What is the best method to budget?

[PrincessPerky]

Re: What is the best method to budget?

If tedium is stopping you you could try the lazy way. We make almost 100% of purchases with debit card..not CC, it is not unlimited, in fact it runs low all the time, so if I want something I really have to consider if we can afford it, anyway..I keep no firm track, I one time added up all my bills (they are pretty constant), anything left after the checks come in is used for 'everything else' literally. I am too lazy to decide if dinner out is food or entertainment, I just don't care either way using money in one spot is less for another, and I don't care, so long as I buy food to feed us every week, the money leftover is find to waste...I pay (paid..it is gone now) the CC first, then go to the store, then whatever is left I spend.

course since there really hardly ever was anything left that was easy too
Now adays there is more since I don't pay the CC and we got a raise..it is actually harder when I have more to play with!

Anyway budgeting for the lazy soul.

[smooper]

Re: What is the best method to budget?

This worked for us for 16 years, and we are not broke.
We have a copy book with a sort of spread sheet that track what bills are due, and what have been paid. It just gives us a snapshot of $ needed each monthe for mort,elec,water,phone....
After its all paid, which for us happens the last week of each month, we know we are in the clear for a month and since not much $ is left, know what needs to be saveed in the next 3-4 weeks.
Its very lazy, but qiucker than Quicken, and of course doesn't cover everything, but it covers the bulk of it.

[Budgeteer]

Re: What is the best method to budget?

Personally, I think it's a really good idea to separate expenses like groceries from "going to the movie theater." I don't track cash - I have a budget item called "Spending Money." Every month I transfer that amount into my own personal account. I spend that money at will on whatever I want - my wife doesn't track the account, doesn't care what I spend it on, and doesn't ask me about it. It's not part of the budget. As far as the budget is concerned, I spent exactly $100 from our budget on fun and frivolous stuff.

When you group this kind of spending with mandatory living costs like groceries, gas, etc, you don't really have a way to know how you could change your spending if you wanted to. I can easily glance at my budget and make a conscious decision to cut back my discretionary spending by $50 a month in order to afford XXXXX or YYYYYY.

[vsjhoc]

Re: What is the best method to budget?

I read the book ALL YOUR WORTH by Elizabeth Warren and found the book an easy read and the information on budgeting common sense. She spends a lot of times on must haves and wants. It would surprize you what she would consider a must have and a want. It was quite an eye opening book for me for a budget that would work regardless of what straights you are in.

Do you remember any examples you can share? Thanks. I must have them.

[Aleta]

Re: What is the best method to budget?

She used a rule of 50/30/20. She believed that your must haves should not exceed 50% for a common sense reason. Say, tomorrow that you are unemployed, you're only going to receive 50% of your pay and that will go to what has to be paid. She says that 50% is sustainable; it is safe. ( because of what I said about unemployment and disability checks only covering 50% of income); and it has been tested over time.

Your Wants are for cable TV, lbeer, haircut, home computer, new sofa, movies, car wash, magazines, and etc.

20% if for savings. Emergency, saibings for plumbing, mechanic, etc. Also to be used to pay off debt. Her theory is to pay 10% to your retirement and 10% toward your debt. After the debt is paid you can then use the 10% to either contribute more to your retirement fund or to save for short term or long term goals.

For instance, in the book for must haves this is for your utilities, mortgage, food insurance, etc. She only considers the basic service part of your telephone service and the other part should go into your wants because you could do without all the bells and whistles if you had to. Also, she considers cell phones a want to unless you are under a contract. Then it would be put in the must haves. There is a lot to the book and you can get it from the library. You may not agree with everything, but there is alot of good information in there.

[tinapbeana]

Re: What is the best method to budget?

She used a rule of 50/30/20. She believed that your must haves should not exceed 50% for a common sense reason. Say, tomorrow that you are unemployed, you're only going to receive 50% of your pay and that will go to what has to be paid. She says that 50% is sustainable; it is safe. ( because of what I said about unemployment and disability checks only covering 50% of income); and it has been tested over time.

be careful with the 50% figure! in a lot of states you may receive up to 50% of your salary up to a pre-set cap. for instance, in SC the cap is $303 per week pre-tax, which means if you make more than $606 per week (or $15.15 per hour or $31512 salary per year) your unemployment will not be half your income. better check your local unemployment office your specifics in your area before you determine what is a 'safe' amount to live on for essentials.

also, i would consider 'essentials' to be my mortgage, power bill, home taxes/insurance, and food. enough to sustain life and not be homeless, nothing else. in my house that is about $850 per month. anything else is flexible if necessary.

