# Family Budgeting



## STone (Apr 17, 2009)

Hello All,

Just looking for some ideas around family budgeting. My wife and I have tried and failed on previous occasions to develop a budget we could stick to. We are a family of 4 (two small children). We are going to take some time this week to create a sensible monthly budget.

From the sounds of it, many of you have developed budgeting strategies that work. What does your month look like? Do you have a set date for bill payments? How do you manage credit cards? etc.

Thanks, and I am really enjoying the forum.


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## stephenheath (Apr 3, 2009)

I'd recommend reading up on http://gailvazoxlade.com/blog/ ... although you might want to go to her information pages directly instead of scrolling through all the blog entries. While she mostly works with people in debt, she has all kinds of articles on budgeting, recommendations on what tools to use and how to budget in a way you can stick to it, etc.


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## CanadianCapitalist (Mar 31, 2009)

I go with the save-a-portion-of-the-salary-and-spend-the-rest school of budgeting. We had one paycheck for a while and we started by saving an initial portion and then banking any surprise cash such as bonuses, tax refunds etc. With two incomes, we spend one and bank the other -- it is an easy budget for us to follow.


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## Ben (Apr 3, 2009)

I've never been able to get a true "budgeting" system up and running, and I'm not sure I want to at this point - we use a recording/tracking system instead. I know we live a fairly frugal lifestyle as it is and am not really interested in squeezing it any more than we do. But this approach probably does not work all that well for many families that don't have the same level of willpower, or have expenses almost equal to income.

We use a tracking system instead of a budgeting system. I have an Excel spreadsheet with various tabs - a tab for every month, a summary tab, and a net worth tab. I copy line items from online statements into the monthly tab, and then use a drop down list to categorize the income/expense (about 15 categories). This tells me whether I've made money that month, or lost money. 

What the tracking/recording method doesn't do necessarily is actually restrict your ability to spend money with a hard cap on how much you can spend in the month. It only tells you after the month ends (or as often as you like to load more data). So it may not be the best for people who need more discipline to control their spending. It does however tell you where you are spending, and have room to cut back.

The net worth tab tells me how we're doing overall (keep home at purchase price to not distort the result, ie. all increases all directly the result of net monthly cash flow, and mortgage reduction).

I also have a "projection" function where I sit down in November/December, and take a look at what each month in the next year will look like, by category. This sums to tell me what my new cashflow will be for the year to come.

I am strongly considering a new version of my spreadsheet that uses more of a monthly lookahead to the next month, lays out what the fixed expenses and known income will be, estimates the variable expenses and planned spending, and therefore sets a net cashflow goal for the month. Still in planning stages on this one...


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## vikdulat (Apr 21, 2009)

You should try the envelope system. Have envelopes dedicated for each tasks. Eating out, groceries, etc, etc. Try to use only the money in there. Instead of using $500 per month, try to cut down to $450. Baby steps is the best way to go and eventually try to lower it as much as you can.


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## michika (Apr 20, 2009)

I have a spreadsheet as well, however I've separated it into fixed, variable, and one-time expenses, and much like Ben, I run numbers at the end of the year and see where it takes me.

I also treat savings and RSP payments like fixed bills, and I find that helps me a lot. When I used to keep them as items under the variable list, I found I was more likely to take some money earmarked for savings & RSPs and use it elsewhere.


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## Rickson9 (Apr 9, 2009)

STone said:


> Hello All,
> 
> Just looking for some ideas around family budgeting. My wife and I have tried and failed on previous occasions to develop a budget we could stick to. We are a family of 4 (two small children). We are going to take some time this week to create a sensible monthly budget.
> 
> ...


You could break down your expenditures like Statistics Canada if you find it useful:

http://www40.statcan.ca/l01/cst01/famil16d-eng.htm


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## Retired at 31 (Apr 20, 2009)

CanadianCapitalist said:


> I go with the save-a-portion-of-the-salary-and-spend-the-rest school of budgeting. We had one paycheck for a while and we started by saving an initial portion and then banking any surprise cash such as bonuses, tax refunds etc. With two incomes, we spend one and bank the other -- it is an easy budget for us to follow.


Worked for me too.


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## Bullseye (Apr 5, 2009)

I have a general framework (done up in Excel) of what our monthly expenditures are, but I just use it as a reference, mainly. I list all monthly expenses, plus savings and extra debt paydown, then I have three totals;

1) bare minimum - monthly amount required to stay afloat
2) comfort point - amount required to live the way we want to
3) retirement - what we'd need in retirement, ie. no mortgage, savings, etc

This keeps me focussed on how much money we need to generate monthly, and gives us a 'big picture' view to help with decisions like how much we want to work, how to manage family, etc.

