It’s Budget Time!

Queue the Fixer Upper “It’s Demo Day” excitement because it’s budget time! Y’all know I spend New Year’s Day working on my budget and this year is no exception. Vanilla latte, Rose Bowl Parade and my budget . . . so cozy.

You know I love my budget but if you don’t love the idea of a budget, skip it. Yes, gasp! you can skip a budget. Decide what percentage of your income you are going to save and set up automated transfers to get that money out of your checking account. Invest it and live on what is in your checking account. Read my Budgeting Doesn’t Work For Me post for more help.

If you’re still reading, YAY! let’s budget! But what does budget time look like? Sorry but it’s even less exciting than you probably think. It takes about an hour, maybe an hour and a half. 99% of my budget this year will be exactly the same as it was for 2017.

Exactly the same you ask? Shouldn’t I increase each budget by inflation or some amount? Nope, I shouldn’t and I don’t. My “spending” category is my largest one and includes groceries, going out to dinner, buying clothes, etc. It’s pretty much anything other than utilities, vehicle/boat expenses, gifts and vacations. And my “spending” budget is the exact same amount as it was in 2006. Yep 12 years ago.

I increased it a couple years but found I didn’t spend that money anyway so I put it back to the 2006 level. In 2017, I beat that budget by about $1,000; in 2006, I beat that budget by about $1,250.

This is how I kept my lifestyle from escalating as my salary grew. Yep, we built a bigger home and our utilities and property taxes went up. Yep, we finally got rid of our VCR (only when you could no longer buy one!) and signed up for DVR service. So yes, other areas of my budget increased but my biggest line item that covers some of my essential spending (food) and most of my discretionary spending didn’t change at all.

This, and living without debt, is how I was able to get my savings rate to the 70% range:


Financial Independence Bloggers can’t agree on how to calculate savings rate but here’s how I calculate mine: (Salary Net of Taxes – Expenses) / Salary Net of Taxes. A 70% savings rate means I was living on 30% of my take home pay. Note that I do not include any investment returns in this calculation–I could really juice up my savings rate by including that growth in my numerator.

So if my budget is almost exactly the same as last year, what does it look like to spend New Year’s Day working on my budget?

First, I finish up my December expenses and net worth calculation. I look at how I did compared to my budget. I celebrate any successes and shrug off any failures. This actually takes most of that hour or so. Then I work on next year’s budget:

  • I take my 2017 budget sheet which has a column for the budget and a column for the actual expenses for each month. I copy it over to a new sheet and change the titles to 2018.
  • I review the budget and actual amounts for each month to see if there was anything really out of wack. If I was way off in my budgeted amount or had the budget in the wrong month, I increase/decrease the amount or move the budget around.
  • I then clear out all of the actual amounts.
  • I finish up any unusual budgets. This year, Mr. Ms. Liz is remodeling the bathrooms in our desert home so we’ve been working on gathering costs for that project.
  • I link in my starting investment values to last year’s ending values–I track my traditional retirement accounts, Roth retirement accounts and non-retirement accounts separately.
  • I calculate my expected investment returns based on the budgeted investment values. I budget 2% returns for cash accounts and 7% returns for invested accounts.
  • I review the growth in my total net worth so I have that goal in the top of my mind.
  • I double check everything and I’m good to go.

This is super easy and it sets me up to succeed in the coming year.

If you don’t have budget and actual numbers from the previous year, it’s a bigger job but still really doable:

  • Download your credit card and bank statements for the year and categorize your income and expenses.
  • If this is your first time, it may be easiest to use really broad categories–think utilities, mortgage, car payment, car expenses, student loans, insurance and spending for your expenses.
  • Then lay out what you think will happen in 2018. If there’s an area you spend too much money on, try to reduce it for your budget.
  • Now pop up to the list above and finish up!

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

I promise I’ll get off my budget soapbox now that that 2018 is here . . . maybe.

Cheers to a fantastic 2018! I wish you a year filled with love, laughter and goals achieved!


Photo credit: Mr. Ms. Liz sunset over Camelback Mountain, Scottsdale, AZ

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Author: Ms. Liz

A CPA, I retired at 51 and I am helping people create their fantastic futures!

10 thoughts on “It’s Budget Time!”

  1. that’s about how ours works. i’m not sure mrs. smidlap even knows where the piece of paper is except that she shoots over a given amount each week and i divvy it up into the proper buckets. i tend to leave some slop in the roth bucket and the tax one with a little more than necessary so we can take a december holiday from those each year and buy some gifts or special holiday things like a rib roast! i like that there is some extra for when you need to replace a big ticket thing like getting a set of tires or a $1200 boiler service call. haven’t had to tap the emergency fund yet with that strategy.

    1. You gotta love “slop”! I have a lot of slop in my budget so it doesn’t feel constricting. And you’re right, the slop keeps us from digging into our contingency money when something comes up.

      When you get towards the end of the year, do you find yourself looking for things to spend some of this slop on? Much as I try not to, I end up with some splurges. This year, it was new path bikes but we called them our Christmas presents so that’s ok, right?

      Great to hear from you Freddy–I hope your year is fantastic!

      1. i think whatever you do with it is ok. we haven’t really looked to spend it on stuff but that might change. we used to have an overtime bucket for me and one for mb’s art sales income when we were both working full time. from these we just kinda bought what we wanted because all the investments were already funded. it’s been fun having a trial retirement run since mb hasn’t had full time work in almost a year. she did spend most of our ebay/downsizing money on xmas for us though…. and that’s ok too.

        all the best to you and yours.

  2. I tried making a budget for the first time in my life. And I think the exercise was a fail. My budget is 25+% over what we normally spend.
    Normally I look at our spending once a month, retrospectively. Deciding beforehand how much to spend doesn’t seem to be working for me.
    I did blog about it yesterday, if you have the time to check it out.

    1. As long as you pay yourself first, many people succeed at this money thing without doing a budget. I’d say you’re doing great to track your money, calculate your net worth and funnel enough money out to investments to meet your goals.

      Paula Pant at doesn’t budget and Tanja at doesn’t budget. You’re in really good company! Be you and don’t do what doesn’t work for you!

      1. Thanks! That is some advice that I can follow. I am okay with what we save – I know we can do way better, but life is easy as it is and I don’t think saving more is going to bring the time frame drastically down. A few months is an okay price to pay.

        1. Yes! Finding the balance that works for you is most important. We worked longer than many but those extra years gave us a two home lifestyle that we love.

  3. Interesting, thanks. One thing that stuck out for me, you budget 2% return on your cash? Where are you getting that sort of return. We’re shopping around hard and getting about 0.95-1.3% before tax. Are you invested in a long term fixed investment to get that rate? Given that our ‘investment strategy’ is 95% cash, this is really important for us.

    1. With 95% cash, you do need to find some better rates. I wrote about it here.

      I tied my money up in 5 year CD’s and got comfortable doing so by looking at the penalty for early withdrawal. Basically the payback was a bit over a year. So as long as I hold the CD longer than a year, I’m better off in the CD. I got 2.3% but I just checked and 5 year rates are as high as 2.5% now. I’d advise setting up a bunch of small CD’s so if you need some money, you pay the early withdrawal penalty on a smaller balance.

      Best of luck to you Susan and thanks for stopping by!

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