Don't Panic

A lot of people are intimidated by the idea of budgeting. They hear the word "budgeting" and immediately think of deprivation, of not getting to do the things they want. Of carefully watching every penny, Scrooge-like, of saving against the nebulous rainy day instead of getting to spend money now. In short, of cutting back on fun.

Budgeting is not a diet!

Creating a budget for yourself is not about deprivation, it's about decision-making. It's about getting yourself the facts you need to make informed decisions. Do you want to go out to that fancy dinner tonight, or would you rather buy the new Final Fantasy later this month? With a budget, you can make that decision. Without it, you might not even know there was a decision, and find it made for you as you have no cash later in the month to buy the game.

Or, on a larger scale, perhaps deciding between two potential jobs. One pays less but has work that's more in line with your interests. Can you afford to take the lower-paying job? Will you have to cut back on some fun things to take the job you prefer? A budget can illuminate these decisions, giving you the confidence to do what you want without worry and without regrets.

Yes, it can be painful or uncomfortable--sometimes you might not want to know that these sorts of decisions exist. You'd rather hope that everything will work itself out and go about your business, blissfully ignorant. But if there's an underlying problem with your spending, not knowing about it won't make it go away. And if there isn't a problem, wouldn't you rather know so you don't have to worry about it?

All right, we've got the rhetoric out of the way. You are now totally convinced that you need a budget (right?). How do you get started?

There are several levels of budgeting you can choose between, all the way from simple and easy to complex and rather more time-consuming. If you're new to budgeting, I recommend starting out with Easy Mode and going from there. It'll give you the most bang for your buck.

Let's get started!

Easy Mode - Monthly Expense Estimate

The most basic level of budgeting. This is more of a one-off self check than an ongoing process. It shouldn't take too long--half an hour or so, if you want to do it properly.

Open yourself an Excel (or your Office suite of choice) spreadsheet. Make a list, going down, of every monthly expense you can think of. Start with fixed expenses--rent, phone, cable, internet, Netflix, what have you. Next list variable monthly expenses--groceries, gas, utilities, dining out, general fun money. Anything that happens every month. Ok. Next, go two columns over and enter the amount each thing costs per month. For variable expenses, give a reasonable estimate. Not what you wish you spent, but a reasonable guess for what you actually spend (and try to fall on the high side). Check through a month or two of credit card statements if you're not sure.

Next, list out your annual expenses--anything you spend money on that doesn't happen every single month. There are probably a lot of these, so take your time listing them out. Some likely possibilities: car insurance, registration, and maintenance. Health insurance, doctor visits, dentist visits. Clothing purchases, dry-cleaning. Vacations, sports tickets. Birthday and holiday gifts. Next, as we did with the monthly expenses, enter the amounts each thing costs. This time, only go one column over, and give your best estimate for how much each thing costs per year.

You're almost done! The next step is to turn those annual amounts into monthly amounts by dividing by 12. And finally, to sum up that monthly expense column and see what you get.

Is the number smaller than your monthly net income? Congratulations, you're in good shape! Consider starting some savings or a retirement account with your monthly surplus.

Is the number larger than your monthly net income? Uh-oh, time to do some thinking and maybe some more digging into the numbers. Look at your variable categories--is there something you can cut back on? Look at your fixed categories--is there anything on there that you don't really need or necessarily want? Is there something that could be switched to a lower payment? Alternatively, is there any way you can raise your monthly income to be more in line with your expenses? Side jobs, more overtime, etc? You don't have to decide right now, but now you now that there's an imbalance. It's something you'll want to look at.

Short version of Easy Mode:
1. Enter your fixed monthly expenses.
2. Enter your variable monthly expenses, with reasonable guesses for the amount per month.
3. Enter your annual expenses, with reasonable guesses for the amount per year.
4. Add up 1, 2, and 3 (converted to monthly).
5. Compare to your net monthly income.

And as illustration, here's a completed Easy Mode budget (made up numbers, of course ):



Normal Mode - Basic Monthly Budget

This is the logical next step from Easy Mode. Essentially we are going to take what we did in Easy Mode, and turn it into an actual monthly budget.