Below that in my sheet, I have a cash flow forecast. This is done just like I would with a business (I'm an accountant), I lay out all weekly cash in and outflows, rolling three months forward. 

We charge all expenses to a credit card, and pay it off monthly, so that makes doing this easier. I know from my budget how much should get charged to the card every month (roughly), so that tells us if we're on track or over budget.

Having a few months forecasted out, I can then have goals to meet for the next section of my file, the balance sheet (or net worth statement). Net worth tells you where you are at right now, but I also want to know where I'll be in three months, a year, five years, etc. So I do side by side statements going forward, with my cash balance linked to my cash flow above. 

All that done, now I can see where I am, where I'm going, and how fast my net worth is growing. I like to set target net worth amounts for future dates, and then work towards meeting that, gives me a lot of satisfaction. 

This probably sounds like a lot of work to someone just starting out, but once it's set up, it's actually quite easy to maintain. It's essentially just running your household finances like a business would, the three statements I've discussed are the same core ones every business uses.


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## archanfel (Apr 7, 2009)

I'd say start by tracking your expenses, at least to the dollar. No matter how you draw up your budget, you will still need to have something to compare it with. So if you can't track your expenses, the budget is quite useless. Then you want to lay out your fixed expenditures: rent, Mortgage, utilities, public transit, gas, insurance, child care etc.... and then see whether you can cut any of those. Once that's done, all you need to worry about are you variable expenses which should be a small percentage of the total expense. 

For credit card, use it for everything and pay it out full every month.


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## mfd (Apr 3, 2009)

archanfel said:


> I'd say start by tracking your expenses, at least to the dollar. No matter how you draw up your budget, you will still need to have something to compare it with. So if you can't track your expenses, the budget is quite useless. Then you want to lay out your fixed expenditures: rent, Mortgage, utilities, public transit, gas, insurance, child care etc.... and then see whether you can cut any of those. Once that's done, all you need to worry about are you variable expenses which should be a small percentage of the total expense.
> 
> For credit card, use it for everything and pay it out full every month.


This is pretty much what my fiance and I do even down to using the credit card as much as possible. We use MS Money to track out expenses which simplifies the whole process.


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## STone (Apr 17, 2009)

mfd said:


> This is pretty much what my fiance and I do even down to using the credit card as much as possible. We use MS Money to track out expenses which simplifies the whole process.


Thanks for all the information everyone. I have started a spreadsheet, with all of our income - expenses (mortgage, prop. tax, ins., groceries, gas, etc.) we should have around $900 to use for savings, entertainment, etc. Now that we have this starting point, we just need to develop a system for tracking what we are spending. We have a few ideas now and we think we are well on our way to making this work.

How do you find MS Money compared to Excel? Is it easier to work with?


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## archanfel (Apr 7, 2009)

STone said:


> Thanks for all the information everyone. I have started a spreadsheet, with all of our income - expenses (mortgage, prop. tax, ins., groceries, gas, etc.) we should have around $900 to use for savings, entertainment, etc. Now that we have this starting point, we just need to develop a system for tracking what we are spending. We have a few ideas now and we think we are well on our way to making this work.
> 
> How do you find MS Money compared to Excel? Is it easier to work with?


I used editgrid, which is a online spreadsheet. It's super slow, but I can access it from anywhere. Google doc would be a better choice if your spreadsheet is not too big. It has a 20,000 formula limit which I blown in August last year. 

I find MS Money too inflexible. Spreadsheet works much better for me.


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## moneygardener (Apr 3, 2009)

I can not imagine how difficult and cumbersome tracking expenses dollar by dollar would be for one month, although I'd like to do it.

I have a Excel spreadsheet with income and what I think we spend in each category of expense. It spits out a number which I call 'non-registered savings' since our RRSP and RESP contributions are inside as expenses.

Basically that number is my guage for how we are doing. Whether we spent $20 extra on haircuts and saved $20 on groceries that month doesn't much matter to me. What does matter is, *if we didn't save $X, why not*. I find this method works because you can strive to hit and beat the number monthly. Also if we reach the number already I feel better about making discretionary purchases (keeps me from obsessing too much over it).


