Family Budgets
August 2, 2004 9:17 AM Subscribe
Trying to create and stay on a family budget. Has anyone had any success following a plan from a book or website? Should I hire a financial consultant? (More . . .)
Have tried creating budgets in the past (This is for a small family, basically myself and my wife and our 3 yr old). But always let it slide after a few weeks. Looking for tried and true methods that Mefites can point to and say "This worked for me!"
Have tried creating budgets in the past (This is for a small family, basically myself and my wife and our 3 yr old). But always let it slide after a few weeks. Looking for tried and true methods that Mefites can point to and say "This worked for me!"
My partner and I are budget-nistas. About 5 years ago we found it was time to get real about our money and get ourselves out of crippling debt, and this is what we did and it works.
First you have to realistically add up what your yearly expenses are. In this you must include the things that only get spent once a year and you may forget about. For the expenses that are not constants, estimate a bit higher. We actually ran into some problems at first because we were forgetting things like vet checkups and car maintanance. But once you get your total, divide by how many paychecks you get per year, and this will tell you how much of your paycheck needs to be put aside for bills.
The important thing about this system is to remember that even though you may have at any time what appears to be a huge surplus of money in that account, sooner or later that one yearly expense will kick in (like a car tax) and the money will be used for that because you have already earmarked that money for that specific purpose.
Whatever is left after the bills are paid we put toward credit card debt. We give ourselves stipends every two weeks to cover gas and have some pocket money. But the budget only works if you stick to it fanatically. If I only have $30 in my pocket until my next "allowance," then I need to spend that money on gas to get to work rather than that new CD I wanted to buy. The reality is that we lived like paupers on the surface because all of our money was funneling toward our debt. We cut out the fancy dinners and movies and concerts and stuff like that and just really focused on the debt. I am happy to report that it took us about 2 years, but we managed to pay off almost $20K in that time while still paying the mortgage and buying the occasional CD and concert ticket.
Keep vigilant records, down to the penny. Use each other to keep yourselves focused. Set up a system of checks and balances and have the understanding with your family that everyone who makes money decisions is accountable and will be held accountable. Things were bumpy at first because it's hard to wrap your brain around the idea that buying that CD actually does affect how much quicker you can get out of debt. You may also find yourself having to adjust the budget a bit in the beginning, which is fine, because it takes a while to find a balance, especially if there are major changes in your life (raises, unemplyment, sickness, etc).
When it comes down to it, if you are budgeting in order to get out of debt you have to make a lot of sacrifices at first, but it is so worth it. We put all of our extra money toward our debt and just having that weight off of our shoudlers was worth 2 years of wearing the same beat up shoes!! Now all of that money that we were sending credit cards is gravy on top of our potatoes!!
posted by archimago at 9:42 AM on August 2, 2004
First you have to realistically add up what your yearly expenses are. In this you must include the things that only get spent once a year and you may forget about. For the expenses that are not constants, estimate a bit higher. We actually ran into some problems at first because we were forgetting things like vet checkups and car maintanance. But once you get your total, divide by how many paychecks you get per year, and this will tell you how much of your paycheck needs to be put aside for bills.
The important thing about this system is to remember that even though you may have at any time what appears to be a huge surplus of money in that account, sooner or later that one yearly expense will kick in (like a car tax) and the money will be used for that because you have already earmarked that money for that specific purpose.
Whatever is left after the bills are paid we put toward credit card debt. We give ourselves stipends every two weeks to cover gas and have some pocket money. But the budget only works if you stick to it fanatically. If I only have $30 in my pocket until my next "allowance," then I need to spend that money on gas to get to work rather than that new CD I wanted to buy. The reality is that we lived like paupers on the surface because all of our money was funneling toward our debt. We cut out the fancy dinners and movies and concerts and stuff like that and just really focused on the debt. I am happy to report that it took us about 2 years, but we managed to pay off almost $20K in that time while still paying the mortgage and buying the occasional CD and concert ticket.
Keep vigilant records, down to the penny. Use each other to keep yourselves focused. Set up a system of checks and balances and have the understanding with your family that everyone who makes money decisions is accountable and will be held accountable. Things were bumpy at first because it's hard to wrap your brain around the idea that buying that CD actually does affect how much quicker you can get out of debt. You may also find yourself having to adjust the budget a bit in the beginning, which is fine, because it takes a while to find a balance, especially if there are major changes in your life (raises, unemplyment, sickness, etc).