The basic notion here is pretty simple--we'll separate out monthly and annual expenses, ideally using a different account for each type, so that we can be confident we'll have the money for irregular expenses when we need it.

So, the first step is to open up a new checking account for annual/irregular expenses (if you generally pay for these things via credit card, you probably will also want to use a different card for annual expenses, or it'll get confusing really fast). Now, go back to your spreadsheet and add up the total monthly cost for your annual expenses. When your new account is open, set up an automatic transfer every month for this amount, or slightly higher to give yourself a buffer.

And... that's it. Really, it's that simple. Pay for monthly expenses with your regular account, and annual expenses with the annual account. You should always have a decent idea of how much money you have available, simply by checking these two account balances.

Ok, ok. There are a few other things here too. This is where some of those decisions spoken of earlier come into play. You'll want to remain somewhat conscious of the amounts you've put down for things in your budget, and if you know you'll likely go over in one category (new Final Fantasy!), to cut back a little in another. You want to generally try to keep your spending in line with your budget. But do note that this goes both ways--you want to spend according to your budget, but you also want to budget according to your spending. A budget is not a diet!

Short version of Normal Mode:
1. Do an Easy Mode budget.
2. Open a separate account for annual expenses, and transfer a monthly amount to it (alternate: simply track annual and monthly expenses separately).
3. Try to remain conscious of budgeted amounts and spend accordingly.
4. Gather data and update your budget when necessary.


Expert Mode - Zero-based Budget

Say what? Zero-based? What the hell does that mean?

I'm so glad you asked! A zero-based budget is one in which every dollar of income is assigned to a budget category, and you keep track of every outgoing dollar. This means that zero dollars are unaccounted for (thus the name), and you always know how much you can spend in any category at any given time. This is also sometimes referred to as the "envelope system" (after people who use physical envelopes with actual cash money in them to keep track of how much they can spend in a given category).

So how does it work? It's pretty simple in principle. You assign all of your income from the past month to spending categories for this month. This allows you to be certain you've got the cash to pay for everything in your budget, whenever in the month it happens. (Alternate possibility: divide up your anticipated income over the month into these categories. It means you don't have to make a possibly painful transition to spending last month's income rather than this month's, but it comes with some added danger.)

As a general rule, you'll want to make sure that the amount you assign to each category matches up with your monthly amounts from the Easy Mode budget. This goes for both the monthly expenses and the annual ones.

Once you've got your budget set up, you'll want to keep up with your spending. Each expense should be subtracted from the relevant category. And do note that this does not necessarily mean tracking every dinky little Starbucks latte--you'll probably want to just buy those things with cash, and track your cash (fun money!) withdrawals.

It's easy to make mistakes. From time to time, you'll want to reconcile what you think you have with what your bank thinks you have. If they don't match, you can either try to track down the discrepancy, or simply alter your budgeted amounts such that they do match up.

Ok. You've probably noticed that I haven't been very specific about implementation of these things. That's because making your own spreadsheet for this is doable, but also a big pain in the ass. You'll probably want some kind of tool for this. There are various possibilities out there, but my personal favorite (which I've frequently evangelized on GAF before) is YNAB. It's pretty much ideal for this sort of budgeting, and the website has lots of great guidance on how to get started. Do note that this software is not free. Though I see that there's now a free trial, so go ahead and check it out and see what you think.

Short version of Expert Mode:
1. Total up your income from the previous month.
2. Divide this income into spending categories, including all the categories from the Easy Mode budget.
3. Track outgoing expenses by category, and subtract them from your budgeted amount.
4. Make sure the amount you think you have reconciles with what your bank thinks you have.

As illustration, here's an example of an ongoing Expert Mode budget (using the old, spreadsheet-based YNAB):


Now you know. And knowing is half the battle. Go forth and spend your money the way you choose!

"Sweet Baby Jesus! Cyan, that's way too much text! I don't care that much. Just give some basic tips or whatever."

Sure thing!

Here are the most basic things you should know about budgeting, in bite-sized pieces:
-A budget is not a diet! When budgeting, be realistic, not aspirational.
-Try not to skip anything. If you spend money on it, it should be in your budget.
-Don't skrimp on yourself. You should always have a category for fun money or something similar.