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## Elbyron (Apr 3, 2009)

Like Ben, I am a responsible spender and therefore prefer to track rather than budget my money. Up until this year, I've been entering all my expenses into a self-designed spreadsheet, but it was quite tedious. I was recently introduced to expensr.com, a *free* expense tracking and budgeting program that allows you to import files that you download from your bank & credit card websites (supports .ofx, .qfx, and .csv). This is much faster than typing everything in, and less prone to errors. It has some smart filtering and also lets you set up your own filters so that you can auto-categorize most of the items as they get imported. Because it's a web-based app, you can access your info from any computer (even by mobile, but I've yet to try this). It's not as feature-rich as Quicken or Microsoft Money, but it sure beats Excel.
I know you can tell it your recurring expenses and it can do some other budgeting stuff to predict your next month's cashflow, but I have yet to try out these functions.


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## CanadianCapitalist (Mar 31, 2009)

moneygardener said:


> I can not imagine how difficult and cumbersome tracking expenses dollar by dollar would be for one month, although I'd like to do it.


I don't find tracking that difficult at all. It takes 5 minutes or less per credit card or bank account every month. As soon as a statement arrives, I pay the bill and balance the account using MS Money. 

The trick is categorizing expenses but again this is really simple. As soon as you type "Es", Money suggests "Esso" and automatically selects "Automobile: Gasoline" as the category. Just type in the amount and your entry is done. 

I've done this for years and I don't think it is difficult or cumbersome at all. Besides, it is good practice anyway because you do need to go through your statements for suspicious charges anyway.


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## mfd (Apr 3, 2009)

STone said:


> How do you find MS Money compared to Excel? Is it easier to work with?


My perspective on MS Money is the learning curve is definitely steeper but once you sort it all out its far easier than excel. You'll remove a lot of the manual headaches as you'll be able to download everything via your bank website. Short term pain with long term gains. You'll be able to generate reports easily to help you through any issues.



archanfel said:


> I find MS Money too inflexible. Spreadsheet works much better for me.



I don't disagree with that statement but its the same thing. Once you've taken the time to understand how to categorize all of your transactions you'll be fine and your budget will balance.


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## Mintycake (Apr 13, 2009)

I tend to put everything on my credit card and analyze my spending at the end of each month. My husband and I are both responsible spenders and so we don't track (although I did track for a while - just to get a grip on how much we were spending on essentials vs non-essentials). 

Online money managers like expenser.com seem interesting but isn't there a privacy concern there?


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## mfd (Apr 3, 2009)

Mintycake said:


> Online money managers like expenser.com seem interesting but isn't there a privacy concern there?


For me it is. I would never use a service like this. I'll stick with MS money


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## Ben (Apr 3, 2009)

moneygardener said:


> I can not imagine how difficult and cumbersome tracking expenses dollar by dollar would be for one month, although I'd like to do it.
> 
> I have a Excel spreadsheet with income and what I think we spend in each category of expense. It spits out a number which I call 'non-registered savings' since our RRSP and RESP contributions are inside as expenses.
> 
> Basically that number is my guage for how we are doing. Whether we spent $20 extra on haircuts and saved $20 on groceries that month doesn't much matter to me. What does matter is, *if we didn't save $X, why not*. I find this method works because you can strive to hit and beat the number monthly. Also if we reach the number already I feel better about making discretionary purchases (keeps me from obsessing too much over it).


My Excel sheet takes me about 30-45min once a month to track every cent of spending in the past month, by copying data from online accounts. 

Also curious how you determine how much you saved if you have only an estimate of what you think you spent.


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## Maltese (Apr 22, 2009)

I've been using Quicken for years and it has helped me track my finances through some VERY lean years. Over the years it has added more and more features and I love the edition I have now that lets me download bank and credit card statements to Quicken. This sure is a lot faster than entering every purchase like I used to do!


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## Elbyron (Apr 3, 2009)

Mintycake said:


> I tend to put everything on my credit card and analyze my spending at the end of each month. My husband and I are both responsible spenders and so we don't track (although I did track for a while - just to get a grip on how much we were spending on essentials vs non-essentials).
> 
> Online money managers like expenser.com seem interesting but isn't there a privacy concern there?


Well, with expensr.com, you don't provide them any credit card numbers, or bank accounts. You don't even have to use real information when signing up, so even if someone gained access to your secure account, all they would see is a bunch of expenses entered by an anonymous person. If it can't be linked to you, there's not much of a privacy concern. 

However, other online money programs like Quicken Online will ask for your bank accounts and credit card numbers, including your usernames and passwords. This is so that it can automatically login and obtain your account statements, but I wouldn't trust them enough to safely hold that kind of information.


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