# Budgeting



## SkyFall (Jun 19, 2012)

What is your budget? You can give % or $ 

ex: 

Income: $50 000

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


Investment: 25%


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## 44545 (Feb 14, 2012)

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.


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## brad (May 22, 2009)

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.


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## 44545 (Feb 14, 2012)

brad said:


> 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.


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## Square Root (Jan 30, 2010)

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.


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## brad (May 22, 2009)

Square Root said:


> 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.


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## Square Root (Jan 30, 2010)

brad said:


> 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.


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## SW20 MR2 (Dec 18, 2010)

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.


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## Echo (Apr 1, 2011)

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.


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## rd_aaron (Jun 24, 2011)

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.


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## MoneyGal (Apr 24, 2009)

I have to admit I track my expenses at a ridiculously high level of detail (I can tell you what every single item of clothing I'm wearing on any given day cost) but I do not budget. I don't need to -- the tracking takes care of that for me, in essence. Before I decided to stay home with kids for a while I did do an incredibly detailed budget, which was very liberating for me. (Liberating because it demonstrated to me that we COULD do it.)


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## 44545 (Feb 14, 2012)

brad said:


> 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.


In my experience, when you have very little, it's important to allocate carefully and not exceed allocations.

We've reached a point where we have a bit of extra cash so our motivation isn't that we can't make ends meet. Rather, our motivation is more intrinsic - see just how little we can spend without feeling deprived. We cut our dining out expenses by about two-thirds this year, just to see if we could. (we added a bit to groceries to compensate)

A word of caution: don't create too many categories and sub-categories. At some point, you lose the forest for the trees.

FYI: I use Microsoft Money for budgeting and spending tracking. Its "Spending Barometers" might appeal to you.


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## brad (May 22, 2009)

CJOttawa said:


> A word of caution: don't create too many categories and sub-categories. At some point, you lose the forest for the trees.


True, but at the same time it sometimes helps to split rather than lump. For example, everything that goes into my mouth gets entered into my "Food" category in Quicken, which means groceries; meals out; wine, beer, etc. I might get a better handle on my spending in this area if I split out Food into "Groceries," "Eating Out," and "Alcohol." I really should do that, but I'm a procrastinator. 

For my car, I have everything split out: service and repairs, license, registration, insurance, and fuel. Lumping all that stuff together gives you a poor picture both for tracking and budgeting purposes. Splitting them out lets you separate the fixed costs from the ones that vary, and the ones whose variation you can control (fuel) versus the ones whose variation you cannot (repairs).


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## Plugging Along (Jan 3, 2011)

I have to admit, I don't budget very well, nor do I track. I have tried to budget, but have found it really not to be that useful for me. In terms of tracking, I did that for a while just to see what are non discretionary spending is. I'm just not really a detailed person.

1. What I do is we know what our bare bones non discretionary spending is and work from there. We have no problems ever meeting our bare bones spending, but that is really really bare bones - keep the lights on type of thing. This includes our mortgages, utilities, taxes, bills, tuition for our kids, and minimal groceries (almost kraft dinner but healthier, no eating out), and minimal car operations, etc.

2. We then add in our set savings which includes, RRSPs, RESPs, TSFA, short term & mid term savings. We treat these like bills.

3. We then add in the next level of spending. It's discretionary, but very important to us, such as kids activities, gifts, basic clothing, car maintenance, vacation savings, things that we pay people to do, but can do ourselves (yard work, cleaning, etc) etc.

4. Then we add in our fully discretionary spending, this is eating out, buying toys, more expensive items.

Finally, anything left over goes into a savings pot.

That's how we 'budget'. If things get a little tight, we work backwards, and start tightening thing up for that time period. If it gets really tight, then everything except #1 is cut out.


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## mind_business (Sep 24, 2011)

This is a very accurate reflection of our spending. I both budget and track my expenses, updating my budget every year.

*Housing: 10.6%*

Property Tax
Insurance
Hydro
Water/Sewer
Heating Gas
Home Repairs
Home Improvement
Garden Supplies

*Food: 7.4%*

Groceries
Dining out

*Vacations: 6.1%*

*Auto: 5.3%*

Fuel
Insurance
Repairs

*Entertainment/Communication: 3.1%*

Cable TV
Internet
Web Hosting
Phone Land Line
Cell phone
Video rentals
Movies / plays

*Personal shopping: 2.5%*
Clothing
Gifts / charity
Books
Music
etc

*Pets: 1.2%*

Dog food
Dog treats
Dog toys
Veterinarian / medicines

*Paycheck Deductions: 28.8%*

Income Tax
CPP
EI
Life Insurance
etc

*Savings: 35.0%*

RRSP
Non-RRSP
TFSA


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## Square Root (Jan 30, 2010)

