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!

But Budgeting Doesn’t Work For Me!

You’re busy, I get it–family, work, physical health, keeping the house clean, trying to get a healthy meal on the table . . .

Budgeting seems like a huge pain–no fun at all.  You know you need one but you’ve not made the time to make one and you know it will be futile; you’ll never track your money or follow a budget anyway.

You may not even need a budget.  What?  You gasp?  And I won’t even call you a slacker for not having one!

Just pay yourself first.

Each paycheck, direct your payroll department to contribute to your company retirement plan up to the company match.

Add the percentage your company matches to the percentage you contribute.

Subtract that from the following guidelines:

Starting in your mid 20’s?  10%
Starting in your mid 30’s?  15%
Starting in your mid 40’s?  30% Continue reading “But Budgeting Doesn’t Work For Me!”

If You Can Only Do One Thing

Life is busy, I get it.  The last thing you need is one more thing on your to do list.

Mastering your finances seems really time consuming and complicated.  I tried to simplify it as much as I could for you but it ended up being 12 steps to a kick a$$ life.  And those 12 steps didn’t include some really important things that help us move through the steps more quickly like figuring out your why and tracking your net worth.  And it didn’t include things like making a will and getting life insurance which are critical if anyone depends on your income or in-home work.

If I had to pick one thing to have everyone do (after getting life insurance*) it would be to calculate your net worth.  Your net worth is like a business’s balance sheet.  What you own minus what you owe.  Calculating my net worth kept my eye on the prize and was my secret weapon to achieving early retirement.  Once you start tracking it, your mind automatically thinks differently about earning and spending decisions–you want your net worth to go up each month.

Net Worth = What I Own – What I Owe Continue reading “If You Can Only Do One Thing”

I Have a Love-Hate Relationship With My Budget

I have a love-hate relationship with my budget but not for the reasons you would think.

I finished up my 2017 budget yesterday–gasp, yes 11 days later than normal.  My careful readers know I typically spend New Year’s Day updating my prior year spending and net worth and finalizing my current year budget but not this year.  I started working on it in mid-November but sort of forgot that it wasn’t complete.  For me, budgeting is such a given that the lack of a budget has no impact.

I’ve been budgeting for 34 years now.  My early budgets had 4 categories–rent, car payments, gifts, spending (everything else).  I now have 21 categories–I have the various utilities dual home ownership requires and I’ve broken spending down a bit further (vehicle, boat, home improvement etc.).  Doing my budget each year takes about an hour and most of it stays the same from year to year.  My spending budget is the same as it was 10 years ago–I didn’t spend it all then and I don’t spend it all now. Continue reading “I Have a Love-Hate Relationship With My Budget”

How can something so simple be so damn hard?

Succeeding at money boils down to this:  Spend Less Than You Earn.

That’s it, simple right?

If you do this one thing well, you are on your way to your fantastic future.

If you want to improve that future, you can either:

Earn More or

Spend Less

Or you can do both

In the blogosphere, there is an earn more crowd (hello my entrepreneurial, side hustle friends!) and there’s a save more crowd (hello my frugal friends!).

Whichever approach feels right to you, the important thing is to grow the gap between what you earn and what you spend.  This not only allows you to save or pay down debt now but it also decreases the amount of savings needed to fund your future dreams. Continue reading “How can something so simple be so damn hard?”

Don’t Let Perfect Be the Enemy of Good

I remember writing this reminder on the office whiteboard–Don’t Let Perfect Be the Enemy of Good.

Too often we want to do something just, exactly, right and if we don’t have the time or the knowledge to get it exactly right, we don’t attempt it at all.

This makes sense when you are creating an artistic masterpiece or preparing a speech to be delivered to hundreds of people.

It doesn’t make sense for many personal finance tasks including preparing a budget or tracking spending.  Rather than seeking out perfection, Nike’s slogan of Just Do It would be more appropriate.  Just sit down and do something. it won’t be perfect but it can be tweaked next week, next month or next year.

Preparing a budget is an art, not a science-there’s no right answer.  It is based on your best guesses.

Continue reading “Don’t Let Perfect Be the Enemy of Good”