Question about Dave Ramsey style budgeting

[Petunia 100]

This is true. All the money has to go somewhere so really everyone has a zero-based budget whether they write it down or not. If we take a costly trip this month (we leave for San Diego on Tuesday ), then less might go into savings for the month. If we go out to dinner for DW's birthday, that money is gone so it can't be used for some other purpose. I just don't always know from month to month, or even week to week, what the outlier expenses are going to be.

Maybe you could try a buffer category, which is what I do. I don't have line items for several categories which tend to be at least partially discretionary. Items such as home maintenance, gifts, entertainment, clothing. Instead, I save an amount monthly for such items, as well as have an "Everything Else" category in my budget. So in practice, if I spend more than I have allowed for "Everything Else", I must dip into the corresponding savings account to cover it. Also in practice, if I know I need to pay for say a home repair and I have a gift-giving occasion coming up, I know that I really can't afford to be spending on entertainment or clothing.

I don't think my method is quite what DR suggests, but it works for me.

[disneysteve]

Maybe you could try a buffer category, which is what I do.

I save an amount monthly for such items, as well as have an "Everything Else" category in my budget.

Exactly. Does DR's system allow for an "everything else" category or does her really expect you to assign every single dollar a specific task?

By the way, I'm not looking to make a budget. Never have, don't expect I ever will. I was just trying to get a better understanding of how others do it.

[Petunia 100]

Exactly. Does DR's system allow for an "everything else" category or does her really expect you to assign every single dollar a specific task?

By the way, I'm not looking to make a budget. Never have, don't expect I ever will. I was just trying to get a better understanding of how others do it.

I recall from TMMO that yes, each category should be a separate line item with its own budget. I can see how if you were starting with no cushion, lots of debt, and little knowledge of where your money was going, splitting out each category separately would make sense.

[breathemusic]

Exactly. Does DR's system allow for an "everything else" category or does her really expect you to assign every single dollar a specific task?

By the way, I'm not looking to make a budget. Never have, don't expect I ever will. I was just trying to get a better understanding of how others do it.

I think you can give everything a specific category.... you just have to be willing to adjust it as you start getting your "actuals." So I just use a basic spreadsheet for my budget. It shows my biweekly payacheck and then it has line times for utilities, rent, credit card payment, student loan payment, etc. For the unknowns, I put in an estimate which I usually can guess at based on what the cost has been in the past. For utilities, I've been living in the same house for 5.5 years, so each year I make the estimate for that month's utility bill equal to the same month from a year ago. That allows me to better estimate based on the fluctuation in seasons. For the credit card bills, I put in a flat budgeted estimate for monthly expenses (I put almost all my expenses on 2 credit cards to get the rewards and then pay them off each month). Around the holidays or birthdays I budget a little extra. I also put in a misc category that is pretty low, but just accounts for the occasions when I happen to use my debit card instead of my credit card, cause I ideally like to be able to open my bank account and see that the balance there is pretty close to the balance estimated in my budget.

Everything else goes into a line for savings. If I happen to over-spend that month on my credit card, it means I'm making a smaller deposit to savings, or vice versa, so I just go in and fill in the amount for the credit card bill when it comes in and tweak it to be a living document. It's nice since I usually project out about a year in advance and can see what my expenses are and see how much I anticipate accumulating in my savings account.

[btctony]

I recall from TMMO that yes, each category should be a separate line item with its own budget. I can see how if you were starting with no cushion, lots of debt, and little knowledge of where your money was going, splitting out each category separately would make sense.

I keep a 1K cushion in my checking account, have very little debt (7k student loan debt), and I still do separate categories for things like groceries (items I buy from the store to make dinner at home) and money I have for eating out. I like to separate those specifically, because eating out can get expensive, if you're doing it for a large percentage of your meals. I budget a certain amount of money for alcohol that gets consumed at home, but I also play in a pool league once a week and usually have a couple of drinks there. I separate the two, because again ... The going out and having drinks can get expensive, if you're doing a lot of it.

I am very meticulous about it, because I like to know where every dollar is going, even though I have very little debt. The high level of detail I put into it allows for me to scrutinize my spending easier. In the end, I don't overspend on things that aren't necessary, and I end up saving more.

