Charting your financial future

[disneysteve]

Assumes that miserly is better than thrifty.

There is certainly a point at which "frugal" becomes "cheap". We've had that conversation here many times. I do not consider myself to be cheap but I am definitely the more frugal partner in our marriage. My wife is not a spendthrift by any means but between us, I'm the bigger saver.

[Nutria]

We follow a zero based budgeting.

Income - Outgo = 0

It's an awesome way to track spending and savings. It's keeps us in-line all the time, debt free except the mortgage.

That's exactly what we do: our checking account starts the month at $600 and ends at $600.

EDIT: We use zero-sum budgeting, because zero-based budgeting is a business tool where you need to re-justify every expenditure every period.

[PhilDanley]

Budget Was A Useful Tool

We used an old school Numbers spreadsheet for the time it took us to pay off our non-mortgage debts. After that we could set aside money from each paycheck for tithe, savings and paying off the mortgage. Whatever was leftover was available to use or not. If we didn't use it, it went to the mortgage the following month. Hope that made sense!

[greenskeeper]

That's a "1% of the First World" problem...

I take home 60K before taxes. BUT, I don't spend my money on stupid things. For instance - I've never had a car payment since I started driving 18 years ago. Basic cable and internet packages. I-phone paid for by my employer. I repair things myself.

[sv2007]

I think the usefulness of detailed weekly and monthly budgets is inversely proportional with income.

Very useful in the beginning when income is relatively a large portion of wealth. Used to project future savings and investment directions (i.e. need to know how much $ will be available at certain points to make plans for future investments).

It is also comforting during times of uncertainty as it provides an outlook into the future.

Later in life, budgets aren't as important as the income becomes a small portion of the total wealth, i.e. investment directions are less influenced by income as liquid investments can be used.

Our experience with budgeting is as outlined above. Very useful during our initial years to show on-target savings, house purchase. But as wealth grows, there seem to be no longer a need for budgeting because the future is very much influenced by existing wealth.

While budgeting does save money overall, the money saved is small and not useful.

[Nutria]

Our experience with budgeting is as outlined above. Very useful during our initial years to show on-target savings, house purchase. But as wealth grows, there seem to be no longer a need for budgeting because the future is very much influenced by existing wealth.

No matter how wealthy you are, if those expenditures exceed your income then you've got to dip into that wealth to pay for it. That's ok for retirees, but not so much for working age people.

(This does not include extraordinary expenses like medical bills, car repairs, etc which you should be saving for anyway.)

[sv2007]

We used an old school Numbers spreadsheet for the time it took us to pay off our non-mortgage debts. After that we could set aside money from each paycheck for tithe, savings and paying off the mortgage. Whatever was leftover was available to use or not. If we didn't use it, it went to the mortgage the following month. Hope that made sense!

That's a good method in that the paycheck sets an upper limit in each period.

When we had a detailed budget, we didn't reference our paychecks. The budget was based on spendings from pre-budget credit card statements and certain fixed expenses (e.g. HOA fees, property taxes, home/auto insurances, etc.) so it's more or less an annual budget that's then divided up into monthly/weekly budgets. The CC spend is classified into categories (dining, entertainment, food, gas, misc, etc.). Sometimes we'll include new items or remove something. The budget is constant and disconnected from our paychecks, estras goes into savings (increases in salary also goes into savings). It allows us to know the lower bound of what we'll have 6months, 1 year, and even 2 years out. It is used mainly for planning (future) purposes.

[sv2007]

No matter how wealthy you are, if those expenditures exceed your income then you've got to dip into that wealth to pay for it. That's ok for retirees, but not so much for working age people.

(This does not include extraordinary expenses like medical bills, car repairs, etc which you should be saving for anyway.)

That's true, if you spend more than your income, then you'd go into debt eventually. Maybe I should have added that there's an implicit assumption that spends , under normal times, is less than income.

I think some advice may not be applicable to everybody. The above is what we went thru and worked out well, but it won't work for people with low income where budgeting means saving every penny possible. I should have qualified it a bit.

However, the important thing is, although we made decent money working, if it weren't for our budgeting (which allowed us to plan investment moves very early on), we probably would still be working (needing the job income).