Changing how I Budget

RG2015

phillw said:

I don't understand budgets, for me the idea is to spend as little money as necessary. If I set a budget, then I would find myself spending more money to use up the budget. What happens when you have blown your food budget, do you stop eating?

You can't budget for emergencies either, will I need a new boiler this year or next? How much should I put by for that?

I agree.

I have an ongoing monthly projection with one off annual payments scheduled in the relevant months. Each month I update the projections with actuals and amend future months as appropriate.

Projects are scheduled in as required and funded from future income or savings as required.

I also think that the term “budget” means different things to different people.

budget
plan
forecast
projection
allowance
goal
target
limit

See the way road works suddenly appear in March just before the financial year end. Spend it or lose it.

I used to manage corporate budgets and the canny managers knew that if they didn’t spend their annual budget they would have the following year’s budget reduced. Madness, but we in Finance knew how each manager worked and as long as they delivered we were happy with them being at the centre of the process.

At the end of the day we just need to manage our goals and fund them according to our available resources.

Peterxxxxxx

This is my reply to Brand7’s comment. 

I have a credit card, debit card, cheque account and savings account. All are with the same provider.
Bills are paid from the cheque account automatically. The debit card is used for day to day purchases. The credit card is used for online shopping. 

The savings account has small amount of money in it.

I’ve read the comments that people have made about the accounts they use. I believe now that I need to review, or change your account which I use. Chase Bank, Starling Bank and Monzo, are all examples of possible alternatives.

Peterxxxxxx

My reply to RG2015
I have been able to create forecasts for rent, electricity, water rates and council tax. This allows me to create forecasts using Excel. I can then compare the forecast against actual increases. 

I take note about your comments about the financial year. Additionally, creating reliable forecasts helps my personal well being.

RG2015

Peterxxxxxx said:

My reply to RG2015
I have been able to create forecasts for rent, electricity, water rates and council tax. This allows me to create forecasts using Excel. I can then compare the forecast against actual increases. 

I take note about your comments about the financial year. Additionally, creating reliable forecasts helps my personal well being.

This sounds good. If you can forecast rent, electricity, water rates and council tax, then you can do likewise for everything else. This will give you a plan. If you forecast a deficit than you might consider limiting some discretionary expenditure. This now becomes a budget. If you stick to your budget for discretionary expenditure than you will avoid a future deficit.

I am not sure that my financial year comment would apply to you in the same way it would to a local council. However, if you have some spare cash at the end of a pre set period, you could choose to buy yourself a treat of some sort.

Last, but absolutely not least, managing your finances well will help your personal well being.

Peterxxxxxx

This shows the monthly consumption in kWh for a four year period.
I feel pleased at being able to post this visual. I can show what I’m talking about.
Microsoft have changed their Office 365 suite. Interesting features and changes.
It’s more interesting to me to able to post with visuals

RG2015

Peterxxxxxx said:

This shows the monthly consumption in kWh for a four year period.
I feel pleased at being able to post this visual. I can show what I’m talking about.
Microsoft have changed their Office 365 suite. Interesting features and changes.
It’s more interesting to me to able to post with visuals

Sorry to be rather critical, but these cannot be consumption figures.

August and September 2019 are negative, which is impossible. Equally Nov 2021 at 227 compared with Nov 2022 at 48.80 is suspicious.

Spreadsheets are only as good as the accuracy of the data. Get this wrong and you are lost.

phillw

RG2015 said:
If you forecast a deficit than you might consider limiting some discretionary expenditure.

If you forecast a deficit you should limit discretionary expenditure.

You might consider limiting it if you are close enough to a deficit that if your forecast is out, then you would be in financial difficulty.

RG2015

phillw said:

RG2015 said:
If you forecast a deficit than you might consider limiting some discretionary expenditure.

If you forecast a deficit you should limit discretionary expenditure.

You might consider limiting it if you are close enough to a deficit that if your forecast is out, then you would be in financial difficulty.

This is what you would advise. That is fine.

I take the view that is It is up to the OP to decide for himself.

He may decide to go overdrawn but that does not necessarily indicate financial difficulty.

Mr Micawber's assessment that being overdrawn equates to financial misery is somewhat outdated.

Eco_Miser

phillw said:

RG2015 said:
If you forecast a deficit than you might consider limiting some discretionary expenditure.

If you forecast a deficit you should limit discretionary expenditure.

You might consider limiting it if you are close enough to a deficit that if your forecast is out, then you would be in financial difficulty.

It depends what is meant by 'deficit'.

If it means running out of money, then limiting discretionary expenditure is necessary, if OTOH, it merely means expenditure exceeding income, there's no problem, so long as there is sufficient capital/savings to fund the deficit.

theoretica

I find it helpful to think of spending in quality categories - including essential minimals (council tax, beans on toast, some of the fuel bill) and nice to haves (better food, more heating, charity shop books...) significant luxuries (holidays, newer car...).  I find it particularly useful to acknowledge that the same spending (eg my grocery bill, heating) can be partly an essential, and part discretionary spending.