When it comes down to it, if you are budgeting in order to get out of debt you have to make a lot of sacrifices at first, but it is so worth it. We put all of our extra money toward our debt and just having that weight off of our shoudlers was worth 2 years of wearing the same beat up shoes!! Now all of that money that we were sending credit cards is gravy on top of our potatoes!!
posted by archimago at 9:42 AM on August 2, 2004
I should probably mention that we got a lot of our ideas from Suze Orman (use the library, don't buy the books). She literally changed the way we treated our money. She'll help you see that any problem you are having with money is really not about the money. If anything she made us smarter about making decisions involving our money.
posted by archimago at 9:47 AM on August 2, 2004
posted by archimago at 9:47 AM on August 2, 2004
I'm now 8 months into a personal experiment of living on a budget. I laid out all my expenses in verbose detail, using my bank statements and credit card bills as a guide. I tried to be conservative about my estimates. I even cut back a bunch of expenses in the process.
Then, when I had a final number, I just doubled it.
Good thing, too.
posted by scarabic at 10:22 AM on August 2, 2004
Then, when I had a final number, I just doubled it.
Good thing, too.
posted by scarabic at 10:22 AM on August 2, 2004
Back in the day, when money was something fresh and new to us, we were doing silly things with it.
Then I got Quicken (the old, old DOS version) and started obsessively tracking every expenditure.
In less than four months our spending habits utterly changed. Once we were able to see how we were frittering it away, and how much it was really costing us over time, we gottaclue.
The old DOS Quicken was great. I've tried the newer versions and hated them all. So I actually suggest you find an open-source Quicken-style clone and use that instead of the commercial product. It'll almost certainly be easier to use and have fewer distracting and unnecessary features.
posted by five fresh fish at 10:27 AM on August 2, 2004
Then I got Quicken (the old, old DOS version) and started obsessively tracking every expenditure.
In less than four months our spending habits utterly changed. Once we were able to see how we were frittering it away, and how much it was really costing us over time, we gottaclue.
The old DOS Quicken was great. I've tried the newer versions and hated them all. So I actually suggest you find an open-source Quicken-style clone and use that instead of the commercial product. It'll almost certainly be easier to use and have fewer distracting and unnecessary features.
posted by five fresh fish at 10:27 AM on August 2, 2004
The important thing is to get everyone to join the big war against debt [or bills, or whatever] not stage petty battles with each other concerning who spent the extra dollar on sodas. The good news is, the three year old can't really spend money yet, so you're mostly talking about you and your wife.
When I say "this is what worked for me" I mostly mean "this is what allowed me to live off of very little money, not saddle myself with massive debt and live the life I wanted to live". The older I get, the more I sometimes say "man I wish I had more cash on hand" sometimes, but I never say "man, I wish I wasn't paying 19% on stuff I bought three years ago." To that end, my spotty advice:
first, keep track of all the money you spend. all of it. this is a hassle and unfun but figure out a baseline limit [record all expenses over a dollar, all expenses over $5, all expenses over 25 cents] and allot some time at the end of the day writing it all down every day. quicken is great for this because you can categorize and sub-categorize. if you need to, get everyone little notepads for writing down expenses. the more accurately you categorize the more useful this tool will be. when I split the "food" category into "eating out" and "food shopping" my whole persective on those things changed for me, try splitting out "credit card interest" from "credit card principal" or doing that with student loans
second, look at these lists of where the money goes in, say a month or a few months, figure out what big ticket items aren't there [once a year bills, or big payments like fuel bills in winter] and try to average out a budget. examine categories closely to see if you can spend less in certain areas. If you're budgeting to pay down debt, be cruel, if you're budgeting just to stay stable and make do with less, be more reasonable [things to look at: second cars, cell phones, cable bills, ISP fees, eating out, dry cleaning, vacation costs, home improvements, drinking when you go out, entertainment in general, Brand Name Anything, new vs used, etc].
third, work forward averaging out what you need to pay towards bills [and spend some time reading Your Money or Your Life or similar books to examine the REAL cost of credit card debt], give yourselves an allowance, build in some splurging [at our house it's one eat out meal a week full price, one budget snack bar meal, everything else is at home]
fourth, keep looking at your budget to see what's working and what isn't. If it's too stringent, you just won't stick to it, Too loose and you won't repect it. Work with your wife to figure out what is working and what is just painful and see if there's room to move there. The reassessing is also a way to keep you paying attention to it.
