How do you guys expense large purchases?

[Bades]

I'll be moving into my first apartment and will be making a few big purchases, such as a new TV, mattress, and couch. I have saved up and can afford them.

But how do you expense these purchases? Obviously if I throw them in my money manger excel file, the month im going to purchase them is going to look like I went way way over budget. And my monthly averages, i.e. entertainment, household furnishes, will skyrocket...

Advice?

[disneysteve]

We don't work off of a budget so it really doesn't matter. Since you do use a budget, I'm still not sure why it matters. Obviously, you will know why the numbers are off from the usual pattern and your budget is just a guide for you anyway.

[Bades]

I understand that, I like to use the graphs a lot to track spending habits, and obviously when you throw a large TV purchase into your entertainment section is creates a large spike!

So people who use budgets, if they anticipate a large purchase that would obviously put them over budget for that particular month, would they just not post it on that month's budget?

I know a budget is more of a guide, but since I'll be living on my own soon I really don't have any good historical data on things I spend money on. I really want to get some good data and figure out how much per month I need to live the lifestyle I want to live, and if I'll have to adjust my lifestyle at all. Obviously I paid for groceries and food during college, but college life, is nothing like the real world, you aren't buying pizzas at 2am in the morning and go out to the bars 3 times a week.

I just want to be really "good" with my money and spending habits once I start living on my own and paying for everything.

[LuckyRobin]

I have a spreadsheet that is seperate from my budget. I call it my holding tank and it has categories like Laptop Fund, Property Tax, HoA Dues, new car fund, etc. Anything that I have to save up for or that only gets paid once or twice a year. Each category gets its own column and gets a new entry each time I add money to the fund and then a balance for that column. When money goes out, it gets subtracted and then the balance (if there is one) is carried over to the next year's spreadsheet, or deleted if it's a one time expense.

I just keep it away from my budget except to record how much went to the holding tank each month (I have a seperate budget spreadsheet for each month).

[skydivingchic]

I use an electronic envelope budgeting system. For me, large purchases like this would come out of my personal savings envelope, which is for a new-to-me car, vacations, and large one off expenses like you are talking about here. So yes, I would assign the purchase to the proper category and that category would spike for that month. However, when I'm analyzing things the variable categories I'm typically worried about are things like the groceries, utilities, gas, and vehicle maintenance categories. So the purchases would not affect those categories. So I guess my recommendation would be to have a separate category for large one off purchases like this, or when you do your math simply exclude things like the TV purchase. My personal savings envelope spending varies wildly month to month - many months it is $0, other months I spend thousands. But it doesn't affect my more "day to day" type of spending categories. As long as the money is in the personal savings envelope, I can buy whatever I want without affecting the rest of my budget.

[snshijuptr]

I just add a bit to my Annual Expenses account. This account already includes our insurance, registration, and membership dues. I add a bit to this for big expenses I expect in the next year. I figure these "irregular" expenses seem to pop up a lot.

[maat55]

If I were you, I would spend the first month or two living on a basic budget. No cable or other luxuries. This would give you an idea of how much money you would need for basics, and give you an idea how much you can prioritize for other goals.

I would treat my rent as a mortgage, figure what you can afford on a fifteen year note(less a 20% down payment), with a payment no more than 30%(25% preferable). I would budget my rent, utilities and a basic food budget(attempt to keep it as cheap as possible).

During this time you can build additional savings. This plan will do two things, it will help you find your bottom needs, and it will break you of any consumption addictions. During this time, I would read a few books on personal finance to pass the time.

After a month or two, you can allocate your prioritizes like retirement savings, large consumer purchase funds(cars,toys,house down payment etc.), and then add things like cable, eating out etc.

The habits you begin now will usually determine your life long habits. Getting off on the right track can be a huge benefit. I'm guessing you are already on a good start, but figured I would bore you a little.

[nick__45]

Originally Posted by Bades

I understand that, I like to use the graphs a lot to track spending habits, and obviously when you throw a large TV purchase into your entertainment section is creates a large spike!

So people who use budgets, if they anticipate a large purchase that would obviously put them over budget for that particular month, would they just not post it on that month's budget?