Budgeting Tools
YNAB - For zero-based budgeting.
Mint - Free online money-management tool.
[Your recommendations here!]

Personal Finance-age Links
Rewards Credit Cards
How Credit Scores Work

Great thread idea for the new year. I am working on cranking my 2011 budget down even tighter this year, and thats considering my wife is now working so we have 2 incomes. Nevertheless, save save save.

And for the record, my notions of what makes a good budget are meant to be a starting point, not the end-all, be-all. Any other ideas, tips, budgeting tools, etc are quite welcome!

Budgeting also isn't a one-size-fits-all thing.

Been using Mint as my financial and budgeting tool. Very convenient though, I got lazy inputting some transaction by cash.

Two questions:

1) Can I use monopoly money?

2) Can I spend it all on hookers?

So long as I can put >25% of my income into savings, I don't worry about it. I pay for everything via credit card so I can see my total monthly spending, and I check once per year that my total savings have grown in a reasonable manner.

I may need to be more detailed in the future, but I don't see a lot of benefit to me right now.

Over a year ago I created this Excel spreadsheet for budgeting, and since then I've had such an easier time keeping track of my money and I'll much I'll have at roughly any given time in the next month. It took a little getting used to and there are a couple things I've wanted to fine-tune or somehow automate, and it only lets me take into account my main monthly expenses (no food, gas, random entertainment etc) but it makes budgeting so much easier and it's perfect for my needs.

http://www.megaupload.com/?d=2KHJT8OD

It's at that link in case anyone wants to download it and use it themself. The PAYMENTS row is where I put my regular monthly expenses like rent/cable/credit card payments; I select the entire section (B17-20 and everything to the right) and use the Custom Sort function on the due date row so it lists my payments by when they're due.
Pending Payments is where I put payments I've made or checks I've written that haven't hit my account yet. The yellow Balance cell takes the available balance in my checking account that I've entered into the cell below and subtracts anything in the Pending Payments section.

Again it takes a little getting used to and it's a bit crude with how much has to be entered manually, but it's perfect for the kind of budget I'm on- paycheck to paycheck, basically. I never miss a payment and always have a sense for how much money I'll have for the next month or so. It's made budgeting pretty stress-free and streamlined for me.

I tried mint.com but it just didn't work out for me, for multiple reasons.

One thing that helps to figure out how much you spend, download an excel document of all your transactions though your bank, and sort by retail store.

Slavik81 said:

So long as I can put >25% of my income into savings, I don't worry about it.

Click to expand...

This brings up an interesting question: How much of my paycheck should I be putting in savings?

Currently, I'm doing about 16% (my ING Direct account deducts it automatically from my Chase checking account on payday). Is that enough or shoot I shoot for a higher portion?

I constantly feel like I don't have enough money in my savings, so I'm guessing it's probably not enough.

Fantastic thread, Cyan. It is really good knowing where your money goes. I recently realized how much money goes into diet Pepsi annually, and how much I would save by buying a 4-pack of 1.5L at once instead of just singles.

I think many have habits "they don't really have", like buying a candy-bar every day (I was guilty of this) - so you don't want to BUDGET a candy-bar a day, because then you acknowledge it. So you basically use money you refuse to budget. If you say "I have to budget everything I use money on", you have to acknowledge your bad habits, or better yet, not budget money for it, and that way you can easily resist the temptation with the saying "it's not in my budget".

But fun money should still be there. But I don't think a candy-bar a day can be considered fun.

BertramCooper said:

This brings up an interesting question: How much of my paycheck should I be putting in savings?

Currently, I'm doing about 16% (my ING Direct account deducts it automatically from my Chase checking account on payday). Is that enough or shoot I shoot for a higher portion?

I constantly feel like I don't have enough money in my savings, so I'm guessing it's probably not enough.

Click to expand...

How can there be a right answer? It depends on what you use your savings for, and it depends on how much you make. Some parts of our lives we can't save anything, other parts maybe we should be able to save 50%. Try clamping down on yourself. What happens if you bump it up to 25%? Does it give you a better view of where your money is going because you can't just throw it around recklessly, but you can still be a big enough spender? If you can save more without ending up with noodles for dinner every day, you're doing it right.