Ultimately, spending money on "stuff" [as opposed to bills and necessities] is a bit of habit as much as anything else. Try to address this at the same time you're budgeting and try to be reflective on what causes you to want to spend money and see if there are other ways to satisfy that urge. Lastly, we keep a big change jar on the countertop that just says "vacation" and all the day-end change goes into it. When it hits $450 we're going to Nova Scotia, and we've gotten 2/3 of the way there in just under a year.
posted by jessamyn at 10:33 AM on August 2, 2004
When I say "this is what worked for me" I mostly mean "this is what allowed me to live off of very little money, not saddle myself with massive debt and live the life I wanted to live". The older I get, the more I sometimes say "man I wish I had more cash on hand" sometimes, but I never say "man, I wish I wasn't paying 19% on stuff I bought three years ago." To that end, my spotty advice:
first, keep track of all the money you spend. all of it. this is a hassle and unfun but figure out a baseline limit [record all expenses over a dollar, all expenses over $5, all expenses over 25 cents] and allot some time at the end of the day writing it all down every day. quicken is great for this because you can categorize and sub-categorize. if you need to, get everyone little notepads for writing down expenses. the more accurately you categorize the more useful this tool will be. when I split the "food" category into "eating out" and "food shopping" my whole persective on those things changed for me, try splitting out "credit card interest" from "credit card principal" or doing that with student loans
second, look at these lists of where the money goes in, say a month or a few months, figure out what big ticket items aren't there [once a year bills, or big payments like fuel bills in winter] and try to average out a budget. examine categories closely to see if you can spend less in certain areas. If you're budgeting to pay down debt, be cruel, if you're budgeting just to stay stable and make do with less, be more reasonable [things to look at: second cars, cell phones, cable bills, ISP fees, eating out, dry cleaning, vacation costs, home improvements, drinking when you go out, entertainment in general, Brand Name Anything, new vs used, etc].
third, work forward averaging out what you need to pay towards bills [and spend some time reading Your Money or Your Life or similar books to examine the REAL cost of credit card debt], give yourselves an allowance, build in some splurging [at our house it's one eat out meal a week full price, one budget snack bar meal, everything else is at home]
fourth, keep looking at your budget to see what's working and what isn't. If it's too stringent, you just won't stick to it, Too loose and you won't repect it. Work with your wife to figure out what is working and what is just painful and see if there's room to move there. The reassessing is also a way to keep you paying attention to it.
Ultimately, spending money on "stuff" [as opposed to bills and necessities] is a bit of habit as much as anything else. Try to address this at the same time you're budgeting and try to be reflective on what causes you to want to spend money and see if there are other ways to satisfy that urge. Lastly, we keep a big change jar on the countertop that just says "vacation" and all the day-end change goes into it. When it hits $450 we're going to Nova Scotia, and we've gotten 2/3 of the way there in just under a year.
posted by jessamyn at 10:33 AM on August 2, 2004
What everyone else said.
But I was never organized enough to track my expenses using receipts, little sticky notes, etc. Instead, I stopped using cash and credit cards totally. Everything goes on a debit card or check card. That way, everything is trackable (unlike cash), and there aren't any hidden or deferred expenses (like credit cards).
Every couple of days, I login to my bank and update my tracking spreadsheet. My spreadsheet includes 3 master categories and many subcategories: Mandatory expenses (housing, utilities, childcare, etc.), Discretionary expenses (Eating Out, Gifts, Entertainment, etc.) and Income.
After getting 2-3 months worth of data, a budget emerged. I could see where my money was going - and I was shocked into action. My impulsive purchases, lavish gift giving and willingness to eat out were draining my wallet. The hardest part was to recognize when I was about to spend impulsively - and stop myself.
Now that I have a budget, I can plan for, and treat myself to the occasional CD or dinner with Mrs. Grateful with the knowledge that we can do so responsibly.
