How do you budget?

Robin9

I don't budget for day to day things. I know that income will exceed normal expenditure.

Holidays etc come out of savings

tempus_fugit

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.

You don't need a "history" as such, what you need is an idea of what you need each month, then on top of that what you want, if you can afford it, and then some savings if you can afford that. If I budgeted according to my history I'd be broke now, I had to rethink everything to get a budget that worked for us, and built upon that. History was a guide but not a rule.

RG2015

tempus_fugit wrote: »

You don't need a "history" as such, what you need is an idea of what you need each month, then on top of that what you want, if you can afford it, and then some savings if you can afford that. If I budgeted according to my history I'd be broke now, I had to rethink everything to get a budget that worked for us, and built upon that. History was a guide but not a rule.

Agreed, and I have acknowledged this in a response to @getmore4less.

However, budgeting according to history does not have to mean spending the same as in the past. You can analyse your history and decide to budget to spend 75% of your historical spend if that is required to balance the books.

No_6

Looks a lot like History is good
but if you have no records...what history do you have/

RG2015

I tried Microsoft money money many years ago but for me it was no improvement on my Excel spreadsheets. I now use a collection of spreadsheets giving different views for tracking, reconciling and projecting.

I did try some of the free budget web offerings such as the MSE Budget Planner. I quite like this but it is still not a patch on my own spreadsheets. In the main I like my monthly summary overview.

Income
Pension
Loan interest
Expenditure
Utilities, water & council tax
Broadband & phones
Life insurance
Credit card (supermarket)
Credit card (discretionary spend)
Credit card (annual payments, insurance, car, subscriptions etc)
Regular savings accounts

datlex

I also use excel for my budgeting. I have regular bills including monthly savings and a built in element for yearly bills on one sheet. I have weekly income less a set amount to bills on another sheet. The weekly income sheet includes planned cash spends. It also has a final available funds column. The final sheet feeds back to the final column, it tracks my unallocated spends.

getmore4less

RG2015 wrote: »

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.

This is very common with people that have never done a proper budget(plan) and just spend till it sort of runs out.
(even if the non planed bit is just a lump in a bigger proper plan)

Often it is the higher income people that are wasting the most money on "stuff" because they don't have a clue where the money goes or set priorities or goals because they have enough.


That's one reason that spending diaries are so important for those that are looking to get control of their finances for any reason, debt reductions or savings goals(bigger house, retire early).

Coupled with even a outline plan many just adapt as they think about a spends often for the first time if it is smaller ones.

coupled with a good look at the regular outgoings on DD/SO many can often get far better value from their resources.

Another good trick is normalising on annual numbers for categories, if never done it it can give a new perspective on what you value.

RG2015

@getmore4less,

I agree, I think.

At the end of the day the most important element is the goal. Maslow only has a single peak.

davenport151

Robin9 wrote: »

I don't budget for day to day things. I know that income will exceed normal expenditure.

Holidays etc come out of savings

But this is the problem. If you zero budget you will know where your money is going and see where it may be possible to cut back somewhere. Then not all holiday spends will be from savings.
How did you get your savings? What do you do for unforseen expenses, do these come out of your 'savings' too?

I use zero budgeting and a basic spreadsheet to keep track of what I spend.
Thanks to the poster who suggested google sheets I will give these a try.

getmore4less

No_6 wrote: »

Looks a lot like History is good
but if you have no records...what history do you have/

You can always reverse engineer some history.

for those stating now they could do a review of 2017.

Most can get a fairly good idea of total income.

You then add the change in debt status for things like loans and credit cards.
If your net borrowings has gone up you need to add that to income because it got spent on something.
If they have gone down you can ignore for now as it is part of the debt repayments.)

You then try to workout where it all went.

start with the big stuff and the easy stuff, mortgage, rent, council tax, debt payments, savings, DD, SO, holidays, white goods etc.

then have a think about general categories like clothes

if you use the SOA or a spreadsheet you can keep adjusting till the balance is zero or have a category labelled unknown which gets the excess.