by Gardening Grandma on Jul 16, 2019 21:06:21 GMT -5
Of course I budget! If that makes me “bad with money” so be it.
When the property tax bill comes due, the money is there to pay it. If Cass runs up an unexpected vet bill, money has been allocated for that.
When DH asks me “Can we afford xyz”, I can look at the budget and give him a clear answer.
We are retired. We cannot afford to run out of money. You bet your sweet bippy I budget.
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Post by Deleted on Jul 16, 2019 21:16:31 GMT -5
It's so easy these days with computer and budgeting apps and online access to accounts. I remember when I was a kid my grandma had this leather bound ledger and she would sit at the dining room table at night and enter transactions. On cross country road trips she had another notebook in the glovebox that she tracked all they spent on the trip and at every gas fill she would also calculate out the mileage they got on that tank. I don't think I could handle the pencil and pen method. I'm the treasurer for our cub scout pack and they won't allow me to have online banking access with the account. DRIVES ME NUTS. Waiting for statements to reconcile accounts and having to remember to write all the transactions in the check register....hate it.
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Apple
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Post by Apple on Jul 16, 2019 23:46:13 GMT -5
Well, I did fine moving along not having a real budget. I added up my bills, then subtracted that from my net income (retirement savings, health insurance, etc already coming out of gross). Then I decided what was "reasonable" spending for me, and decided that with all those factors, I should see my account grow by at least $x/month. If it didn't, I had to determine if it was because of a large bill that gets paid bi-annually or annually, or if it was because I just went a little crazy with spending.
Then I bought some property. This property cost more than my house did. So I made a goal that I wanted to pay off this property and build on it. I'd already been making payments on the property for five years when I really wanted to get serious about paying it off. Within one year, I was hit with a $3/hr pay cut and no more child support (it would go directly to my son), as well as helping my son with college expenses. I also had to replace my car earlier than planned. I've also since taken the hit of no more Head of Household filing.
However, in (less than) four years I have seriously been budgeting, I have replaced my car, got my son through two years of community college, and will be paying off my property within the month (the fact that I could have a completely paid off house instead, or bought different property with a nice house, had I just waited, has not been lost on me...) I have also been on two European vacations in the last four years (for a total of 7 weeks), along with trips closer to home, a five day long road trip to Utah (from Oregon), and gone to some fun concerts and great shows (Book of Mormon, Hamilton, Oregon Shakespeare Festival, etc).
I would not categorize myself as "not successful". Sure, I can't wait for the day when the son is self-supporting, my new house is built, and my old house is sold, so that I can go back to my old method of "good enough" instead of tracking every penny. But, I would not have achieved the financial accomplishments of the last couple years without budgeting with a very specific and steadfast determination.
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Tiny
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Post by Tiny on Jul 16, 2019 23:57:56 GMT -5
Ow! This made my brain hurt:
Yes, I have a budget - I call it my Spending Plan (but it's the same thing). And oddly enough my spending plan DID prepare me for a broken car, a leaking roof and even 6 weeks of "short term disability" time off of work. It also helped me prepare for buying an investment property and then buying a second one. I doubt I'd be in as good a financial state as I am - if I hadn't worked with a "budget/spending plan" starting back in my 20's....
And yes, I did consider how much $ I needed to save each month to achieve my long term goals - and it took me nearly a decade to get to the point where I was saving enough (long term) money to reach my long term goals. and before I got to the point where I COULD save the big bucks for retirement - I struggled for many years just to save enough in "sinking funds" and my EF so I COULD even start to allocate more money to long term savings. IT's been a very long process... and budgeting helped me get there.
So, yeah, I budget. A lot. I'm even starting to think about how I will spend my money (budget) 5years from know if I 'retire' early at 60 and then 10 years from now at 65yo when my pension kicks in.... I need to know/think about how much I will have and were it will go... I don't want to run out of money AND I don't want to be too afraid to spend money.
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weltschmerz
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Post by weltschmerz on Jul 17, 2019 1:39:08 GMT -5
I do not budget.
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plugginaway22
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Post by plugginaway22 on Jul 17, 2019 5:47:47 GMT -5
We definitely had a budget back when we were raising 3 kiddos on DH's income and my very part-time income. We barely had enough to get all bills paid and then save a little. Now with 2 large incomes and an empty nest, it is freeing to not really watch the money like we used to. We continue to max 401ks, all bills are paid, and we continue to add to savings, but budget? No.
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Post by Deleted on Jul 17, 2019 6:31:12 GMT -5
LOL That's exactly what budgets do!