Whatever approach you use to track your expenses, it is important to realize that it is the easy part. The challenge is to see the budget as more than just numbers on a piece of paper. There have to be consequences for overspending - chastisement, derision, etc - or it becomes a meaningless exercise.
I'm sure Suze says so too, but save first via payroll deduction. Makes a huge difference.
posted by grateful at 11:40 AM on August 2, 2004
But I was never organized enough to track my expenses using receipts, little sticky notes, etc. Instead, I stopped using cash and credit cards totally. Everything goes on a debit card or check card. That way, everything is trackable (unlike cash), and there aren't any hidden or deferred expenses (like credit cards).
Every couple of days, I login to my bank and update my tracking spreadsheet. My spreadsheet includes 3 master categories and many subcategories: Mandatory expenses (housing, utilities, childcare, etc.), Discretionary expenses (Eating Out, Gifts, Entertainment, etc.) and Income.
After getting 2-3 months worth of data, a budget emerged. I could see where my money was going - and I was shocked into action. My impulsive purchases, lavish gift giving and willingness to eat out were draining my wallet. The hardest part was to recognize when I was about to spend impulsively - and stop myself.
Now that I have a budget, I can plan for, and treat myself to the occasional CD or dinner with Mrs. Grateful with the knowledge that we can do so responsibly.
Whatever approach you use to track your expenses, it is important to realize that it is the easy part. The challenge is to see the budget as more than just numbers on a piece of paper. There have to be consequences for overspending - chastisement, derision, etc - or it becomes a meaningless exercise.
I'm sure Suze says so too, but save first via payroll deduction. Makes a huge difference.
posted by grateful at 11:40 AM on August 2, 2004
Personally, budgets have not worked out for me. But this book introduced me to the "Pay Yourself First" approach. In a nutshell, the idea is to set aside a fixed amount from every check RIGHT OFF THE TOP (preferably via automatic DirectDeposit, so you never even perceive it as a "loss" or are tempted to redirect it to anything else) and only then pay bills & luxuries out of the remainder. Your life just sort of...conforms to what's available. No stressing over whether you went over a few bucks on this line item or if you can squeeze a little more out of that line item.
The surprising thing for me was that not only hasn't my standard of living "felt" lower, but savings have been accumulating so quickly that it keeps building enthusiasm for putting ever larger amounts aside. It doesn't feel like a sacrifice at all. Obviously everyone's different, but it's a worthwhile alternative if you're not doing well with a traditional "budget" approach.
posted by nakedcodemonkey at 11:51 AM on August 2, 2004
The surprising thing for me was that not only hasn't my standard of living "felt" lower, but savings have been accumulating so quickly that it keeps building enthusiasm for putting ever larger amounts aside. It doesn't feel like a sacrifice at all. Obviously everyone's different, but it's a worthwhile alternative if you're not doing well with a traditional "budget" approach.
posted by nakedcodemonkey at 11:51 AM on August 2, 2004
I had to keep trying to hit that liveable balance between savings and spending and to provide for those expenses you can't really budget for, but eventually I found the formula that works for me is:
- automated withdrawals for my bills and for savings
- I withdraw X dollars in cash from an Instant Teller twice a month (on the 1st and 15th). This money is for groceries and incidentals. I don't allow myself to exceed this.
- I can put X dollars on my VISA every month. I keep track of what I've put on there every month so that I don't spend too much.
I work out a new budget everytime there's an increase in either income or bills.
posted by orange swan at 12:39 PM on August 2, 2004
- automated withdrawals for my bills and for savings
- I withdraw X dollars in cash from an Instant Teller twice a month (on the 1st and 15th). This money is for groceries and incidentals. I don't allow myself to exceed this.
- I can put X dollars on my VISA every month. I keep track of what I've put on there every month so that I don't spend too much.
I work out a new budget everytime there's an increase in either income or bills.
posted by orange swan at 12:39 PM on August 2, 2004
I do very well with a simple spreadsheet, one line per pay period.
