Budgeting & Money Management

[Square Root]

And why resources have to be sufficient.

I know I am preaching to the choir here, but out there in the "real world" people seem to operate under the misapprehension that budgeting is some kind of special magic that will make insufficient resources stretch to cover a perceived desired lifestyle. If you have sufficient resources, you don't even need to budget, really.

I agree. 20 years ago I really needed a budget. Just started a very messy divorce, cash was tight, and I had to plan for 2 households really. Fast forward 20 years and probably don't need one now since resources are sufficient to support our very expensive lifestyle. However, things can always go wrong and having very good financial control over my life is something I have grown to like. Now it is more a tracking and reporting system rather than an actual "budget" that we have to keep to. Anyway, I will always have something like it- it's actually fun for us. Crazy, I know.

[phankinson]

No, I'm using the You Need A Budget software (after 20 years of using Quicken, which I have now abandoned).

With the YNAB software, whenever you receive income you have two choices for it: assign it as income for this month or as income for next month. This creates an amount "available to budget" and then you assign those dollars to categories in your budget until the "available to budget" amount is zero. (This is simply zero-based budgeting, nothing novel here.) This process is made easier in the software because it can automatically budget for any recurring transactions you have entered in your account registers, plus it can use the same values you budgeted for the previous month or your average values over the past 3 months, and then you can adjust and customize from that starting point. Setting up my budget each month takes me about 10 minutes.

Brad, I love the idea of YNAB. I downloaded it yesterday and played around with it, but I personally like my own spreadsheets and playing around with numbers. I realized based on what you said one of my core problems was I had basically one budget for all 12x months. It was hardly reliable because I was always stealing from one category to move into another category. So I rebuilt my spreadsheet to show 12x months upfront so I can see possible issues way before they happen. Now, if I have a month where my expenses end up higher than usual I can move things around easier.

Would love to get your feedback on my spreadsheet:
https://docs.google.com/spreadsheet/...1E&pli=1#gid=0

It's purely fictitious numbers, but you get the point.

[brad]

I downloaded it yesterday and played around with it, but I personally like my own spreadsheets and playing around with numbers.

Apparently the YNAB software started out as an Excel spreadsheet and they even sold it as a spreadsheet for a few years. I think it would be pretty easily to replicate much of its functionality with a spreadsheet.

YNAB only looks one month ahead; there are ways to work around that limitation, but they've found it's too easy for people to get into trouble when they give jobs to dollars that don't exist yet. You can enter recurring transactions into your budget, and one-time future transactions (e.g., income tax instalments), but YNAB forces you to work only with the money you have at hand, not money you expect to have in the future.

[phankinson]

Apparently the YNAB software started out as an Excel spreadsheet and they even sold it as a spreadsheet for a few years. I think it would be pretty easily to replicate much of its functionality with a spreadsheet.

YNAB only looks one month ahead; there are ways to work around that limitation, but they've found it's too easy for people to get into trouble when they give jobs to dollars that don't exist yet. You can enter recurring transactions into your budget, and one-time future transactions (e.g., income tax instalments), but YNAB forces you to work only with the money you have at hand, not money you expect to have in the future.

Am still a little confused.

How do you budget for an expense that you know is going to happen in 6 months from now, using YANB, if they only focus on this month? For example, each year I know I'm going to have accountant fees. Let's say the fees are $6,000 but I only make $2,000 of income that month?

[brad]

Am still a little confused.

How do you budget for an expense that you know is going to happen in 6 months from now, using YANB, if they only focus on this month? For example, each year I know I'm going to have accountant fees. Let's say the fees are $6,000 but I only make $2,000 of income that month?

You can add a category for it now and start saving for it.

[phankinson]

You can add a category for it now and start saving for it.

Ok that makes sense. I need to play around with the software some more I guess.

[brad]

It lets you carry over and build up amounts from month to month. So if you have some distant expense that you need to save for, you just divide it into monthly instalments and keep funding it until you reach the amount you need. I have a bunch of those set up.

[the-royal-mail]

phankinson, I'm happy to help but it is not necessary to quote everything you reply to so specifically. In a threaded view the most you should need to do is address the person or use ^, otherwise just type and that will save a bunch of needless scrolling. Thanks for understanding.

[phankinson]

^ noted.