Awesome thread. I became debt free this year, so I'm gonna lay down a plan for myself to save. Need to organise myself.

BertramCooper said:

This brings up an interesting question: How much of my paycheck should I be putting in savings?

Currently, I'm doing about 16% (my ING Direct account deducts it automatically from my Chase checking account on payday). Is that enough or shoot I shoot for a higher portion?

I constantly feel like I don't have enough money in my savings, so I'm guessing it's probably not enough.

Click to expand...

That's better than most I would guess. Question, though. Do you contribute to a 401(k) and/or IRA as well? Piling up a bunch of money in a savings account, without actively saving up for something specific in the near term, doesn't do you a lot of good at the moment.

General rule of thumb I go by is 6-12 months of expenses in savings, depending on your risk appetite and maybe your line of work and/or other options.

Slavik81 said:

So long as I can put >25% of my income into savings, I don't worry about it. I pay for everything via credit card so I can see my total monthly spending, and I check once per year that my total savings have grown in a reasonable manner.

Click to expand...

And that is totally cool. It's really just whatever works for you, and it sounds like this works fine!

BertramCooper said:

This brings up an interesting question: How much of my paycheck should I be putting in savings?

Currently, I'm doing about 16% (my ING Direct account deducts it automatically from my Chase checking account on payday). Is that enough or shoot I shoot for a higher portion?

I constantly feel like I don't have enough money in my savings, so I'm guessing it's probably not enough.

Click to expand...

Well, that depends on what you're saving for. Is this an emergency savings sort of thing (i.e. insurance for job loss or other major problem)? Is it for a specific purpose--house, new car, lavish vacation? Is it just saving to have some savings?

If you constantly feel like you don't have enough in savings, by all means bump it up a bit. But knowing what you're saving for and how much you need should really help.

Septimius said:

I think many have habits "they don't really have", like buying a candy-bar every day (I was guilty of this) - so you don't want to BUDGET a candy-bar a day, because then you acknowledge it. So you basically use money you refuse to budget. If you say "I have to budget everything I use money on", you have to acknowledge your bad habits, or better yet, not budget money for it, and that way you can easily resist the temptation with the saying "it's not in my budget".

Click to expand...

This is an excellent point. I shy away from telling people to track every little bit of spending because I think it makes it that much less likely they'll actually track spending at all, but if you actually do it, it can be eye-opening.

I still probably wouldn't recommend doing it all the time. Maybe as a month- (or two) long experiment?

Anno said:

That's better than most I would guess. Question, though. Do you contribute to a 401(k) and/or IRA as well? Piling up a bunch of money in a savings account, without actively saving up for something specific in the near term, doesn't do you a lot of good at the moment.

General rule of thumb I go by is 6-12 months of expenses in savings, depending on your risk appetite and maybe your line of work and/or other options.

Click to expand...

Cyan said:

Well, that depends on what you're saving for. Is this an emergency savings sort of thing (i.e. insurance for job loss or other major problem)? Is it for a specific purpose--house, new car, lavish vacation? Is it just saving to have some savings?

If you constantly feel like you don't have enough in savings, by all means bump it up a bit. But knowing what you're saving for and how much you need should really help.

Click to expand...

Now that I think of it, the purpose of my savings account is somewhat fuzzy at this point. It sort of fluctuates. I'll see it as a means to save up for a large purchase (like a television, laptop or a vacation), but I also see it as a rainy day fund. There's a good chance I'm going to be moving in the next few months, so I want to make sure I have plenty of money in my savings to cover expenses.

I do have a 401(k) through work, though I definitely need to up my contribution next year. It's kind of tricky, because I'm only a couple years out of college and still paying off student debt. At this point, saving for retirement is a lower priority than paying off debt.

While I track my spending pretty religiously, I don't really budget outside of my fixed costs. Should really change that...

Anybody know of any more budgeting tools? Since YNAB isn't free, better to shop around before committing.

I saved about 45% of my take-home income last year. I still live at home though.

I hope that I can save about 55% this year if I actually use some budgeting software.

Cyan said:

I still probably wouldn't recommend doing it all the time. Maybe as a month- (or two) long experiment?

Click to expand...

