tracking your finances

blue.peter

getmore4less wrote: »

The ultimate goal with financial planning is knowing when you can stop earning because the pot is big enough.

If this was true, then there would be no need to continue budgeting after retirement.

As a retired person, I can assure you that this is not the case. I retired about four years ago, and continue to manage my finances in exactly the same way as I did before I retired. For many people, income after retirement is more limited, which actually increases the need for budgeting.

The real purpose of budgeting is resource allocation and planning: to ensure that all of one's needs are met. Of course this includes savings (whether for retirement or other purposes), but it goes much wider than just this. It's a tool for making financial decisions generally and for monitoring the results.

Retirement planning is a separate, though related, exercise. You might have integrated it fully into your budgeting, but it does not follow that this is either necessary or the sole purpose of budgeting for everyone. I chose to do my retirement planning separately, though of course budgeting decisions fed into it and vice versa.

blue.peter

Eco_Miser wrote: »

That's only a problem if you spend the money without considering what else it may be needed for - and you don't need a full rolling year budget to do that.

Absolutely true.

Sea_Shell

I'm finding it's not so much about budgeting, but about managing the cashflow, and keeping the pots balanced, between instant access cash, notice cash, long term fixed cash, ISA's and pension contributions.

You need to make sure your money is working as hard as it can for you, and to do this you need a fairly firm grasp of what you need and where it's going.

blue.peter

MDMD wrote: »

One complication I have is I use the accrual method of recording expenses (so if I use a 0% CC I record the cost as “spent” even though the cash may not leave the bank for weeks, months or even years).

I also have been until recently (when a number of the rates have dropped to my self imposed 2% floor) doing the multiple regular saver and current account hokey-kokey.

Both of those mean that I have to have a “cash flow” as well as a budget as the budget may show me in a healthy surplus but if I haven’t funded the accounts properly then I can end up overdrawn. In practice it’s just a list of all the payments that go out (although I am trialling the HSBC “balance after bills” feature) but it’s a reminder that cash is king!

I don't know what you're using to record all this, but I find that my use of AceMoney (see description upthread) allows me to do both. As future payments accrue, I record them on the schedule page. They then show up on the relevant account page in the correct chronological order. The account page therefore always shows the correct cash balance at all times (looking a month ahead as well as into the past), and gives prior warning of any potential overdraft. The reality of that overdraft can be avoided by transferring money into the account as necessary before it actually arises.


Edit: AceMoney can display future bills up to five years ahead. One month is simply the option that I've chosen to use.

Zero_Sum

MDMD wrote: »

One complication I have is I use the accrual method of recording expenses (so if I use a 0% CC I record the cost as “spent” even though the cash may not leave the bank for weeks, months or even years).

I also have been until recently (when a number of the rates have dropped to my self imposed 2% floor) doing the multiple regular saver and current account hokey-kokey.

Both of those mean that I have to have a “cash flow” as well as a budget as the budget may show me in a healthy surplus but if I haven’t funded the accounts properly then I can end up overdrawn. In practice it’s just a list of all the payments that go out (although I am trialling the HSBC “balance after bills” feature) but it’s a reminder that cash is king!

Why would that be a complication? All you're doing is charging the expense to the credit card. The cost shows up in your income& expenses, then your credit card is in effect a bank account that always has a negative balance which just offsets your main current account.

I go a step further on the accrual front in that annual charges like insurances is transfered from cash to payments in advance, then charge out 1/12th each month.

MDMD

Zero_Sum wrote: »

Why would that be a complication? All you're doing is charging the expense to the credit card. The cost shows up in your income& expenses, then your credit card is in effect a bank account that always has a negative balance which just offsets your main current account.

I go a step further on the accrual front in that annual charges like insurances is transfered from cash to payments in advance, then charge out 1/12th each month.

The complication arises because I have to manually ensure that the accounts are funded. I pay more out of my bank on the first of the month than my net pay, but if I were to take a snapshot view on the last day of the prior month then it would appear that I have a large surplus at the end.

This month I’ve also had £6k sitting in my bank for a season ticket loan but the spending will go through the budget over the next year as my employer deducts the cost from my net pay.

The point is that it’s not just about the budget, it’s about matching the spending with cash flow and being able to monitor the exact position. I find the only way I can do this is with a budget, a cash flow and a “balance sheet”, all on spreadsheets.

getmore4less

The ultimate goal with financial planning is knowing when you can stop earning because the pot is big enough.

blue.peter wrote: »

If this was true, then there would be no need to continue budgeting after retirement.

That is the wrong conclusion.

There is still the need to budget to manage the transition from accumulation to dissipation of the pot.

The retirement planning and budgeting are linked as retirement goals drive how much of the income needs to be not spent.

getmore4less

MDMD wrote: »

One complication I have is I use the accrual method of recording expenses (so if I use a 0% CC I record the cost as “spent” even though the cash may not leave the bank for weeks, months or even years).

I also have been until recently (when a number of the rates have dropped to my self imposed 2% floor) doing the multiple regular saver and current account hokey-kokey.

Both of those mean that I have to have a “cash flow” as well as a budget as the budget may show me in a healthy surplus but if I haven’t funded the accounts properly then I can end up overdrawn. In practice it’s just a list of all the payments that go out (although I am trialling the HSBC “balance after bills” feature) but it’s a reminder that cash is king!

That's where a tool like MSMoney comes in handy because it does both capturing the category of where the money went and the actual cashflows against the accounts.

An example would be something like a shopping trip to Tesco where you buy multiple categorises of stuff and pay by CC.

In MSmoney you can break down the transaction for each category of spend to record those against the budget and show it as a single spend on the CC account for the accounts cashflow

Also scheduled will be the future payment of that CC from your chosen bank account(that is just a transfer with no categories).

Once set up most of the transactions can be automated, with the detail getting updated at the time, like actual date/amount for the variable ones, or DD that move a bit due to W/E and BH

blue.peter

getmore4less wrote: »

That is the wrong conclusion.

It's an entirely logical consequence of your statement that "retirement planning was the ultimate objective". If it's the wrong conclusion, then you said something other than what you meant.

getmore4less wrote: »

There is still the need to budget to manage the transition from accumulation to dissipation of the pot.

The retirement planning and budgeting are linked as retirement goals drive how much of the income needs to be not spent.

You appear not to have read the whole of my post. I said that retirement planning and budgeting are interlinked, which you appear now to be accepting.

I can't necessarily agree that "retirement goals drive how much of the income needs to be not spent". This will not always be true. It assumes that one has sufficient income to be able to put all that one wants into retirement funding. If income is insufficient to allow this, retirement plans will have to be changed - either by accepting a lower retirement income or by deferring retirement. There has to be feedback in both directions.

Budgeting has to be part of one's lifetime financial planning, which means that it has to continue past the transition from accumulation to decumulation, and not just up to retirement and (as you now say) managing the transition. For some people, that transition is abrupt, as a DB pension is brought into payment or a DC fund is annuitised. For others, a more gradual process applies, as with phased retirement or drawdown. Either way, budgeting needs to continue for the whole lifetime, even once a "steady state" retirement has been achieved.

Herbyme

getmore4less wrote: »

The ultimate goal with financial planning is knowing when you can stop earning because the pot is big enough.

You've all got me thinking there... is that the point of my planning? Actually I'd find it quite hard to say what the point of it is, apart from feeling more comfortable when I know I'm in financial control and I can deal with most situations which might arise.