First column, date; second column, income; third column, incidental income, fourth through x columns, expense and savings categories; y column, balance from week's income; z column, cumulative cash/checking account balance.
posted by mischief at 12:44 PM on August 2, 2004
First column, date; second column, income; third column, incidental income, fourth through x columns, expense and savings categories; y column, balance from week's income; z column, cumulative cash/checking account balance.
posted by mischief at 12:44 PM on August 2, 2004
I have been meaning to ask about financial advisors. We have been to a couple, and both tried to sell us something. Should we be going to a pay-per-hour advisor (i.e. one who doesn't depend on commissions), or is it easy to track various investments yourself?
posted by whatnot at 4:04 PM on August 2, 2004
posted by whatnot at 4:04 PM on August 2, 2004
You don't need to pay a financial advisor. Someone mentioned Suze Orman previously--watch a few episodes of her show and you'll learn the vernacular and pick up tons of organizational tips really quickly. The goal when investing is to shave off the expenses as much as possible to maximize your earnings; you can do better with a few weekends of reading through booklets than any kind of for-pay advisor who is looking after *their own* best interest.
posted by bcwinters at 7:32 PM on August 2, 2004
posted by bcwinters at 7:32 PM on August 2, 2004
Meet your new best friend, Clark Howard. He's got an excellent web site, a few great books, and an awesome radio show that may or may not be available in your area. I recommend any and all things Clark without reservation.
posted by spilon at 7:45 PM on August 2, 2004
posted by spilon at 7:45 PM on August 2, 2004
>Everything goes on a debit card or check card. That way, everything is trackable (unlike cash),
But watch out for hidden debit card fees. The debit card can also tempt you with a higher limit than taking a fixed sum from the bank.
I would side with orange swan. Take out fixed amounts one day of the week and after some time you will work within this amount. I can mentally track down the cash I spend to within five dollars a week. Then there's the tactile/visual reminder: you had five twenty dollar bills on Tuesday and have three on Thursday, so where the hell did they go?
posted by philfromhavelock at 8:58 PM on August 2, 2004
But watch out for hidden debit card fees. The debit card can also tempt you with a higher limit than taking a fixed sum from the bank.
I would side with orange swan. Take out fixed amounts one day of the week and after some time you will work within this amount. I can mentally track down the cash I spend to within five dollars a week. Then there's the tactile/visual reminder: you had five twenty dollar bills on Tuesday and have three on Thursday, so where the hell did they go?
posted by philfromhavelock at 8:58 PM on August 2, 2004
I think you haven't got an answer to your question here, which was online budgeting tools. Perhaps there aren't any worth mentioning, but I'll leave this comment here as a reminder/refresher in case anyone has comments thereon to offer.
posted by scarabic at 12:26 AM on August 3, 2004
posted by scarabic at 12:26 AM on August 3, 2004
Okay, here's what worked for me and my partner.
1) Add up all of your mandatory expenses for the year. For us that included
a) fixed costs that were easily found using bank statements or bills: mortgage, student loans, car payment, car insurance, minimum credit card payment (when we still had C.C. debt), phone/cell phone/DSL, cable.
b) non-fixed costs which had to be estimated based on spending history: groceries, pet food, gasoline, water bill, gax/elec bill, etc.
c) once a year items such as car tax, car registration, professional memberships, magazine subscriptions, dentist/doctor/vet visits, birth control, etc It is important to try and get EVERYTHING here. It is very helpful if you have a year’s worth of spending data (I used Quicken) so that you don’t forget the ‘once a year’ items and can get good estimates for the bills that vary (ie. gas/electric). I purposely over estimate some the variables as a safety net. Also, note that what is mandatory for you may be discretionary for me (for instance I do not consider ‘clothes’ as mandatory…insert joke here)
2) Find the difference between the mandatory expenses and your yearly income. Divide by 52. The result is the amount you have to spend each week on all discretionary items as well as what you can put into savings/pay down debt. You can also divide by 12 and do this on a monthly basis. I found that weekly was easier for us because our spending revolved around the weekends. If you go by month, two months of the year will have 5 weekends. This tended to cause us to come up short in those months.
3) Next you have to find a comfortable balance between what you can save and what you need to live comfortably. We started out trying to put 1/2 of our weekly discretionary money into savings, found that we were not at all happy and adjusted accordingly. Someone upthread noted that if your budget is too strict you wont stick to it and/or will be miserable and/or will be self-loathing when you go over. I wholeheartedly agree. Push yourself to save but don’t make yourself miserable. If you find that you are getting by easily on a certain amount, you probably need to put more in savings. Adjust until you are at the point were you DO have to make some sacrifices to make budget but not so many that you are entirely unhappy.