I am surprised more people don't include their net income in their budget. If you do, the budget can become more of an income or cash flow statement. It also allows you to balance to your bank account each month ensuring you have tracked everything. Also, if you use income after deductions as your starting point you don't have to track the deductions which are totally out of you control anyway. Finally, if you earned more than you thought you could spend or save more and still be "in budget"


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## mind_business (Sep 24, 2011)

Square Root said:


> I am surprised more people don't include their net income in their budget. If you do, the budget can become more of an income or cash flow statement. It also allows you to balance to your bank account each month ensuring you have tracked everything. Also, if you use income after deductions as your starting point you don't have to track the deductions which are totally out of you control anyway. Finally, if you earned more than you thought you could spend or save more and still be "in budget"


Since I use Quicken for my budgeting / tracking, I can report out various scenarios. If I was interested only in basic budgeting, I'd agree with starting with net salary. However since my deductions don't change, except with a raise or incentive bonus, it's easy enough to include in my budget allowing me to report-out either Gross or Net salary. I have specific targets with my savings rate that I compare to Gross salary.

Although I track every penny we spend, it's not as onerous as it sounds. Almost all of our spending is with plastic, where each transaction gets automatically downloaded from my electronic bank statements. All I have to do is verify that Quicken has assigned the correct budget category to the transaction ... which usually it does. The more you use Quicken for downloading transactions, the more intuitive it becomes as to the correct category to select. The only time I have to spend tweeking transactions is if I have to 'split' a transaction between multiple budget categories. It takes me minutes a month to maintain tracking expenses vs hours it used to take me when I manually recorded all my transactions. 

Btw, one of the biggest time-wasters I used to do is assign each purchased item to a category/sub-category (didn't apply to groceries). This led to having way too many budget sub-categories to track, and wasted too much of my time. In the end, a person just needs to understand where they're under/over-spending in the discretionary areas. I no longer use tracking of expenses to be able to go back in time to find out how much an end table cost in 2010


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## Sherlock (Apr 18, 2010)

I used to budget and foudn that it didn't really give me any important information so I stopped. I can tell you approximately how much I spend on each category per month or per year, probably to the nearest 100 dollars, and that's good enough. I really don't see how knowing that I spent $273 on food last month and $113 on gas vs knowing that I spent approx $300 on food and approx $100 on gas is going to give me any benefit?

I still keep track of how much I spend vs how much I save.


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## m3s (Apr 3, 2010)

Some people like stats, whether they are useful or not. It's interesting to see how it compares year to year, and if there's a problem you can quickly see where.

Gross Income Breakdown
32% Tax and deductions
8% Rent and ins fixed
6% Utilities - heat, elec, garbage, telcos etc
3% Food - live on per diem
10% Auto - higher than needs to be
6% Vacation
5% Entertainment
3% Misc
1% Household
1% Clothes and pers admin

25% Gross saved up front

About the same as last year except vacation spending replaced household spending


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## marina628 (Dec 14, 2010)

I use quicken ,we have a set monthly cash budget , a 20% cash savings budget (emergency fund) TFSA ,RRSP ,RESP AND Mortgage prepayments.I max everything and then I really don't care about the rest.My main thing is taking advantage of the tax savings plus meet my savings goals.I work on net pay ,only budgeting concern i have is my cable ,internet and phone bills are crazy for our two homes,really stuck out in quicken this month lol


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## kcowan (Jul 1, 2010)

Marina, your budgetting concern surprises me.
TV Satellite
Phone/Internet/Mobile/LD 
Total $210/mo for 2 places, one in Mexico, one in BC. Naturally the 2 countries causes some breakage.
What are you spending?


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## Square Root (Jan 30, 2010)

kcowan said:


> Marina, your budgetting concern surprises me.
> TV Satellite
> Phone/Internet/Mobile/LD
> Total $210/mo for 2 places, one in Mexico, one in BC. Naturally the 2 countries causes some breakage.
> What are you spending?


We average about $150/month for each of 4 places. 9 HD TV's ,3 cell phones, internet everywhere. Satellite TV at the cottage and Alberta is the worst. Can turn them off though. You really have to watch the telco providers. They will gradually inch you up if you aren't careful. Much cheaper in Arizona- but we knew that.


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## marina628 (Dec 14, 2010)

we have two homes and we are spending about $500 a month cable,internet home phones but I have extreme internet needs and as for the tvs we have every channel and HDTV .cell phones about $220 a month for 3 phones with data plan and it seems that at least part of each month one of the phones are in USA roaming ,crazy I know!


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## kcowan (Jul 1, 2010)

Have you looked at Techsavvy or another major consolidator, Marina? Just tell them you spend $720/mo and watch them fight for the account.


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