Developing a new Budget

[mrpaseo]

What topics should I be tracking on an annual basis? i.e. Clothes, groceries, vehicle fuel, rent/mortgage... What area's should I cover? Should I group up "Utilities" such as electric, water, cable... How do I determine what goes in what group...lol.

This all stems from the book I am reading. They said that most wealthy people can tell you exactly what they spent on (For example) clothing each year. I have never tracked my budget like this and I would like to start.

So... Opinions?

Thanks,
Ray

[photo]

There is no right or wrong way. Probably the best way to begin is to write down every expense, no matter how small. From there, start categorizing into large groups, then divide the small groups down to whatever you find reasonable and helpful.

[kork13]

What topics should I be tracking on an annual basis? i.e. Clothes, groceries, vehicle fuel, rent/mortgage... What area's should I cover? Should I group up "Utilities" such as electric, water, cable... How do I determine what goes in what group...lol.

I keep my budget moderately simple. I use 10 basic categories: Taxes, Charity, Housing, Loans/Debt, Auto (gas, car payments, repairs), Groceries, Utilities, Insurance, Savings, "Fun Money" (because after I cover of everything that's required, I don't apportion how I spend the rest). I like this setup, because doing it this way keeps my budget pretty accurate without any adjustments -- my expenses don't change much month to month, so I have good approximations of what I spend where. And when one month finds itself having higher expenses in a category than normal, savings or the "fun money" cover it.

One thing of note, I keep my budget distinctly separate from tracking my expenses. I see the budget as the goal of how I want to spend... the expenses tracker is truth data. In my expenses tracker, it's again fairly simple, broken up into 3 columns by Food/Grocery/Restaurant, Charity/Housing/Auto/Utilities, and Everything Else.

What's really most important is just figuring out something that works for you. I could give you the spreadsheet I use along with 30 other templates, but you need to just figure out what works for you and how it all makes the most sense to you.

[disneysteve]

What topics should I be tracking on an annual basis? i.e. Clothes, groceries, vehicle fuel, rent/mortgage... What area's should I cover?

This all stems from the book I am reading. They said that most wealthy people can tell you exactly what they spent on (For example) clothing each year.

I guess my question would be why do you want to track that stuff? I'm not wealthy but I think we're doing okay and I don't have a clue how much we spend each year on clothes, groceries or vehicle fuel.

Are you having trouble making ends meet? Are you living beyond your means? Are you not saving enough for the future? If the answers to those questions are yes, then getting a hold of your spending patterns is very important so that you can see where to cut back to free up cash. If, however, you are meeting your savings goals and enjoy your lifestyle, I'm not so sure that it matters.

Here's what we do. 50% of my wife's income goes into her 401k. 23% of my income goes into savings divided between retirement accounts, DD's 529 and prepayments on our mortgage. Anything that remains after taxes and other necessities (mortgage, utilities, health-auto-life-disability insurance, etc.) is fair game for spending. In what categories it gets spent really doesn't matter to me.

[bjl584]

What topics should I be tracking on an annual basis? i.e. Clothes, groceries, vehicle fuel, rent/mortgage... What area's should I cover? Should I group up "Utilities" such as electric, water, cable... How do I determine what goes in what group...lol.

This all stems from the book I am reading. They said that most wealthy people can tell you exactly what they spent on (For example) clothing each year. I have never tracked my budget like this and I would like to start.

So... Opinions?

Thanks,
Ray

I track major things. The amount that I save and invest each month. Major monthly bills such as mortgage, insurance, taxes, and utilities. I don't sweat the rest. I can't tell you what I spend on gas, food, or entertainment. I've never had to worry about it. Once the major things are taken care of, then the rest is mine to do what I please with. That sort of system isn't for everyone, but it works great for me.

[cypher1]

I guess my priorities are a little different when it comes to groceries/toiletries (those I just buy, but already know the avg cost monthly), gas (fill up weekly), clothing (rare, probably buy twice a year if that). I suppose I keep those numbers in consideration, but don't worry or think about how to lower. But as a HO, I tend to factor optional seasonal expenses, spraying lawn in summer, purge sprinkler system in fall (DIY next year), and just being aware of gas utility increasing in winter, electricity in summer, etc. Property taxes/HO insurance are in escrow. For auto, every 6 months renewal, annual tabs avg cost, and AAA roadside assistance.

I don't need to worry about where every dollar from my paycheck goes to, as long as I'm paying myself a certain % first every time. It's good to have a better idea of my monthly spending, but I don't keep many restrictions or limitations. Although we can't plan for every little surprise in life, it can't hurt to be ahead on some.

[kork13]

I guess my question would be why do you want to track that stuff? I'm not wealthy but I think we're doing okay and I don't have a clue how much we spend each year on clothes, groceries or vehicle fuel.

Personally, I like to know how I'm spending. Not out of any concern (I'm the same way--saving plenty and doing just fine), but out of curiosity and as a means of understanding my habits. I'm simply more comfortable knowing what I'm spending than not knowing. Besides, knowing where you spend makes it easier to cut back if ever it's required.

