How do you budget?

Zola.

True, but If you don't track you don't know what your budget is realistically.

hugheskevi

Personally I would detest tracking and recording every piece of expenditure, and find it far easier to keep records at aggregate level to determine a budget. I define discretional spending (consumption) as:

Consumption=Gross salary - pension saving - ISA saving - income tax - National Insurance - Mortgage + Saving interest - net debt repayment

That gives our income less the various pots listed above which incoming money goes into that isn't day-to-day spending. I keep annual accounts, and record the various values of each pot on 5th April. I treat everything at household level (myself and wife), and don't consider anything at an individual level. Over the last 4 years this has shown:


(Debt repayment includes mortgage payments)

To manage spending within each year I have a spreadsheet with various rules about how much should be in each account at the start of a month (for which some of the data above is helpful). At the end of each month I move funds around based on those rules. My spreadsheets are quite detailed, and I keep a monthly expenditure plan which incorporates things like major credit card repayments (stoozing) and any other large one-expenditure items, eg, car insurance, etc. I set that all up at the start of the year, so it is very quick to move things around at the end of each month and nothing is ever forgotten as it is all in the spreadsheets and automatically included on a monthly basis for the next 2-3 years.

Spending decisions are simply based on need, with each spending choice based on judgement and value rather than affordability. That has resulted in quite stable expenditure of around 21% of gross income.

getmore4less

Zola. wrote: »

True, but If you don't track you don't know what your budget is realistically.

Tracking is about checking the plan.

Make a plan then track.

Don't track then make a plan.

The plan is about deciding your priorities/allocations in advance not after you spent the money

RG2015

getmore4less wrote: »

Tracking is about checking the plan.

Make a plan then track.

Don't track then make a plan.

The plan is about deciding your priorities/allocations in advance not after you spent the money

But you need the history to construct the plan. The exception though is if your disposable income is lower than your needs. This may mean going without some basics such as three meals a day. In this case the plan is to not exceed your disposable income.

I used to manage corporate budgets and department managers always budgeted core expenditure as current year plus inflation. The problem here is that there is no incentive to save in the current year. Quite the opposite in fact.

getmore4less

RG2015 wrote: »

But you need the history to construct the plan. The exception though is if your disposable income is lower than your needs. This may mean going without some basics such as three meals a day. In this case the plan is to not exceed your disposable income.

I used to manage corporate budgets and department managers always budgeted core expenditure as current year plus inflation. The problem here is that there is no incentive to save in the current year. Quite the opposite in fact.

History is useful but not essential to planning you can set the planned spends but need to be realistic on what can be varied.

Mortgage will have a range, clothes could be reduced to zero.

RG2015

getmore4less wrote: »

History is useful but not essential to planning you can set the planned spends but need to be realistic on what can be varied.

Mortgage will have a range, clothes could be reduced to zero.

I absolutely understand your point. In fact, there is a strong case for zero-based budgeting which requires that you ignore the history for fear that it may contaminate the plan.

However, the history needs to be replaced by some facts, for example research and bench-marking. The problem is that this can be time consuming and if tracking history is available it can be very useful.

(Thinks) You are right. History is useful but not essential.

As a final point though, I once asked my wife to record all of her expenditure to help us to reduce our outgoings. She hated it so much that she stopped spending as much to avoid having to record it. The experiment did not last long but it was very revealing. I know what to do though if things ever get tight again.

Zola.

I don't mind doing it, I typically update it in work as part of morning routine, I just check transactions on my banking app and note them into the count.

I should maybe consider having a bills only account and such. Most of our bills come out of the joint account and we put pay into it as well.

Apart from our mortgage overpayment fund account, all cash sits in our joint account. Maybe not the most efficient way?

Mnd

I use a excel sheet but too be honest I don't go into huge detail
An amount goes into 1 bank account that my wife looks after, this is supposed to cover groceries, petrol and her vital spends..haircuts, shoes, birthday cards etc
I know how much our monthly house spends are.council tax, water, power sky etc, and I know how much income we have.
This then leaves a savings amount that I look after, obviously it will vary if car insurance or other 1 offs are due, or if my feed in tariff or wife's bonus get paid. As long as I can see where any discrepancies are then it's OK. .we don't have an emergency fund or anything like that, we are fortunate enough to have disposal money every month and as long as our savings climb towards our target to form the bridge for my wife's early retirement then it's fine.
However, if we book a holiday then the total due gets knocked off our savings total immediately, even if it's not due for months.
It's just keep a eye on where the bridge is

Mnd

agrinnall wrote: »

It seems a bit odd that you'd start a thread complaining about budgeting being on this board at all, and then start a thread about budgeting. Not very consistent is it?

I don't see that they were complaining

enjoyyourshoes

I use three basic documents (either use Excel or similar or pen and paper will do)

1.0 Analysis of all annual,1/2 & 1/4ly costs. Then produce aa cash flow identifying what I need to accrue on monthly basis to pay for these. include all insurances as cheaper to pay annually. & allocations for Xmas/Birthdays/Holidays etc

2.0 Bank reconciliation sheet updated daily with all transactions from this account, that includes accrual from above plus DD/SO ;for monthly paid bills ;plus an amount to cover 'Budgeted costs' (clothing by person etc) and Regular savings/investments.

3.0 Sub bank account (good interest bearing account) where 'Budgeted cost'
are transferred monthly and then auto split into allocated sub accounts for the individual to spend as required.

Like all systems if it works for you then the key is to keep it working. If it doesn't find out a system you like and keep it going.

The key issue is people reading this will have their own system, but the people that don't read this probably don't and get themselves into debt and ought to read everyone ideas and trial one that will work for themselves.