I Started My 2018 Budget . . . Have You?

It’s become a joke among my friends that I spend New Years Day doing my budget.  I usually start working on it a few weeks earlier but I get it finished up while watching the Rose Bowl Parade.

I guess it’s one of my holiday traditions–vanilla latte, parade and budgeting.  Sounds cozy doesn’t it?

I budget my net worth so the earliest I can finish up my budget is New Years Day.  Until I know my starting investment and retirement balances, I can’t budget my investment earnings.

Budgeting one month at a time works for lots of people but I prefer to budget for the full year.

Because I have some ugly months.

April is the worst.  We pay property taxes, homeowners insurance and income taxes in April.  By budgeting the full year, I make sure I save in other months to pay for these big expenses.  Before I boosted my savings rate above 50%, April was the only month when I spent more than I made.

December is tough too with holiday expenses.  Though we’ve reduced our gift giving a lot through our perfect gift policy, it is still an expensive month.  We travel to see family and friends and there are more costly gatherings.

If I were budgeting monthly, I would have to budget a sinking fund for these once a year expenses.  By budgeting the whole year at once, I make sure I meet my savings goals in spite of the ugly months. If my cash was tight, I’d still set up sinking funds for those big expenses even if I was doing my budget for the full year.

Seeing my year end budgeted net worth helps me stay on track. 

I like (ok, I admit, I love) seeing my net worth grow.  When I do my budget, I can see how much my net worth should be at the end of the year.  If the investment markets cooperate and I control my spending, I know I can get to that number.

Budgeting for just a month’s growth in net worth wouldn’t work as well.  It’s hard for me to get excited about an increase of a few hundred dollars but easy to get excited about thousands.

It’s the middle of December so it’s time to get this party started!

There are no hard and fast rules of budgeting, finding one that works for you is the tough part.

Does a detail budget make you think brain damage and drudgery? Then budget in summary.

Are you a detailed person and do you look forward to tracking your expenses by detailed categories? Then budget in detail.

Are there certain things you like to track closely but others that can be summarized? Then prepare a hybrid budget.

Need some more information about how to budget? Check out MoneyPeach.com to get started.

A hybrid budget works best for me. I like to track my vehicle and home related expenses in detail but I’m fine with a big total for most of my “spending”. It doesn’t matter to me whether I’m getting my hair done, buying groceries or a new shirt–that’s “spending” in my budget. When I track the actual expenses in quicken, I break them down a bit more. For my budget, a summarized amount is just fine.

So grab a latte or maybe a glass of wine, a cozy blanket and get started!

How do you budget?  What works for you?

Photo credit Ms. Liz taken from our back deck–lucky us!

I’ve Stopped Wishing My Life Away

My Dad used to tell me not to wish my life away.  I was always looking forward to what was coming, what would make my life better.

When I was 7 I couldn’t wait to be 10–double digits!
When I was 10 I couldn’t wait to be a teenager.
When I was a teenager, I couldn’t wait to drive.
When I could drive, I couldn’t wait to graduate.
When I graduated I couldn’t wait to go to college.
When I went to college I couldn’t wait to graduate.
When I graduated, I couldn’t wait to hear if I passed the CPA exam.
When I passed the CPA exam, I couldn’t wait to start my real job.
When I started my real job, I couldn’t wait for time off.
And for the last 22 years, I couldn’t wait for summer.
While I also couldn’t wait to retire.

Now that I’m retired, I look forward to various events in the future but I no longer find myself wishing my life away.

Even when we were getting ready to migrate to the desert for the winter, I wasn’t longing for it like I had in the past.  It was more like a balancing of what we would be losing (I miss you my mountain friends!) and what we would be gaining (mmm-warmth, and desert friends!).

I think that means I’ve finally found my happy time in life.  There’s no longer the need to wish my time away.

When you have BIG financial goals like early retirement, it’s difficult to find the right balance between living for later and living for now. And that right balance will be different for each of us.

Much of the population is too focused on living for now. Just have a look at current personal debt levels and that is clear.

I was too focused on living for later.

What should have been a huge wake up call didn’t even change that balance. We lost Mr. Ms. Liz’s Mom when she was 64–a year before she intended to retire.

Living for later doesn’t always pay off. 

So how do you find the right balance for you? We started using the die tomorrow test.  If we were to die tomorrow, would we be happy with our choices? When the answer was no, we would talk about what we needed to change.

Among other things, those conversations led to us buying a boat.

If we hadn’t bought that boat, we would have reached financial independence earlier. But at what cost?  We could have been hit by a bus before getting there.

We would have missed out on countless weekends at the lake with our friends. And those friendships wouldn’t be as rich.

Our lives are rich in so many ways and each decision we made to get here created that wealth.

So think about your balance between living for later and living for now.  Ask yourself that die tomorrow question, tweak that balance and repeat. It’s a never ending process.

I’d love to hear your stories! Have you been really out of balance? What have you done to correct it? I look forward to your comments.

Photo credit – Ms. Liz at The Linq, Las Vegas, Nevada