4) Once you do find that happy medium, have the savings automatically transferred into your savings account on a regular basis (weekly for us).
5) Adjust the budget whenever there is a change in either your income or your mandatory expenses.
Another thing that worked REALLY well for us was to have three checking accounts, one master, one for my wife’s sole use, and one for mine. A fixed amount (deducted from the weekly discretionary funds) is automatically transferred to our accounts. That way when I want to go out for beer with my buddies after work or if she wants to buy some male strippers neither of us gets bent out of shape about it.
I have no great advice for sticking to your budget, which now that I’ve reread your question (and after I’ve spent all this time typing the above), may really be the problem you have. Here’s a couple auggestions that may help.
1) Make a goal. Goals can include paying off a credit card, saving for a vacation, buying a monkey, whatever suits you. Set a timeframe in which you’d like to have accomplished that goal. In a month, in a year, etc. Every time you think about going over your weekly budget, think about your goal, and know that by making that purchase you are jeopardizing your ability to meet your goal. I’d suggest making a simple goal at first, one that is easily attainable. Your success in meeting that goal will make it more likely that you will do well in future goals. (Duh!)
2) Involve your spouse intimately in the budget process. She needs to know where the numbers are coming from, where the money goes, help set goals for yourselves, etc. It will be much easier if it’s a team effort.
posted by topherbecker at 10:08 AM on August 3, 2004
1) Add up all of your mandatory expenses for the year. For us that included
a) fixed costs that were easily found using bank statements or bills: mortgage, student loans, car payment, car insurance, minimum credit card payment (when we still had C.C. debt), phone/cell phone/DSL, cable.
b) non-fixed costs which had to be estimated based on spending history: groceries, pet food, gasoline, water bill, gax/elec bill, etc.
c) once a year items such as car tax, car registration, professional memberships, magazine subscriptions, dentist/doctor/vet visits, birth control, etc It is important to try and get EVERYTHING here. It is very helpful if you have a year’s worth of spending data (I used Quicken) so that you don’t forget the ‘once a year’ items and can get good estimates for the bills that vary (ie. gas/electric). I purposely over estimate some the variables as a safety net. Also, note that what is mandatory for you may be discretionary for me (for instance I do not consider ‘clothes’ as mandatory…insert joke here)
2) Find the difference between the mandatory expenses and your yearly income. Divide by 52. The result is the amount you have to spend each week on all discretionary items as well as what you can put into savings/pay down debt. You can also divide by 12 and do this on a monthly basis. I found that weekly was easier for us because our spending revolved around the weekends. If you go by month, two months of the year will have 5 weekends. This tended to cause us to come up short in those months.
3) Next you have to find a comfortable balance between what you can save and what you need to live comfortably. We started out trying to put 1/2 of our weekly discretionary money into savings, found that we were not at all happy and adjusted accordingly. Someone upthread noted that if your budget is too strict you wont stick to it and/or will be miserable and/or will be self-loathing when you go over. I wholeheartedly agree. Push yourself to save but don’t make yourself miserable. If you find that you are getting by easily on a certain amount, you probably need to put more in savings. Adjust until you are at the point were you DO have to make some sacrifices to make budget but not so many that you are entirely unhappy.
4) Once you do find that happy medium, have the savings automatically transferred into your savings account on a regular basis (weekly for us).
5) Adjust the budget whenever there is a change in either your income or your mandatory expenses.
Another thing that worked REALLY well for us was to have three checking accounts, one master, one for my wife’s sole use, and one for mine. A fixed amount (deducted from the weekly discretionary funds) is automatically transferred to our accounts. That way when I want to go out for beer with my buddies after work or if she wants to buy some male strippers neither of us gets bent out of shape about it.
I have no great advice for sticking to your budget, which now that I’ve reread your question (and after I’ve spent all this time typing the above), may really be the problem you have. Here’s a couple auggestions that may help.