I know a budget is more of a guide, but since I'll be living on my own soon I really don't have any good historical data on things I spend money on. I really want to get some good data and figure out how much per month I need to live the lifestyle I want to live, and if I'll have to adjust my lifestyle at all. Obviously I paid for groceries and food during college, but college life, is nothing like the real world, you aren't buying pizzas at 2am in the morning and go out to the bars 3 times a week.

I just want to be really "good" with my money and spending habits once I start living on my own and paying for everything.

Why don't you just enjoy your life and not worry about the pennies or even a few dollars. You should have a goal of how much you should put away each month and try to aim to achieve that amount, give or take 20%. For example, if you are maing 3000 dollars a month and like to put away 750 dollars, that would be a good goal. Your aim should be anything from 600 dollars to 900 dollars. That is why I have been doing minus the 5 years that I went into super saving mode due to fear of job losses and converted much of my stash from cash reserve to durable good investment. After receiving my tenure and had my contract renew for 10 years, I bought a house 18 months ago at a very reasonable price and still have 45k dollars today.

If at all possible, you should have roomate or live at home so you can save up some money quickly to buy a house before the price start going up and out of hand. I believe price will stop falling in most places in 2 years and may start going back up in many places already. I know my area price has gradually gone back up since it went up too fast and fell flat on its face around the time I bought my house for half of what my neighbor paid the exact house in 2006. Having an apartment by youself is over-rated, so is home-ownership if you are looking at it from a tax write-off angle. However, buying something cheap at a very low interest rate will make owning about the same or cheaper than renting. I see a lot of young people making mistake of paying such a high price for renting that they could buy for much cheaper. For example, there are idiots that rent for $1300 when my mortgage, property tax, insurance, water & sewer, and utility is less than that and I have a 5-bedroom house instead of them renting a 2-bedroom apartment.

[MonkeyMama]

Personally, I just wouldn't put it in the budget. It's just such a one-time type thing.

I don't do budgets, per se, but I do track my spending. I have a separate category for "big purchases" that I can easily leave out or ignore when considering more average/usual spending. (I use Quicken, so this is very easy).

I also track my net worth. BIG purchases (homes/cars) are shown as assets and re-valued over time (gain/loss,appreciation/depreciation - depending on the type of asset). The reason is because if I spend $15k on a car, I didn't throw that cash down a black hole - I have an asset I can sell. I just don't bother tracking anything smaller than that. Probably because it's pretty safe to say almost everything else depreciates to nothing pretty rapidly. But I can relate that at a certain dollar value it really starts to throw certain tracking mechanisms off.

[tan fish]

I do sort of what some of the other posters mentioned, which is save up regularly for "big" expenses in a savings account. In my savings account, I literally have an account called "car" for the next car I intend to buy years from now. I track the regular monthly payments I make to it, and when I use it I imagine it will basically zero out. I also have savings accounts for new computers, new HD TVs, etc. Pretty much any big, irregular purchase over about $400 that I anticipate I will need in the mid or long term I have a separate savings account for.

As for regular purchases which come daily/weekly (food) or monthly (rent, school loan payments) I just pay those things out of my checking account. By the end of the month, I can usually expect a general amount to be in there based on my purchases throughout that month. I'm pretty much always taking mental note of when I make both regular and larger purchases, and I always try and stagger the larger ones over time so I can spread them out.

[Bades]

Thanks guys for all the responses.

As for the renting/buying deal. I hope within a year my g/f and I will will have enough money saved up for a down payment on a house. We're looking at apartments that are around $800 a month so we'll be splitting that. I'm not a big fan of apartments anyway, I spent 8 hours getting bossed around why do I need to deal with landlords and all their BS??

I like the idea of tracking assets: you buy a car, and it looks as if you just dropped $xx,xxx down a hole but that's not true. Good way of looking at it.

I think I'll stick to actively tracking my daily/monthly expenses (rent, food, utility, insurance etc). I feel like sometimes I spend a little too much on dining out. However like I said I was in college the past 4 years and it pretty easy getting caught up in dining out a lot, especially when it looks like a bomb went off in your kitchen.

With the salary I'll be making and the lifestyle I currently live, and the expenses I anticipate, I should be saving around 1200 a month. That money I save will go to EF, a future house down payment, and any other irregular purchases.