Completely agree. If you do it for a month, you see where your money goes. If you're a smoker, you realise how much of your pay goes into it. You pretty much see what parts of your life costs money, and you can weigh if it's worth it. When you then go back to not budgeting rigorously, you still have this knowledge, and you can then both adjust how you spend your money with how much you have, and you can generally be smarter with your money. I actually think I'll do a vigorous budgeting month in February. I'll be perusing this thread before then! :>

Great thread.

After doing a budget for 7 years I can't even picture going w/o one now.

EDIT: Fun money/Blow money is a very important piece of the budget that normally never gets mentioned. So I was glad you had it in your spreadsheet and that you mentioned it specifically in your tips section. AWESOME!

BertramCooper said:

Now that I think of it, the purpose of my savings account is somewhat fuzzy at this point. It sort of fluctuates. I'll see it as a means to save up for a large purchase (like a television, laptop or a vacation), but I also see it as a rainy day fund. There's a good chance I'm going to be moving in the next few months, so I want to make sure I have plenty of money in my savings to cover expenses.

Click to expand...

Hmm. I would strongly recommend that you not mix together your savings for large purchases and your rainy day/emergency-type savings. Too much chance of not having enough in the rainy day savings when you need it, or alternatively too much worry over spending on large purchases where you're not sure you've left enough for your rainy day savings.

This may be why you keep feeling like you're not saving enough.

Duality said:

I saved about 45% of my take-home income last year. I still live at home though.

I hope that I can save about 55% this year if I actually use some budgeting software.

Click to expand...

Don't ever move out.

Duality said:

I saved about 45% of my take-home income last year. I still live at home though.

I hope that I can save about 55% this year if I actually use some budgeting software.

Click to expand...

Hot damn! What are you saving towards?

This thread reminded me that I haven't done my usual budget spreadsheets in quite awhile, gonna start doing it up again.

BTW, I don't expect this to be an enormously active thread, but it shouldn't be outdated anytime soon.

Feel free to bump in future with questions etc.

Cyan said:

Hot damn! What are you saving towards?

Click to expand...

I'm saving for a 20% downpayment. Ideally, I want to move out around 2015 and also buy the best available TV at that time.

In terms of retirement, I have a small portfolio consisting of low-cost index funds. My employer also has a company-matched RRSP with automatic payroll deductions.

I will probably check out the YNAB trial this week!

I've always kept track of all the bills and expenses for my wife and I, and even though I protested she forced me to start doing a budget. I'm still kind of protesting, but I'm doing it. We downloaded a HomeBudget app for our iPhones and we've been doing it that way.

I only really protested for a few reasons. One of them is that my wife is notorious for forgetting everything so I have no faith in her remembering to put down what she's spending, so the first month I had to deal with her hoarding receipts around her already rather messy desk. The other is that, like someone mentioned, budgeting puts you face to face with what you're really spending your money on. I already know what I'm spending my money on. Student loans and other completely inflexible bills. I don't want to have an exact number for that

But anyway, for you people with iPhones and spouses that buy things get that app, because fit is pretty nifty and it syncs between people. So if you're doing it right you can pop out your phone and put in your expense and say what it's for and everything.

My parents got me a copy of Quicken a year or so ago because it's what they use for their budget. I've mostly just used it to check my bank account balance though, as being a student means my incomes and expenses aren't exactly stable and predictable.

Best thing I ever did was separate my leisurely money from my bill money. I have two accounts and I calculated how much I KNOW I will need to pay for rent, cable, loans etc. Take that out of every check + a little more for savings.

And Im still pretty frugal with my leisure account. Went a little overboard which is why Im on a subway diet now. Works for both financial reasons and eating (somewhat) decently so its win win. Its my gf that screws all this up. Whenever shes in town I end up overspending as she has no concept of money management. Thats why I love thats shes an opera singer and leaves me for months at a time. Gives me time to save up and recover.

So one key aspect for new comers to budgeting is to make sure you have some goals ( preferably agreed upon with your spouse if applicable ).

Your goals could be:
Save for vacation
Engagement Ring
Pay off debts
Save an emergency fund ( A small emergency fund relieved a lot of stress for me )
Save money to give to others
Saving for a car
etc.