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buystoys
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Post by buystoys on Jul 17, 2019 6:57:59 GMT -5
Yes, I budget. I'm less interested in the month to month spending and more interested in the YTD right now. We're over budget so far with getting the rental together and our major project for this year. That's OK because we have been spending under budget earlier in the year, so we're not in as deep a hole as we could be.
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bobosensei
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Post by bobosensei on Jul 17, 2019 7:16:17 GMT -5
Mortgage, escrow, and car insurance come out of my checking account. Everything else goes on a credit card. I save and invest first then after my bills from the checking account I know how much I can spend on my credit card (I always know this). I keep an eye on the credit card and about midway through the month I'm checking there before I spend to keep myself under the amount I can pay off in full. So I am not thinking oh I can only spend 50 more on groceries it is more I have 300 left I can spend so if I spend 200 on this then I probably can't get steak and crab at the grocery store on the next trip. So I am prioritizing my expenditures and keeping it to an overall amount, but I am not saying I get x for gas, y for groceries, and z for fun money.
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flamingo
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Post by flamingo on Jul 17, 2019 8:05:43 GMT -5
I don't budget in the traditional sense. But I do know how much comes in every month and how much must go out to bills and expenses. I know the limit I need to keep my credit cards at to be able to pay them off each month. And I've always "paid myself first". So retirement and savings accounts keep building. I check my checking account regularly which helps keep me on track.
I could create a budget I suppose. Having a line item budget in excel or in an app doesn't really help me. Although, I guess you could say that I have that, because my bank's app does some of that for me. I think if I struggled with overspending, then I'd likely need to create a "real" budget.
The line in the article about budgets not preparing you for emergencies is laughable. If I didn't have a healthy emergency fund, that's exactly what I'd use a budget to help me create, so that those thing wouldn't be "emergencies" any more.
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teen persuasion
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Post by teen persuasion on Jul 17, 2019 9:20:16 GMT -5
I don't really budget now, more like we ride along on autopilot. Everything that can go on the credit card, does, and gets auto paid in full each month. A few things get auto drafted from the checking account. A few things I manually pay online once of twice a year, and a few checks for taxes and water bills. Paychecks get direct deposited into checking. So the checking account floats up and down throughout the year due to lumpy expenses - property taxes, school taxes, oil prebuy, annual insurance bills double or triple the typical monthly expenses now that we are debt free. I just keep a good size cushion in the checking, and view things on a yearly basis, not monthly.
I definitely had to plan out bill paying vs income years ago when we had one income and student loans and a mortgage (and 5 kids at home). Now we just spend normally (for us), and it works out. If a big unexpected expense comes up, I will reevaluate, but we've got the cushion to cover it initially and make adjustments going forward. But don't really need to do this much at all.
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giramomma
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Post by giramomma on Jul 17, 2019 9:50:24 GMT -5
When we were first starting out....yes...I tracked every penny. Now I don't. I just keep track of habits. We can afford a big costco run or target run. Not both. If we have a month where the kids need extra things for scouts, we cut back in other places. We can afford take away food 2-3x a month. Need more than that...well, then we go needs only for Target. My life is static and predictable, and I do not have time to retool the budget every week. It's easier for me to remember, Oh, we've been to Target, we're done for the month than changing the budget.
I don't do sinking funds for everything either. We have an EF and a short terms savings account. We're poised to retire on time. Still doing most things right.
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cktc
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Post by cktc on Jul 17, 2019 9:52:56 GMT -5
I haven't been budgeting much since we bought our house two years ago. I should. We are getting too comfortable spending and could probably be saving more, or at least spending on more worthwhile things like travel. We just keep an average month's expenses in checking, another month in a short-term/emergency savings account, the rest goes to various savings and investment pots. If we need to replenish the checking or emergency savings we use extra paycheck month, bonuses, tax return, or whatever little windfall is next on the horizon.
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haapai
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Post by haapai on Jul 17, 2019 11:02:14 GMT -5
I have never budgeted. I've never used that word. What I have done is keep accounts and compile reports. The insights and priorities that I derived from studying what I was making and where it was going were probably responsible for me getting out of some tough spots.
I stopped this accounting and tracking about seven years ago and now feel completely adrift and uncertain. Getting back in the saddle would probably do me a world of good.
I'm unsettled by Edelman's article. He appears to be presuming a degree of financial health and discretionary income that should not be taken for granted.
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souldoubt
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Post by souldoubt on Jul 17, 2019 11:29:44 GMT -5
I budget and track my expenses each month. I'm an accountant and it's my personality but I realize I'm more OCD about it than most. I think budgeting and/or tracking expenses at least once in a while is something most people should do because otherwise it's hard to know exactly how you come up short or don't have what you think you should at the end of the month. I think when people who find themselves needing to budget and track expenses start doing it it's an eye opener because they realize they spend quite a bit more on certain things than they thought they did.
