Where are posts about budgeting?

enthusiasticsaver

carolinerunner wrote: »

Thank you for all the useful comments and links, much appreciated. You're right RG2015, I'm looking for general advice and inspiration. I go through phases of trying to be very rigorous about budgeting, managing and controlling my finances, and at other times I just spend without thinking about it. I'm in the fortunate position of earning enough to do that at least sometimes, but then it means I don't have the savings I'd like to have and I wonder where all my money's gone.

One thing I always used to do was pay myself first. That means putting some of my income in savings rather than saving what was left. I always did track spending either in a spending diary, spreadsheet or spending tracker app on a phone. It is not as sad as it sounds and only took half an hour or so each weekend. The spending tracker app was so easy so I used to complete that every day. It really focuses the mind on where your money is going.

So I'm in a 'get control' phase atm and I'm trying to make it a habit, hence my interest in how other people budget, what tools they use, what habits they have, how often and how they keep track of their spending etc. I have made some progress over the last month or so, including not spending at all on my credit card. It's one less place to download data from, and it makes sorting out transfers between accounts simpler.

I have detailed above how I spend. One good thing about clear checkbook (or similar software) is that it does not matter if you spend on a credit or debit card as you never look at the balance in the account but focus solely on the monthly budget categories and balances in the savings envelopes. The credit card is just paid off in full by direct debit every month. We pay for supermarket and fuel shopping by credit card as we get cashback and it makes no difference to my budget. I could just as easily use the debit card all the time but the cashback covers the card fee and more and it is useful to have a credit card for the section 75 protection. We do have a large buffer in our current account though as we keep our savings envelopes (or part of them) in there as it pays interest.

I've found that banking apps make a huge difference to my motivation to stay in control, checking daily (first thing, then often multiple times) really helps me focus on what's coming in and going out. I'm self employed so the money in is random, it does always come in but in very odd amounts, so I'm now working on a salary system where I have a separate account for spending (not bills) which I pay a 'salary' into on 1st of each month. That comes from the account that my payments go into. There's then another transfer into an account that my direct debits come out of, so I don't have to keep track of which has/hasn't come out of my account at any given point in the month. I scrape what I can out of both current accounts into savings - I HATE taking money out of savings so it makes me think twice before buying something that would mean taking money out of savings.

Having a regular salary day will certainly help you with budgeting and if having your direct debits in a separate account helps you that is fine. You presumably then use your main account for general spending and move money from there into savings (which you can think of as envelopes). Are you saving for anything in particular as allocating the money to something like a house purchase or new kitchen or holiday, replacement car etc can focus the mind and persuade you not to withdraw as it is allocated? There should be some savings for annual expenses like insurances, holiday, Christmas and car maintenance/white good replacement etc. Also having an emergency fund is crucial.

What I don't yet have is a place to keep money for those expenses which aren't monthly or predictable but which I need to budget for, eg car repairs, holidays, vets bills. I've got a spare savings account which I don't use, maybe I should transfer a monthly amount into that and have it on stand by to cover those kinds of expenses. I've now put 5 months of spending on Excel and analysed the spending by category (mostly - what category does a harmonica go in?!) so I can start to see how the one-off spends work out as monthly averages.
see above for my suggestions for that. Envelopes are my suggestion. If I was paying for a harmonica it would come out of my personal spends but the beauty of budgeting is you tailor it to your spending habits. My latest quandary was new glasses which we have agreed should not come out of personal spending but comes out of our house account which covers everything from glasses/dentists to boiler services or topping up with envelopes/Sellotape. Some break categories down further but I don't find that helpful and prefer to just work with the four. We have recently edited our car envelope to also cover our ebike expenses too so they can evolve.

That's as far as I've got for now. I was actually excited today to download my November data and analyse it in Excel. Still grappling with how to deal with payments between accounts, but am refining my system as I go.

Any other thoughts most welcome, TYIA!

I have given a few ideas above. I absolutely love budgeting and credit it with not only keeping us out of debt but paying off the mortgage and saving for an early retirement. Even though we are retired we still use the same system but no longer save for retirement as we did when working. One of my smaller pensions pays out at the beginning of next year when I am 60 and I have only just worked out how I will allocate it. I wish more people did it as I am sure it would be helpful to most.

enthusiasticsaver

One other thing I thought of is that budgeting and knowing how much you spend in each category comes in extremely useful in retirement planning. One of the things any good IFA will ask is how much do you need to live off in retirement. Having the figures to hand on how much you spend on food every month or knowing how much you have spent on holidays each year for the last few years is imperative in working that out. In the retirement forum you will see people asking what is your number. In other words what is the minimum level of income you need to cover your lifestyle.