I didn't budget just for the fun of it, especially at first, so making progress toward my goals was the driving force that kept me doing a budget.

The first two or three months that I made a budget it took a lot of tweaking and revising of the budget in terms of the actual physical layout of the budget and the dollar amounts I assigned to certain categories. But after that initial rough patch it smooths out and budgeting required much less time.

When I created my first budget my goal was to pay of my debits ( I had a quite a bit of them, and many were delinquent ). After attaining that and some other goals my wife and I are currently trying to save up money to pay cash for a car.

If you are trying to convince your spouse to budget or if the spouse is trying to convince you to start a budget the person trying to persuade should always start out with the WHY (aka goals) first and then move to the HOW (aka budget).

I believe it has helped the quality of my marriage significantly because my wife and I don't fight about money. We agreed on our goals as couple and we agree on how we are going to reach them when we agree on the budget every month.

Just thought I would mention it. It may be a given, so I might have wasted everyone's time. If so apologies

mbmonk said:

So one key aspect for new comers to budgeting is to make sure you have some goals ( preferably agreed upon with your spouse if applicable ).

Your goals could be:
Save for vacation
Engagement Ring
Pay off debts
Save an emergency fund ( A small emergency fund relieved a lot of stress for me )
Save money to give to others
Saving for a car
etc.


I didn't budget just for the fun of it, especially at first, so making progress toward my goals was the driving force that kept me doing a budget.

The first two or three months that I made a budget it took a lot of tweaking and revising of the budget in terms of the actual physical layout of the budget and the dollar amounts I assigned to certain categories. But after that initial rough patch it smooths out and budgeting required much less time.

When I created my first budget my goal was to pay of my debits ( I had a quite a bit of them, and many were delinquent ). After attaining that and some other goals my wife and I are currently trying to save up money to pay cash for a car.

If you are trying to convince your spouse to budget or if the spouse is trying to convince you to start a budget the person trying to persuade should always start out with the WHY (aka goals) first and then move to the HOW (aka budget).

I believe it has helped the quality of my marriage significantly because my wife and I don't fight about money. We agreed on our goals as couple and we agree on how we are going to reach them when we agree on the budget every month.

Just thought I would mention it. It may be a given, so I might have wasted everyone's time. If so apologies

Click to expand...

Makes sense. Right now Im saving just to save. Not actually saving up for anything which makes me dip into my savings more than I should. Since I have no goal or number in mind, it makes the whole thing seem non-essential.

Feels good to be able to just buy things that I need though. Been using my savings to pay for improv classes I otherwise wouldnt be able to take.

mbmonk said:

When I created my first budget my goal was to pay of my debits ( I had a quite a bit of them, and many were delinquent ). After attaining that and some other goals my wife and I are currently trying to save up money to pay cash for a car.

Click to expand...

This is why I'm starting to do it again. My goal by the end of the year is to have my Credit Card debt down to a level where I'm essentially able to rarely have a balance of > $100 on it, and then work towards making larger payments towards my Student Loan of which I have like $8,000 left on it.

I just moved out, again, I'm settled in and have a good job so now is the perfect time to start tracking what I'm spending and making sure I stick to it.

Reflecting back at my post. I made a couple of mistakes and omissions.

1) Goals are really and means to an end as well and not really a WHY. The WHY for example would be: I want to put me and my future family in a good financial position ( pay for college, allow my wife to stay at home if she desired etc. ) and the means to do that was the goal of paying off the debt. Another example is you want to marry your GF, so the means to that is the goal of the Engagement Ring. In reality a pretty bad oversight on my part

2) The explicit omission how exactly agreeing on financial issues w/ your spouse improves your marriage. If you look up the most common factors for divorce there are normally two reasons listed in the top 5 that are relevant to this discussion. They are arguing over money and lack of communication. See this picture from a USA today article. Agreeing on your goals and budget, is going to require communication and once those are agreed to it is going to reduce your arguments over money.

.GqueB. said:

Makes sense. Right now Im saving just to save. Not actually saving up for anything which makes me dip into my savings more than I should. Since I have no goal or number in mind, it makes the whole thing seem non-essential.

Feels good to be able to just buy things that I need though. Been using my savings to pay for improv classes I otherwise wouldnt be able to take.