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Tiny
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Post by Tiny on Jul 17, 2019 12:02:26 GMT -5
Budgets change over time due to one's circumstances. Maybe that's what the link is trying to hint at. And that all budgets aren't necessarily to the penny. You know the old 50/30/20 budget for example (or any of the other % breakout budgets). Back in the beginning I did "budget" to the penny - I had a lot of bills/obligations and at the end of the month (or rather out of every 2 paychecks in the same month) I had $50 that wasn't allocated to something in the current month or being 'saved to spend within 12 months of the current month'. This from the money that hit my checking account (so doesn't include 401K savings). But over time my income went up and my expenses staid the same or went away - so I increased Retirement saving/long term saving. I currently have way more income than expenses/outgoes so I do "budget" differently. The day to day is taken care of without any thought so if I'm adding some on going expense - I'm looking at my "saving streams" to see where I will have to redirect money. If I'm doing some one time want that I didn't expect I'm again looking at what "saving stream" will the money come out of. These kinds of things rarely effect my day to day life/spending (it might effect my "allowance" for the month though. ) .... I'm just re-directing a flow of money - I don't have to decide to not eat out or to not buy groceries. Behind the scenes IS a spending plan/budget - even if it's not obvious.
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swamp
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Post by swamp on Jul 17, 2019 12:08:45 GMT -5
Not really. I know what our income is, what our expenses are (including savings), and how much money we have to play with each month. If shit hit the fan, we could reduce our expenditures really quickly.
My fixed expenses are so far below our income we have a lot of wiggle room. The only debt we have is the mortgage, and at 3.5%, I'm in no hurry to pay it off, even though I only have 3.5 years left on it.
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Post by The Walk of the Penguin Mich on Jul 17, 2019 13:15:45 GMT -5
We had to put together a budget for retirement, to figure out what our expenses will be by what we are spending now and padding it some. For instance, we know that we will have a lot more kenneling charges in the future so have accounted for that. But until TD actually leaves his job, that budget is a best guestimate from what we are spending now. But currently, we do not budget. Like Swamp, we have a lot of wiggle room in the budget now and could cut things fast. Our mortgage is paid off, so we only have to account for property taxes.
When I was working, for most of my career I only got paid once each month. After the first few months where I was scrambling to pay bills that were due a week before payday, I realized I needed to do something. So I had a list of bills that were due and changed their arrival/due date so that I had everything I needed to pay at the end of the month. When my check hit the account, everything got paid out, money went into savings and the balance was fun/food/gas money. Usually there was enough of a slush in the leavings that I was able to pay for an unexpected expense (like a car repair, vet bill, etc.). For the most part, this seemed to work well and even when I got sick and was getting massive medical bills, I just decreased what got sent to savings by 2/3 and was able to cash flow those from my monthly pay.
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MN-Investor
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Post by MN-Investor on Jul 17, 2019 13:52:52 GMT -5
I've never budgeted, but I've always had an understanding of where we stood financially and it ended up that we never felt deprived and yet saved and invested very well for retirement. Since 2006, I've maintained a spreadsheet which summarized our income and expenses from Quicken into broad categories. The purpose of that was 1) to get a general idea of what we would be spending each year in retirement, and 2) to ensure that we had several years worth of cash, CDs, and short term bonds in our taxable accounts to handle all expenses should the stock market tank right after my DH retired. My sweetie retired in 2016, and passed away very unexpectedly last year, so now I'm taking a new look at my spending. Now I'm looking at cash flow. I don't need to adjust my spending. What I'm doing now is trying to come up with a financial plan so that my checking accounts only have what's necessary for short term spending and they are replenished from investments in a way that makes financial sense. One spreadsheet that I created this year was an eye-opener for me. During our earning years we lived strictly on salaries and interest from our bank accounts. I didn't pay any attention to interest and dividends from investments. So this year I created a spreadsheet which tracks all income - social security along with all interest and dividends in both taxable and retirement accounts. I was surprised at just how much our retirement accounts received in interest and dividends. It makes me feel more secure.
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resolution
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Post by resolution on Jul 17, 2019 13:55:39 GMT -5
So for the people that do real budgets, how do you handle extra money that you can't count on continuing to receive? My husband has been working a ton of overtime, which I hope won't continue, so it's not accounted for anywhere. Reality doesn't ever match the budget, and I end up either spending it or investing it.
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