[Aleta]

Re: What is the best method to budget?

As you said, you have to check with your state. I think that the message that I got from it was finding out was really a must have, because sometimes we don't cut corners because we consider a want as a must have. She does consider a mortgage, utilities and the like a must have. For instance, as much as I tried to figure and refigure, it was difficult because I live in South Florida and our homeowners insurance rates are higher than most people's mortgages. So, you have to read it and gleam from it the little nuggets that it has. It's still a book worth reading.

[vsjhoc]

Re: What is the best method to budget?

Aleta, if you enjoyed that book you'll like one of her other books, The Two Income Trap (which she co-wrote with her daughter). Warren is a professor at Harvard but writes so that the rest of us can understand what she's talking about.

[vishenda]

Re: What is the best method to budget?

Aleta, if you enjoyed that book you'll like one of her other books, The Two Income Trap (which she co-wrote with her daughter). Warren is a professor at Harvard but writes so that the rest of us can understand what she's talking about.

I think my sister has a copy, will take a look!thanks for the mention

[LivingAlmostLarge]

Re: What is the best method to budget?

10% for retirement is not enough. It might be if you are 22, but if you are 35, it's definitely not enough. You really need to think about what you need to retire and work backwards from there. I think the idea is very close to the 60% rule from MSN, however every situation is different.

15% is probably better in the 20s for retirement, 25% 30s, and 35% in your 40s.

[Raisecapital01]

Re: What is the best method to budget?

I do not know if you ever read Dave Ramsey's book. He offers great information on budgeting with the envelope system. I follow it now, and have fairly well with it. The way it works, is that you put all your billing money in each envelope including making an envelope for spending money. If your envelope empties, you are out of money.

[Budgeteer]

Re: What is the best method to budget?

I do not know if you ever read Dave Ramsey's book. He offers great information on budgeting with the envelope system. I follow it now, and have fairly well with it. The way it works, is that you put all your billing money in each envelope including making an envelope for spending money. If your envelope empties, you are out of money.

Isn't this a lot of work? It's the same as doing it with excel, except you don't have to go get cash and shuffle stuff in and out of envelopes all the time. Let computers to do the work for you. =)

[Aleta]

Re: What is the best method to budget?

Yes vsjhoc, I have heard about the book that you mentioned. My daughter-in-law and son is currently in that position. I have heard that it is excellent.

Yes, I have heard of the envelope system and Dave Ramsey. I haven't read his books, but plan to. I like the reader above use a facimile of an envelope system. I have a page with each account on it and it does basically the same thing of subtracting and I wholeheartedly agree with it.

My goal for the new year is to read a book a month on finances. You can always get a nugget from each book. I'm currently reading The Only Investment book that you'll ever need by Tobias. I also have checked out The Wealthy Barber. On the website, there is a whole list of books you can choose from. I get them from the library.

[disneysteve]

Re: What is the best method to budget?

Aleta, if you enjoyed that book you'll like one of her other books, The Two Income Trap

I think there is some fascinating and enlightening history in that book, particularly of the credit industry. It's a very good read. But I found some of the conclusions unconvincing. It's been a while since I read it, so I can't recall specifically what my issues were. I just recall feeling some of their points weren't accurate.

[disneysteve]

Re: What is the best method to budget?

10% for retirement is not enough. It might be if you are 22, but if you are 35, it's definitely not enough...
15% is probably better in the 20s for retirement, 25% 30s, and 35% in your 40s.

I'm assuming you mean if you are just starting your savings at those ages, correct? If so, you're right. Starting at age 40 and only putting away 10% won't be enough. However, if you are 40 and have been saving for 15 years already, that's a different story.

That said, however, so very many people are saving little to nothing that even 10% would be a huge improvement.