Click to expand...

I used to save just to save and I was terrible at it.

That is really cool that you are taking classes w/ the money. I am a little jealous. I might have to look into to doing something similar.

Slavik81 said:

So long as I can put >25% of my income into savings, I don't worry about it. I pay for everything via credit card so I can see my total monthly spending, and I check once per year that my total savings have grown in a reasonable manner.

I may need to be more detailed in the future, but I don't see a lot of benefit to me right now.

Click to expand...

That's pretty much what I do as well.

Now I have a question. What does GAF do with the 2 or 4 months a year(depending on if you get paid weekly or biweekly) you get an extra paycheque? I budget myself based on getting 4 weeks worth of pay a month and the 4 times a year I get 5 weeks of pay in a month is like "woo hoo, Free money!"

Entropia said:

This is why I'm starting to do it again. My goal by the end of the year is to have my Credit Card debt down to a level where I'm essentially able to rarely have a balance of > $100 on it, and then work towards making larger payments towards my Student Loan of which I have like $8,000 left on it.

I just moved out, again, I'm settled in and have a good job so now is the perfect time to start tracking what I'm spending and making sure I stick to it.

Click to expand...

Congrats, it seems like things are moving in a positive direction for you. That really is awesome (excuse the cheesey term ).

It sounds like you are using the Debt-snowball method to pay off your debts. That is the method I used and it worked well for me because I was looking a long climb to get out of debt so getting those quick victories helped me stay committed and focused.

Regardless you are obviously sharp and are paying attention to your money so I am sure you are going to reach your goals.

krae_man said:

That's pretty much what I do as well.

Now I have a question. What does GAF do with the 2 or 4 months a year(depending on if you get paid weekly or biweekly) you get an extra paycheque? I budget myself based on getting 4 weeks worth of pay a month and the 4 times a year I get 5 weeks of pay in a month is like "woo hoo, Free money!"

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For me it depended on how I handled my money. Cash flow everything vs credit card float.

I used to use cash only ( thus no floating ) so the timing of when a bill was due was really important. So I would create my budget for the month that included all 3 paychecks and then do my budget that way. Normally when I get that extra paycheck it's really late in the month ( like the 30th or 31st ) and my next paycheck wasn't going to be until the middle of next month ( 13th for example ) so I had to make sure all the bills that were due early in the next month were covered. Any extra was pretty much free money as you stated . I love those months.

When I use credit cards then the timing aspect becomes much less significant because I just have to have the money to pay off the credit card saved up before the due date. So I can pay multiple bills at various times on my credit card, and then once a month I would pay off the card.

I need another one of those months to come again.

I created a excel budget over a year ago and can't imagine myself without one. It makes saving so much easier and I can completely track where my money goes.

krae_man said:

That's pretty much what I do as well.

Now I have a question. What does GAF do with the 2 or 4 months a year(depending on if you get paid weekly or biweekly) you get an extra paycheque? I budget myself based on getting 4 weeks worth of pay a month and the 4 times a year I get 5 weeks of pay in a month is like "woo hoo, Free money!"

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I actually just adjusted my monthly income to be an average of what I get over the year. Part of the problem I was having by just accounting for two paychecks a month was that I was "excluding" items from being accounted for in my budget because I knew I had those extra paychecks to cover them in the past. The problem was that I was basically just blowing through that extra cash and not saving much of it. This year I have adjusted my budget to be the monthly average for income, and set year long budgets for the things I used to exclude, which were primarily gifts and vacations.

I only get paid monthly now, so now I don't really get to experience the paycheck rush as often, but I think my finances are more stable.

Because we shut down early for the holidays, my December paycheck came 11 days earlier than usual. I was expecting to panic stretching that across a month and a half, but it actually hasn't been bad at all. Ever since moving to monthly pay, I take care of all my bills at the beginning of the month, so I know exactly how much I have for the remainder.

The only bad thing about front-loading all my bills is I no longer check my bank transactions as rigorously.

nice thread. We basically do the 'normal' budget. Wife has the 'yearly' and 'savings' accounts, which I pay into each month, and my current (checking) account is for monthly expenses.