LobsterMemory

May I say what an excellent few posts those were, enthusiasticbod, and not just because it's not dissimilar to my own approach

What can I add?

Recording spends
I do it every day - come in from work, cup of coffee, record spends into my software - I happen to use Jiosoft, which is a poor man's Quicken. Bus, paper, Sainsbury's, entertainment - it's not complicated so long as the entertainment wasn't too overboard. Using financial software also gets rid of your account transfer dilemmas; it does it for you
Personally, not really a fan of using the banking apps for budgeting but then I enjoy reconciling bank statements. Doing it manually gives me a better feel for where I've being careless.

Credit card/s
If you're going to be paying it off every month, then I'd be putting everything I could on the card. As you're keeping track of your spending, you then transfer what you spend into an interest-paying savings account. Transfer it back when you get the statement. Free money.

Savings
If when you put money into Savings you say what it's for then you won't need to feel guilt about taking it out when it's needed. As an example, in a few hours time, I'm going to transfer a grand out of mine. Grr I instinctively said when I realised. But I'd paid for a holiday on my credit card this month so I'm taking it out of my holiday savings, that's what it's for. Grr turned to Purrr

Herbyme

Thanks all, a few Qs/thoughts:
enthusiasticsaver, whats the difference between your budgeting categories and your envelopes, ie how do you use each of them differently? (and why do you have different definitions?). Are envelopes literally in separate accounts or are they just nominal? (in your head/budgeting software!) Or are they made of brown paper?!

My main account is really a work account (I'm a sole trader so all my income goes in there) and anything work related gets paid from there. anything else gets paid from my 'salary' account.

I don't want to use a credit card much as it just pecks at my head til I clear it. I may use it for big purchases where I want the extra cover.

RG2015, it's an interesting dilemma, spend now scrimp later, or save now, party later (well maybe not exactly party, but...). No right answer I guess. I certainly don't have a hard and fast answer and a (less than totally bought-in) OH doesn't make it any easier. But relocation/semi-retirement is planned in a couple of years, so I'm trying to save towards the costs of the move, selling, buying, moving, new furniture etc. Which isn't very precise. maybe I should save (eg) towards the stamp duty, to take your thought forwards?

This is where your thought about knowing what you need to retire 'comfortably' (in one's own terms) really helps enthusiasticsaver.

LobsterMemory, you're right about apps, I'm actually using them for monitoring my spends rather than budgeting, I hadn't really appreciated the distinction until you put it that way. And also I hadn't thought that software would sort the 'where did that internal transfer go and why?' dilemma either, I've just found myself very resistant to them, not sure why, maybe just the effort of getting them up and running. Maybe it's a control thing too. And yes, I can see that taking money out of savings is ok IF I know that a certain portion of the savings was set aside for that purpose - but not sure how to keep track of what % of the balance of the account (the one I use for that kind of irregular spend) is for what. Eg, if there's £2000 in the account and I've decided that 25% is for holidays, I have £500 available to spend on a holiday?) Maybe again that's where the software helps, or maybe I can find a way to do that say at month end, against a target... more food for thought, thanks all!

dreaming

I budget using Excel - mainly because I used then when I worked so find them easy. I have several bank accounts from which I gained switching bonuses and keep them for future switches. I also have 2 credit cards. I use all of these (current accounts and CCs) for different purposes. I am currently having work done on the house so use my 0% CC for large purchases and then divide the balance by the remaining 0% term. Thisthen gets paid monthly so will be cleared in time aven though I have more than enough money in one of my interest paying currect accounts. The other CC is a rewards one so I use this for most other "regular" spends - groceries/petrol etc. - and use the rewards as and when I need them. One of my current accounts reuires me to use the debit card at least once a month inorder to het bonus next year, so I treat that as my "personal" spending card and transfer a set amount into it each month for that purpose. On the actual spreadsheets I break down my spending into different categories and split annual costs (such as insurances/breakdown cover etc.) into a monthly amount (based on last year's figure plus a generous 10% increase each year) so I know I can pay these when they are due. I am quite disciplined about recording everything but I do have a miscellaneous "mad money" category which allows for the odd impulse buy (such as a harmonica should I ever want one!). So although I have the various current accounts and credit cards I actually use my spreadsheets to view my available money rather than the bank balances as some of that is earmarked for future spending. It's probably quite outdated now to do it this way but it works for me. However my income is regular so not sure how it would work for those with a variable income stream.

enthusiasticsaver

carolinerunner wrote: »

Thanks all, a few Qs/thoughts:
enthusiasticsaver, whats the difference between your budgeting categories and your envelopes, ie how do you use each of them differently? (and why do you have different definitions?). Are envelopes literally in separate accounts or are they just nominal? (in your head/budgeting software!) Or are they made of brown paper?!