1) Make a goal. Goals can include paying off a credit card, saving for a vacation, buying a monkey, whatever suits you. Set a timeframe in which you’d like to have accomplished that goal. In a month, in a year, etc. Every time you think about going over your weekly budget, think about your goal, and know that by making that purchase you are jeopardizing your ability to meet your goal. I’d suggest making a simple goal at first, one that is easily attainable. Your success in meeting that goal will make it more likely that you will do well in future goals. (Duh!)
2) Involve your spouse intimately in the budget process. She needs to know where the numbers are coming from, where the money goes, help set goals for yourselves, etc. It will be much easier if it’s a team effort.
posted by topherbecker at 10:08 AM on August 3, 2004
There are few pre-canned budgets available with specific dollar amounts pre-assigned based on income or some other arbitrary piece of data, and for good reason. Obviously, the cost of living is vastly different from place to place. Moving just a mile to a larger apartment would save me 50% of what I am paying because of the proximity to the downtown area. Other examples aren't always as dramatic, but it highlights why a cut and paste budget will not be easy to find.
Budgeting styles are deeply personal. Some people need hard and fast rules and dollar amounts. Others need some basic understanding of finances. Others still need some motivation. You may not be able to do with out dinning out or cable tv, others may not be able to do without an arbitrary consumer habit like the use of cash or shopping at a favorite store.
The three basic tools of budgeting are:
1) Education
2) Observation
3) Accountability
If you're looking for education, you have a virtually unlimited number of sources, from books, continuing education courses, a CPA, the Internet and so on. I'd suggest picking up a few popular books and reading until some thing(s) click(s). You don't want to budget yourself into further financial problems or personal misery. Cover your options first.
Assuming you're okay with the education end of things, budgeting works best when you have some data. If you don't have your fiscal history available in an accounting package or excel, get it from your bank or your bank statements. Using online banking to get your account history is a huge help in observing your historical and current habits. Once you've observed some patterns in behavior, you can make some educated decisions about your budget.
What are you spending your discretionary income on? Is it mostly cash? Is it mostly credit cards? Are they mostly big ticket, luxury items? These are likely places to make savings with a budget.
What are your mandatory monthly expenses? Does that include things like food, auto fuel and luxuries you refuse to give up? This is the base of your budget. You can expect to always spend more than this, but how much more is up to your personal level of comfort.
Lastly, there is accountability. Having a budget to help achieve a goal isn't going to be enough of a motivator for a lot of people. The reward may be great, but not attaining the reward may not amount to a loss. What happens if you go over budget? Turning the budget into a divisive relationsip tool is not recommended. Punishing one person in a family is not recommended, though you have to address people's habits in some manner.
Some things I have done to help me with budgeting are as follows:
1) Go through a month or two of moving your payment dates on your credit cards, utilities, loans, mortgage and rent forward. Pay them as early as comfortable while not limiting your choices. My rent and utilities are paid between a month and two weeks before I am billed. In the event of some unforseen disaster, I have a coasting period of 45 days to adjust. This has a huge impact on my comfort with my bills and budget and allow for a great deal of flexibility.
2) Budget both your credit card payments and credit card spending. If you're trying to reduce debt, don't use the credit cards and always make a payment above the minimum. I try to make sure new purchases are paid off within a few months or I make sure to get no-interest deals from the bank or merchant. After you pay off your debt, don't start building debt again by transferring the extra cash available in your budget to discretionary spending. Put it towards savings.
3) Use online banking to schedule your bills to be paid as close to when you receive your paychecks as possible. All of my bills go out within a day or two of each other and they always coincide with one of my paychecks. And be hyperaware of bank fees. One bank I had used was charging me hundreds of dollars a year in hidden fees, many of which were fraudulent, but most of which were my stupid behavior. Avoid ATM fees, they add up.
4) Use automatic deposit to keep money from the accounts you spend from. This method can systematically force you to spend less. Don't connect this account to your ATM card, you can always do it in an emergency with your bank, probably even over the phone at a merchant.
5) Read your bills carefully every month, especially ones that change from month to month. Question everything, but always remain polite if you call the company. If you find errors, don't buckle to the CSR saying no, call back until you get a CSR who says yes. Try not to melt down, even when things go dramatically wrong. It's hardly ever to your benefit.