One more question about irregular purchases...do you guys put money away in anticipation for buying something like a new TV, or do you just keep contributing to a savings account, and whenever you feel like you want to buy something you just do it? I'm assuming as long as these irregular purchases don't interfere with your contributions to retirement, loans, and other types of funds, you can then buy however many tvs and toys you want?

[snafu]

We've always had a 'furnishings' column which includes major appliances. I've kept it balanced by making contributions regularly, adding receivables from selling existing furniture/appliance and showing 'transfer' details when a cash infusion is needed to pay for a new item.

If you wish to save $1,200. I suggest you 'pay yourself first.' Transfer that sum to a linked saving account as the 1st action or set an automatic transfer. The sums will be there for you when you decide how to make best use of the funds.

[1yearfrom0debt]

I have an online tracker that does this same thing. I agree that it will throw it off, but is there a way for you to take that out. For example, if you have it in a savings account that wouldn't show up in your normal spending from your checking account. I guess that I understand, but if it wasn't linked to your every day spending it might not have this affect. I track my spending because I have been on a major debt relief plan to get out of 25k in debt! So I know how much it will bother you to see that uptick in "spending" even though you have saved for it.

[Hector]

Originally Posted by Bades

I understand that, I like to use the graphs a lot to track spending habits, and obviously when you throw a large TV purchase into your entertainment section is creates a large spike!

Try not to look at that large spike. Focus on average and trend lines.

[Hector]

Originally Posted by nick__45

W
If at all possible, you should have roomate or live at home so you can save up some money quickly to buy a house before the price start going up and out of hand.

I see a lot of posts about getting a room mate. Does that mean
A. people are taking mortgages too early when marriages are not in picture OR
B. people dont get married these days?

My guess is that its A. Does that mean we didnt learn anything from last 2-3 years?

[humandraydel]

Originally Posted by Hector

I see a lot of posts about getting a room mate. Does that mean
A. people are taking mortgages too early when marriages are not in picture OR
B. people dont get married these days?

My guess is that its A. Does that mean we didnt learn anything from last 2-3 years?

Not sure why A implies we didn't learn anything. Roommates just make financial sense. I'm not married and my mortgage is 1.5x my salary. My monthly payment is slightly less than my rent payment was. I don't have a roommate, but I wouldn't be opposed to one (especially if I already knew them).

[cypher1]

Originally Posted by Hector

I see a lot of posts about getting a room mate. Does that mean
A. people are taking mortgages too early when marriages are not in picture OR
B. people dont get married these days?

My guess is that its A. Does that mean we didnt learn anything from last 2-3 years?

Whats wrong with having a roommate? While I can easily afford my mortgage without one, I'm not going to argue about additional income for my EF or projects. Luckily they're also my friend who share the same habits and we don't get in each others way.

[MonkeyMama]

Living in a large home, I could easily pay my mortgage with 2 roommates - and I have the room. (meaning 2 renters = mortgage payment - I wouldn't have to pay a dime). It's quite simply an EASY way to save money. (Of course, as a renter, I estimate I saved $50k over 5 years by sharing a space with roommates. That's just the rent).

Of course, roommates come with hassles, but they can really be a gold mine. The only people I know who seriously consider roommates tend to be more frugal minded, anyway. So I wouldn't assume much about taking on roommates = being broke.

[Hector]

Originally Posted by cypher1

Whats wrong with having a roommate? While I can easily afford my mortgage without one, I'm not going to argue about additional income for my EF or projects. Luckily they're also my friend who share the same habits and we don't get in each others way.

Nothing is wrong with having a roommate. In fact its great to have roommate, but I don't think its a good idea if I take mortgage that I can not pay by myself and I'll need to rely on roommate.

[Slug]

To answer a couple of the OP questions:

1) For big ticket items I usually create separate accounts to force savings towards the item(s) in question. You can always raid the account if life situations change during the saving period.

2) You might consider the store credit cards for these purchases if they defer the interest. That way you can make a monthly payment on the item, while letting the rest of the purchase price work for you in a savings acct, and it SMOOTHS your budget graphs while fully capturing the purchase.