[ecoadapt]

There is no right or wrong way. Probably the best way to begin is to write down every expense, no matter how small. From there, start categorizing into large groups, then divide the small groups down to whatever you find reasonable and helpful.

This is the most advice that you really can follow! Noting down all your expenses,and grouping them into small to big (or what works for you best) but you should follow what's on your note to maintain your lifestyle!

[mrpaseo]

Thank you all for your replies. I am looking to save more for our future. For the better half of my adulthood we have thankfully not had to count pennies. That said, we should have more saved... I went and spoke with a Finance guy at the Army Community Service (ACS) and the only thing he could tell me is I should track better where my money is spent. We have general categories, for example Clothing. We have a monthly allotment that goes to clothing and when someone needs something... we buy it. So, I can tell you we alot 100 a month, or 1200 a year for clothing... but does all that get spent on clothing? I don't know...lol. Sometimes I might dip into it for something else.

I am most interested in knowing how much we spend on food (Groceries/Dining out/Fast food).

Thanks again,
Ray

[snafu]

MINT has a free program to track spending categories. You can separate or combine Food into groceries/restaurant/supplies [non edibles like soap, tp, toothpaste often bought at grocery store for convenience rather than price]

We've used QUICKEN [and it's updates] since it 1st came out primarily to track investments but it tells me immediately when designated categories like utilities are more than I expected/planned. We feel comfortable knowing we have a plan and feel terrific when it does better than expected. We work hard for our money and we want our money to work for us. I dislike feeling I failed to get value for money or spent stupidly.

[disneysteve]

We have a monthly allotment that goes to clothing and when someone needs something... we buy it. So, I can tell you we alot 100 a month, or 1200 a year for clothing... but does all that get spent on clothing? I don't know...lol. Sometimes I might dip into it for something else.

I am most interested in knowing how much we spend on food (Groceries/Dining out/Fast food).

How do you pay for your purchases? If you use a credit card, this is very easy. Sit down with your last 12 statements and you can figure out how much was spent on groceries and restaurants pretty easily. With some cards, you may even get a free summary of charges by category (our Chase cards do that).

If you use cash, you would need to track it yourself as you spend it (part of why I prefer using credit cards).

[jpg7n16]

There is no right or wrong way. Probably the best way to begin is to write down every expense, no matter how small. From there, start categorizing into large groups, then divide the small groups down to whatever you find reasonable and helpful.

I agree with this.

You want the categories to be small enough to be meaningful, but not so small that you're micromanaging.

Bad:
- Bills $750
- Living expenses $1550
- Fun $450

That tells you nothing useful.

Also bad:
-Socks: $14.23
-Shorts: $15.17
-Jeans: $45.84
-Summer shirts: $22.33
-Winter shirts: $27.50
-etc.

That breaks it down too far and you get lost in the information. You want groups that identify what the general reason for the spending was, and enough info to break apart and see if there are trends you could cut back on.

I'd recommend starting with the following categories:
Food, Housing, Utilities, Transportation, Clothes, Recreation, Medical and Personal

[GoalSmart]

I both agree & disagree. My thoughts are:

Tracking your spending is essential when initially setting up a NEW Budget - which is what this thread is about. It's especially important to get a handle on all those discretionary cash items we spend money on - buying lunch, a coffee, magazine, etc etc.
I recommend you get a pocket pad & write down every cent you spend for a month.

Then you sit down with a budget template and enter it all along with your regular bills & expenses (just get your last few months bank & credit card statements our for that)

Once you've done that, you can use a budget template to project that current spending to an annual figure. This is a necessary wake-up call for most people.

Then, once you gather yourself up off the floor, you can get to work on making choices around your spending that are in line with your financial goals.

One of the most important things is Saving for Wealth Creation. Most people just allocate their left overs to that (and usually there are none) so they're perpetually broke. 10% of income going to Savings is the ideal, but start at 1% if you must - it's important to have something here as a compulsory budget item.

When people say 'I don't need to budget , we're doing ok', it usually rings alarm bells for me. Steve sounds like he actually does have a system in place and that's what it's all about -a regular system. Simple is good.

I also strongly believe that once your budget is set up, you shouldn't have to track your spending anymore (unless you decide it's time for a budget overhaul, then you start again at the top). Otherwise, a good budget should run on auto pilot so you can get on with the fun part of life!

And which expense items should you have? Most budget templates will prompt you & give you ideas but it varies for everyone. The important thing is that you make some choices around what you will spend, see where you can save money on regular bills and set up a system to run on auto pilot.

Happy New (Budgeting) Year everyone!

Cheers,
Miriam

[Shewillbemine]

You're reading a Thomas Stanley book aren't you?

My budget creating process is more ground level. You can spend hours thinking of categories and sub-categories and still come up with a budget that isn't particularly suited to your lifestyle.

I would suggest you access/print your 2011 bank statements. Look at your spending from those statements and create the budget from there. Budgeting "Clothes" doesn't make sense for someone like me, for example, because I rarely if ever buy clothes.