[BMEPhDinCO]

The way I do it is more in line with YNAB, although I don't use their software. Basically, I budget THIS month's paychecks for NEXT month.

So I know how much money I have to spend - then I can allocate it out. I get the bills during the month and then everything is already covered and ready for the next month. For people who are struggling, this can be hard to set up, but once it's set up, it's really easy AND it gives you a month float time if something goes wrong (ie, DH's paycheck did NOT come in as expected).

Further, by doing this I can "give each dollar a job" - even if that job is to sit in my savings accounts until I need it! (We also do bucket savings... so house, travel, auto, medical, etc all have their own account).

Finally, I try and keep required expenses low. So if we have extra one month, it goes to whatever savings bucket needs it. If we have just enough, we are good. If we have not quite as much, savings comes into play. I do tend to take this one extra step and budget for the next year's worth of "odd" expenses" in advance and put them into the correct savings bucket. For example, I estimate DH will need around $500 for professional expenses in 2014. So that money has already been put into that savings account. He won't get any more (unless I really mis-estimated) and I don't have to think about it any more. This means that once all the savings are handled for the year, anything else goes into retirement. We don't have a ton of money, so this is rare, but it does happen....

I like budgeting so this works for me. A simpler version would be:

$XX for monthly needs (highest amount ever paid *10% for every category, or exact amount if you know it for mortgage, car payments, etc)
$XX for monthly wants (ie, your allowances)

Rest of money into savings. Then adjust as needed and at the end of the month, anything left from the "budgeted" dollars goes to savings (or fun if you can afford it). For example, if your needs are $1,400 a month and your wants are $1,100 per month, then put $2,500 in the checking account for spending. Anything over that gets put in savings. If you have an extra $100 at the end of the month, you can save or spend it on fun stuff. If something unexpected comes up (ie, driving longer, visits, college tour, etc) then it comes from savings.

[ActYourWage]

I recall from TMMO that yes, each category should be a separate line item with its own budget. I can see how if you were starting with no cushion, lots of debt, and little knowledge of where your money was going, splitting out each category separately would make sense.

This. Having little or no debt, the zero based budget works great. I use one every month.

Here are my categories breakdown (there are a few categories not being utilized, but soon will):

1. Giving (fixed amount)
2. Retirement (fixed amount)
3. Housing 
	- Insurance (fixed amount)
	- Electric (variable amount, but I can use last year's as guidance)
	- Gas (variable amount, but I can use last year's as guidance)
	- Water/Sewer (variable amount, but I can use last year's as guidance)
	- Cell Phone (fixed amount)
	- DSL (fixed amount)
	- Netflix (fixed amount)
	- Taxes (fixed amount)
4. Auto
	- Gas (fixed amount)
	- Insurance (fixed amount)
5. Miscellaneous (in our case spend in anyway, "blow money")
6. Food
	- Regular (fixed amount)
	- Dinning Out (fixed amount)
10. Medical (fixed amount)
11. Savings (variable amount, this is where all unassigned money goes)
12. Business (fixed amount)
13. Other Taxes (fixed amount)
14. Life Insurance (fixed amount)

This is based on the Net pay (after all taxes, dental, health, etc. are allocated). If any thing special comes up or a category expense is more than the allocated amount during the month, I just take it from my savings category. Same is true if a category is less than, I put in the savings category.

[Like2Plan]

For example, we just finished the college search process. Sometimes, I found out on Monday that we were doing a college visit on Saturday that would involve travel, a hotel stay, dining out, etc. I wouldn't have known that on the first of the month so it wouldn't have been part of the budget. It isn't a problem since we don't live paycheck to paycheck so we could easily cover those costs without having to cut back somewhere else, but if we were strictly following a budget, that money would need to come out of another category, right?

As much as you like to travel, I would think you would have a line item category allocated specifically to travel in your hypothetical budget ie x number of $$ each month (carrying forward any funds left over from the previous month). If you have more travel planned in a given year (college search, for example), more $$ set aside for that purpose.

[bjl584]

I have a rough idea how much money I will need for the month. I usually over estimate, so the excess gets dumped into savings. I think that it would be nearly impossible for someone to follow DR's budget plan to a tee. There has to be some wiggle room built in or it won't work.