If you need online tools, Yahoo! offers a product similar to Quicken. I find it cumbersome, but a great deal more flexible than the Quicken online component.
posted by sequential at 12:27 PM on August 3, 2004
Budgeting styles are deeply personal. Some people need hard and fast rules and dollar amounts. Others need some basic understanding of finances. Others still need some motivation. You may not be able to do with out dinning out or cable tv, others may not be able to do without an arbitrary consumer habit like the use of cash or shopping at a favorite store.
The three basic tools of budgeting are:
1) Education
2) Observation
3) Accountability
If you're looking for education, you have a virtually unlimited number of sources, from books, continuing education courses, a CPA, the Internet and so on. I'd suggest picking up a few popular books and reading until some thing(s) click(s). You don't want to budget yourself into further financial problems or personal misery. Cover your options first.
Assuming you're okay with the education end of things, budgeting works best when you have some data. If you don't have your fiscal history available in an accounting package or excel, get it from your bank or your bank statements. Using online banking to get your account history is a huge help in observing your historical and current habits. Once you've observed some patterns in behavior, you can make some educated decisions about your budget.
What are you spending your discretionary income on? Is it mostly cash? Is it mostly credit cards? Are they mostly big ticket, luxury items? These are likely places to make savings with a budget.
What are your mandatory monthly expenses? Does that include things like food, auto fuel and luxuries you refuse to give up? This is the base of your budget. You can expect to always spend more than this, but how much more is up to your personal level of comfort.
Lastly, there is accountability. Having a budget to help achieve a goal isn't going to be enough of a motivator for a lot of people. The reward may be great, but not attaining the reward may not amount to a loss. What happens if you go over budget? Turning the budget into a divisive relationsip tool is not recommended. Punishing one person in a family is not recommended, though you have to address people's habits in some manner.
Some things I have done to help me with budgeting are as follows:
1) Go through a month or two of moving your payment dates on your credit cards, utilities, loans, mortgage and rent forward. Pay them as early as comfortable while not limiting your choices. My rent and utilities are paid between a month and two weeks before I am billed. In the event of some unforseen disaster, I have a coasting period of 45 days to adjust. This has a huge impact on my comfort with my bills and budget and allow for a great deal of flexibility.
2) Budget both your credit card payments and credit card spending. If you're trying to reduce debt, don't use the credit cards and always make a payment above the minimum. I try to make sure new purchases are paid off within a few months or I make sure to get no-interest deals from the bank or merchant. After you pay off your debt, don't start building debt again by transferring the extra cash available in your budget to discretionary spending. Put it towards savings.
3) Use online banking to schedule your bills to be paid as close to when you receive your paychecks as possible. All of my bills go out within a day or two of each other and they always coincide with one of my paychecks. And be hyperaware of bank fees. One bank I had used was charging me hundreds of dollars a year in hidden fees, many of which were fraudulent, but most of which were my stupid behavior. Avoid ATM fees, they add up.
4) Use automatic deposit to keep money from the accounts you spend from. This method can systematically force you to spend less. Don't connect this account to your ATM card, you can always do it in an emergency with your bank, probably even over the phone at a merchant.
5) Read your bills carefully every month, especially ones that change from month to month. Question everything, but always remain polite if you call the company. If you find errors, don't buckle to the CSR saying no, call back until you get a CSR who says yes. Try not to melt down, even when things go dramatically wrong. It's hardly ever to your benefit.
If you need online tools, Yahoo! offers a product similar to Quicken. I find it cumbersome, but a great deal more flexible than the Quicken online component.
posted by sequential at 12:27 PM on August 3, 2004
This thread is closed to new comments.
- estimate how much we spend (include everything - utilities, cost of last holidays, food, eating out, presents, parties, average amounts for working on house, "spending money" etc)
- put that much money every month into a joint account
- spend money just from that joint account
- track what is spent in enough detail so that at the end of the month we know what the money left over is for (eg what fraction is savings for holiday and what fraction can be spent on home improvements)
since we earn more than we calculate we need, and spend what we calculate, that works. if you spend more than you calculate you need to work out why by tracking receipts. if you calculate more than you earn you need to change your lifestyle to spend less.
having the joint account that is just for the money that we calculate we need every month is the key - it's obvious if you spend too much because it goes into the red and it's obvious when you can spend a bit more on a treat because you have money left over at the month end.
posted by andrew cooke at 9:26 AM on August 2, 2004