Budgeting

[SkyFall]

What is your budget? You can give % or $

ex:

Income: $50 000

Expense (a): 5%
Expense (b): 15%


Investment: 25%

[CJOttawa]

Net pay is about 65% of gross.

Budget as follows and validated by about five years of MS Money data and averaged over the year, as a percentage of net income:

Rent: 15% (30% total but it's split 50/50 between me and spouse)
Electricity: 2.6% (steady/fixed cost)
Renter's Insurance: 0.6% (fixed cost)
Transportation (bus pass): 2.6% (fixed cost)
Transportation (gasoline, shared car): 2.4% (very little use, Yaris so not a gas hog)
Clothing: 3% (not a clothes horse so this isn't one I watch too much)
Groceries: 11.1% (I do track this and am careful with it)
Dining Out: 3.8% (I watch this closely)
Snack Food: 0.6% (usually don't spend much on it so it's passively tracked)
Cellular (no home phone): 1% (fixed rate plan - never have to watch, just track)
Sports Participation: 1.3% (fairly steady fixed cost, no need to track)
Gifts: 4.4% (careful with this one, especially around holidays)
Saving: 38.2%% of net income (I work hard to make this one as high as possible - this is the average)

That only adds to 86.6%; I'm missing a few items like appliances, home improvements, car maintenance etc.

We usually go over on groceries and under on dining out.

[brad]

After experimenting with various approaches to budgeting over the years, I decided it's mostly a waste of time for me and I only track the four or five items that I tend to overspend on so I can keep them in check. And even then I don't pay too much attention.

For savings and investing, I generally set targets and work toward them. For general spending I have an overall monthly limit in mind and I stay under it to ensure I never carry a balance on my credit card.

Food, electricity, etc. are not entirely under my control: if we have company our food expenditures go up; likewise if it's an unusually cold winter our electricity bill goes up. So I don't set a budget for these; I do monitor my food expenses but mostly out of curiosity. Same goes for transportation costs; those vary based on things that come up: a wedding, a funeral, visits to friends and family, etc. Dining out is such a rare occurrence (once or twice a month) that we don't budget for it.

[CJOttawa]

After experimenting with various approaches to budgeting over the years, I decided it's mostly a waste of time for me and I only track the four or five items that I tend to overspend on so I can keep them in check. And even then I don't pay too much attention....

Same here. I track groceries and dining out as well as a few discretionary groups. Most of the other stuff is by feel - "gee, we took a lot of out of town trips last month... we'd better scale back this month" and so forth.

[Square Root]

We have been budgetting for about 20 years. Quite detailed with about 40-50 expense categories. Start with income after deductions, less all expenses to get the net increase(decrease) in cash for the month. I add this to my opening monthly cash balance to get the ending cash balance. I then reconcile this to my bank accounts, ie it must equal. We have the current year plus two more budgetted years. Really helps in cash flow planning to ensure the cash is available for large future expenditures. We group the expenses by property(have 4) and pay particular attention to discretionary expenses like travel,entertainment, auto purchases, gifts, donations,etc. Bottom line: it is important to know where your money goes otherwise difficult to plan for retirement or anything else. many different ways to do it though. use tne one that makes most sense for you. One size does not fit all.

[brad]

Bottom line: it is important to know where your money goes otherwise difficult to plan for retirement or anything else. many different ways to do it though. use tne one that makes most sense for you.

I think there's a difference between tracking your expenses and budgeting. I track all my expenses too, and have been doing so for many years...lots of categories and subcategories. But that's not budgeting. Budgeting is setting out limits for those categories and monitoring how your spending tracks against those limits. That's the part that doesn't work for me: in my case I find it's mainly an exercise in futility.

[Square Root]

I think there's a difference between tracking your expenses and budgeting. I track all my expenses too, and have been doing so for many years...lots of categories and subcategories. But that's not budgeting. Budgeting is setting out limits for those categories and monitoring how your spending tracks against those limits. That's the part that doesn't work for me: in my case I find it's mainly an exercise in futility.

Yes. I understand your point. Prior to retiring we tracked rather than budgeted. We really didn't have much constraint on our ability to spend. In retirement and especially during the financial crises it became clear that no matter how much you have it will be a fixed amount and needs to be controlled. Thus our first real budget(2009). Now our income is fixed- dividends and pensions and unless you want to spend down the portfolio and risk running out of money, you need to keep total spending under this amount. i think the best way to do this is know whete you have been spending so you can decide where you want to spend. In our case we have a very large cah cushion so overspending just reduces this a bit.

[SW20 MR2]

I honestly don't look too much at our budget. That being said, we are not big spenders by any stretch. My only vice is golf, and I spend about 1% of our gross income on it. My wife doesn't have any hobbies that cost money. Aside from that, we don't spend a heck of a lot on entertainment/hobbies/toys, and when we do, I always shop around and look for the best deals.

[Echo]

I think it's important to track your expenses for at least a year to get a handle on your spending patterns. From there, you can adapt your budget to whatever works best for you. I still track my monthly spending, and I also use a spreadsheet to forecast my future income and expenses over about 12-18 months. This way I can make a proactive spending and savings plan that takes into account things like an annual raise and the extra income you receive once you stop paying CPP and EI premiums, as well as the non-recurring charges like a one-time property tax bill, home insurance, Christmas gifts (birthdays, anniversaries). All those things that sneak up on you.

Then I can make sure I put every dollar of income to work, whether it's for future expenses or for savings. I don't really care too much if I go over-spend in a category one month...I just shuffle things around in the big picture spreadsheet to account for it.

Sounds tedious and boring but it only takes a few minutes to update and it allows me to set some realistic financial goals.

[rd_aaron]

Although this is moreso tracking than it is a budget, I thought I'd give it a try as I'm curious how the percentages work out. I'm doing this as a percentage of net income.

Rent: 16.3%
Groceries: 7.0%
Gasoline: 1.5%
Electricity: 0.8%
Insurance (contents & car): 3.1%
Student Loan Payment: 5.8%
Dining Out: 3.5% (total guess... sometimes more, sometimes less)
Cell Phone: 1.6%
Cable/Internet: 1.1%
Entertainment (including sports fees): 4.1%
Travel: 4.0% (what I've spent on flights/hotels for 3 trips this year)
Saving: 19.8% (TFSA, sometimes also paying off big chunks of student loan)

Total: 68.6%

Well that's a little depressing. Over 31% of my spending is basically unaccounted for. This would be things like shopping, car repairs, gifts, donations, etc.

I guess a positive I can take from this is if I reign in my spending more, I can contribute quite a bit more to savings. Also, once my student loan is paid off, I'll have nearly 6% of my income to do with as I please.