My budgeting categories are categories which are used all the time. Food, diesel, eating out and entertainment and direct debits/standing orders. They reset on the 1st month back to nil so I set the amount I will spend each month on each category and sometimes it is different so if we are on holiday for 2 weeks the food and diesel is lower than normal. If we have a heavy month socially the eating out and entertainment is increased. If we overspend I have to take it from an envelope and if we underspend it goes into an envelope.

An envelope does not reset each month so usually the same amount goes in every month and it builds up so there is always money there to pay a car repair bill or house insurance premium for example. I work out my christmas and birthday spends and divide by 12 and put that into the gift envelope each month. Some do have their envelopes in separate accounts but I don't as my current account Santander 123 pays interest up to £20k at 1.5%. So I keep my emergency fund in there and part of my envelopes although some of the envelopes are kept in internet savers in mine and my DHs name too. I keep a spreadsheet to keep track of where the envelopes are. Never used the brown envelope though as I prefer to have a record of where I have spent and cash has a habit of disappearing.

My main account is really a work account (I'm a sole trader so all my income goes in there) and anything work related gets paid from there. anything else gets paid from my 'salary' account.

I don't want to use a credit card much as it just pecks at my head til I clear it. I may use it for big purchases where I want the extra cover.

I am totally with you on the not using the credit card but strangely budgeting the way I do by looking at the monthly budgets rather than the bank balance stops me stressing out about the credit card. I also find it useful to keep track of the diesel/supermarket spends as I know if we go above £500 for both on the credit card we are likely to be overspending.

RG2015, it's an interesting dilemma, spend now scrimp later, or save now, party later (well maybe not exactly party, but...). No right answer I guess. I certainly don't have a hard and fast answer and a (less than totally bought-in) OH doesn't make it any easier. But relocation/semi-retirement is planned in a couple of years, so I'm trying to save towards the costs of the move, selling, buying, moving, new furniture etc. Which isn't very precise. maybe I should save (eg) towards the stamp duty, to take your thought forwards?

This is where your thought about knowing what you need to retire 'comfortably' (in one's own terms) really helps enthusiasticsaver.

LobsterMemory, you're right about apps, I'm actually using them for monitoring my spends rather than budgeting, I hadn't really appreciated the distinction until you put it that way. And also I hadn't thought that software would sort the 'where did that internal transfer go and why?' dilemma either, I've just found myself very resistant to them, not sure why, maybe just the effort of getting them up and running. Maybe it's a control thing too. And yes, I can see that taking money out of savings is ok IF I know that a certain portion of the savings was set aside for that purpose - but not sure how to keep track of what % of the balance of the account (the one I use for that kind of irregular spend) is for what. Eg, if there's £2000 in the account and I've decided that 25% is for holidays, I have £500 available to spend on a holiday?) Maybe again that's where the software helps, or maybe I can find a way to do that say at month end, against a target... more food for thought, thanks all!

Interesting discussion. I don't actually think of savings as spare money. It is all allocated whether to a future car, new kitchen or long haul holiday. That is why all of our money is either in a savings envelope or allocated on the current monthly budget. That is why I do not mind taking money out of savings as essentially that is the purpose of the money in the first place. Money which is not touched is invested as back ups to our pension in retirement. Again we saved it for that purpose so I do not mind if we draw on it if needed. Same goes for our emergency fund so we would never draw on all of our savings.

Of course when we were working it was different as we allocated part of our wage to retirement savings and we do not do that now as we are in the drawdown stage. Budgeting the way we do though means although we saved for retirement we also did holidays and bought cars and did work on the house, helped our daughters with house deposits etc. It is all about balance as none of us know what is around the corner. I would not want to scrimp and scrape for retirement as I know too many people whose health has suffered recently just before retirement and they are no longer fit enough to do long holidays etc.

enthusiasticsaver

LobsterMemory wrote: »

May I say what an excellent few posts those were, enthusiasticbod, and not just because it's not dissimilar to my own approach

What can I add?

Recording spends
I do it every day - come in from work, cup of coffee, record spends into my software - I happen to use Jiosoft, which is a poor man's Quicken. Bus, paper, Sainsbury's, entertainment - it's not complicated so long as the entertainment wasn't too overboard. Using financial software also gets rid of your account transfer dilemmas; it does it for you
Personally, not really a fan of using the banking apps for budgeting but then I enjoy reconciling bank statements. Doing it manually gives me a better feel for where I've being careless.