In the UK we have a couple of anomalies such as council tax and water bills that only charge you for 10 months out of 12. So there is always some rollover. Ideally what we do is just sweep the current account at the start of a year so its empty (well almost) and move that extra into the savings account.

Duality said:

I'm saving for a 20% downpayment. Ideally, I want to move out around 2015 and also buy the best available TV at that time.

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Good for you if you can pull it off. 20% would be a good downpayment, IIRC that's the level where you no longer have to pay for mortgage insurance.

mbmonk said:

Reflecting back at my post. I made a couple of mistakes and omissions...

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Nah, good post. Goals are very important in budgeting. It definitely helped me when I started out that I wanted to buy a car that was better than the $400 Craigslist junkheap I was driving. Don't have any near-term goals currently, but now I'm so in the habit of budgeting that it doesn't really hurt.

krae_man said:

Now I have a question. What does GAF do with the 2 or 4 months a year(depending on if you get paid weekly or biweekly) you get an extra paycheque? I budget myself based on getting 4 weeks worth of pay a month and the 4 times a year I get 5 weeks of pay in a month is like "woo hoo, Free money!"

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Heh. Not a problem with a zero-based budget! Otherwise, this could make good seed money for an emergency fund, or for paying down debts or whatever. Though I'm an advocate of always taking out a chunk of windfall money to have fun with.

mrklaw said:

In the UK we have a couple of anomalies such as council tax and water bills that only charge you for 10 months out of 12. So there is always some rollover. Ideally what we do is just sweep the current account at the start of a year so its empty (well almost) and move that extra into the savings account.

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Whoa. That's an odd billing structure. Sounds like you found a good solution though; that's more or less what you'd do with a zero-based budget as well.

How do you guys track your FSA spending? Obviously it's automatically budgeted out for the year, but I'd like to see the transactions in the same place as everything else...

Ok, I downloaded the mint app and it wants me to link my username and password to my bank app and I don't really feel comfortable with that until I know what it does. Is there a demo version or a tutorial?

I really need to budget. I got $90 back on my 0.5% cash back credit-card a few weeks ago. That means I spent over $18,000 on it last year. ;_; I'm supposed to be saving for a house!

Shick Brithouse said:

Ok, I downloaded the mint app and it wants me to link my username and password to my bank app and I don't really feel comfortable with that until I know what it does. Is there a demo version or a tutorial?

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Hmm, good question. Unfortunately, I don't use Mint myself, and I don't know anything about demo versions, etc. From looking at their site, there doesn't seem to be much beyond a brief explanatory video.

You might try the regular web version; not sure if that demands bank info right off the bat or not.

Just going to post because this thread made me try YNAB (not quite what I'm after), then create my own budgeting excel spreadsheet, which is working beautifully.

It really is satisfying to make a spreadsheet tailored to your own needs, and once it is set up, it's quite easy to maintain as well. I just add in my purchases weekly and whole thing is set up in 13 week quarters because that's how my employment works. Luckily my loan (60 k+) and car are paid off because I spent a year at home, so the finances are looking healthy ATM.

Cyan said:

Hmm, good question. Unfortunately, I don't use Mint myself, and I don't know anything about demo versions, etc. From looking at their site, there doesn't seem to be much beyond a brief explanatory video.

You might try the regular web version; not sure if that demands bank info right off the bat or not.

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Did some quick googling and its owned by Intuit, the owners of turbo tax and quicken. Seems legit. Thanks for the link.

I do this!

(as good of an endorsement as any, I mean, I do have Awesome in my username)

I would like to add a recomendation for a free budgeting/balancing tool called Grisbi. Works on pretty much every OS.

http://www.grisbi.org/

My budget's getting all shaken up for the next couple of months. My federal student loans go off of deferral this month. I wanted to start putting extra towards my CC debt snowball, but it will have to wait till next month due to the large amount I owed the IRS last month

I really need to get around to calling the CC companies to try to get my interest rates down. Based on everything I've read, it doesn't hurt to just ask.

out0v0rder said:

I would like to add a recomendation for a free budgeting/balancing tool called Grisbi. Works on pretty much every OS.

http://www.grisbi.org/

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Open source? Looks cool, can you tell us anything else about it?