Credit card/s
If you're going to be paying it off every month, then I'd be putting everything I could on the card. As you're keeping track of your spending, you then transfer what you spend into an interest-paying savings account. Transfer it back when you get the statement. Free money.

Savings
If when you put money into Savings you say what it's for then you won't need to feel guilt about taking it out when it's needed. As an example, in a few hours time, I'm going to transfer a grand out of mine. Grr I instinctively said when I realised. But I'd paid for a holiday on my credit card this month so I'm taking it out of my holiday savings, that's what it's for. Grr turned to Purrr

I am glad I am not the only enthusiastic budgeter around here then. Never heard of Jiosoft but I used to use quicken many moons away. I use the clear checkbook app on my phone or on the laptop/ipad (they all sync) to record spends. It has reports too and shows the budget position at any one time. I use the free version but there is a paid version which probably does loads more. I also use a spreadsheet to agree the bank statement as well by adding up the envelopes, working out how much is left of the current monthly budget depending on when in the month I do it and subtracting the credit card balance. I only have the one credit card though which is paid off each month.

I have exactly the same thoughts about saving and no longer think anything of taking money out of the account as this was exactly the purpose. Life is for living not accumulating money just for the sake of it. We save but we spend too and I think some people think that just because we save regularly we do not live as well. We have two big holidays planned next year which we have saved for over the last three years. All paid for by savings.

enthusiasticsaver

RG2015 wrote: »

carolinerunner

Your first paragraph reminded me about this thread.

https://forums.moneysavingexpert.com/discussion/6052316/how-much-to-save-opposed-to-enjoying-life&highlight=life

I used to fall into the trap of budgeting for its own sake rather than to achieve a specific goal. In the end I was great at budgeting and ended up with a load of money and nothing to do with it.

I have just read the thread you linked to. I think I must have missed it in September.

I find it very interesting how people decide how much to put away for the future, spend or save for specific things and I guess it is different for everyone.

We had a formula many years ago where if we received a large amount of money it was divided into three. One third went to long term savings or overpaying the mortgage, one third was medium term savings towards a new car or large home improvement project like a kitchen and one third was short term towards an annual holiday or weekend away or new TV or something.

We rarely get lump sums now so don't always follow that formula and are retired so don't do savings long term either but our monthly income is now divided 50/50. 50% is monthly spends on budget categories and personal spends. 50% is saved in 4 envelopes for car/house/holidays/gifts. Emergency fund already full.

I find it very difficult to think how we would manage if we did not budget but I guess people do.

dreaming

enthusiasticsaver wrote: »

I find it very difficult to think how we would manage if we did not budget but I guess people do.

Except that many don't! I know quite a few people who always seem surprised when it's time to pay for the car tax/house insurance/Christmas and end up putting everything on credit cards which they never seem to pay much off from as yet another bill crops up. My sister is like this and lurches from month to month in feast or famine mode although she still manages to find money for drink and cigarettes. Despite having a good level of intelligence and education, and having worked in accounts when younger, she often tells me she doesn't know where the money goes. I have tried to help her but she thinks I am "lucky" that I don't have any money worries. I do budget very carefully but still enjoy my life (I have several hobbies) and love randomly treating my daughters and grandchildren occasionally as well as at Christmas and birthdays.

enthusiasticsaver

dreaming wrote: »

Except that many don't! I know quite a few people who always seem surprised when it's time to pay for the car tax/house insurance/Christmas and end up putting everything on credit cards which they never seem to pay much off from as yet another bill crops up. My sister is like this and lurches from month to month in feast or famine mode although she still manages to find money for drink and cigarettes. Despite having a good level of intelligence and education, and having worked in accounts when younger, she often tells me she doesn't know where the money goes. I have tried to help her but she thinks I am "lucky" that I don't have any money worries. I do budget very carefully but still enjoy my life (I have several hobbies) and love randomly treating my daughters and grandchildren occasionally as well as at Christmas and birthdays.

Yes it is not like Christmas or house insurance fall at random times throughout the year. I guess it is a question of priorities with some people like your sister and they live in the here and now rather than planning for the future. I would find that incredibly stressful. I am like you and budget carefully but we have hobbies and do holidays and treat our family. We don't feel like we are deprived but I fully accept I am disciplined about our spending.

The old saying you can lead a horse to water but cant make it drink applies here I think in that you can give advice but people may not choose to take it. I have a friend who keeps telling me I was lucky to retire early in spite of me telling her more than 20 years ago to put more in her pension. I just bite my tongue now.