Budgeting ?s for Dia

Erudite · #1 01-31-2008, 09:23 AM

Dia? Would you mind going into more detail on your budgeting?

We've long used Quicken, but never really made it work super well for us. A gajillion categories have to be monitored all the time and while I have a reminder to do that every week, it generally only gets done once a month when I reconcile the accounts. I thought it was working well enough for us until I read your blog and I wondered if maybe there was a better system that we could be using. We too have a goal to get our house paid off considerably faster than our mortgage papers say, but I'd like to do even better at that goal and several other goals. We are working right now to save the money to pay cash for a car, but the way we currently have things outlined, that's going to take us over a year and we don't think the current car will last that long. So I'd like to know more about your system and see if there are some ideas that we can apply.

So first, you said something about 40/60...you save 40% and spend 60%. Do you actually do that? Or is that just the goal. K...I'm going to go back and take notes from your blog and come back with more questions. I think I'm not remembering it the way I should be.

Thanks for your help!
E

Erudite · #2 01-31-2008, 09:36 AM

Ok...the questions

You said in the 60% part that you had a long term savings plan and a short term savings plan...was that actually a part of the 40% part? I just wasn't clear on that.

I wondered if you took out all the automatic stuff BEFORE looking at the 60/40...like taxes and the health insurance that gets deducted and so on. The stuff that you never see. So the 60/40 plan is on the net of his check, right? Do you also take tithing out at this point? or is tithing in the 60/40 too? For me it'd make sense to take it out before the 60/40.

So if that's the case...and you have say, $1000 net a month (just for nice round figures), then you divide that 60/40. $400 goes to savings, and $600 to monthly expences. The $400 gets divided into long term and short term savings...goals you've decided on together, right? And the $600 gets divided into 4 weeks, so $150 per week. With that you buy the groceries and all the other day to day kinds of expenses...is that right?

And you don't worry about figuring that you spent X amount on tights for the girls at Walmart, so that's in the clothing category; and X amount on groceries in the grocery category; and X amount for oil for the car so that's in the car category. It's just what has to taken care of in the $150 per week and when that's gone, you stop spending?

Am I understanding correctly?

THANKS!

Dia Minha · #3 01-31-2008, 10:58 AM

Yes, Erudite, you got it. And explained it a whole lot better than I could as well. Saving 40% is a goal. We aren't there yet, but hope to be by 2009.

We have a little bit more going on then the way you presented it. When I get a chance I'll give you some more info. I just need to crunch some numbers using your $1,000 idea (which, by the way) is a real good way of sharing examples without sharing actual numbers) then I'll post again.

Dia

**5ft Diva** · #4 01-31-2008, 11:47 AM

I do the money at our house and I like this system as well. It'd definitely help us reach our goals faster than we're currently doing. I don't know if I could swing the 60/40, but the idea of percentages is great! I'm sure BS has thought of all of this and has been waiting for me to come up w/ it on my own. He's so patient w/ me as I stumble through this money stuff.

Thanks for asking for clarification, E, as this helped me understand her system better, too!

Dia Minha · #5 01-31-2008, 02:26 PM

Spending 60% of our income and saving 40% is our goal. We are not there yet. In fact right now we aren’t even working with just percentages. This is what we did to come up with our spending numbers.

We took a look at our spending habits over the last year and how much we had been allotting into each category. We ignored the automatic deductions. We added up tithing, fast offerings, mortgage, car payment, life insurance, average monthly cost of utilities, including internet. Then we subtracted this from DH take home check. We then decided we wanted to have our credit card paid off by July. We estimated tax return and summer bonus, which will go directly to the card, and then divided the balance by the number of months we had to pay it off. We then subtracted this from the remains of our income. We then decided how much we should put into a short term savings to cover unexpected costs. We did this by adding together such former categories as health care, car repair, and home improvement. These are things that do not necessarily come up each month, but that need to be planned for. We actually put more than what our numbers showed, because we wanted to make sure we had enough, so we wouldn’t end up using our credit card. Then to come up with the amount we had each week to spend on groceries, clothing, children’s activities, etc., we then took the remaining balance and divided it by four. We dropped it down to round it off to make it easier to remember and keep track of (It is just nicer to start with say $125, then $132.57, if that makes sense.) and then we added those few extra odd dollars into our short term savings. We also made a commitment to only buy necessities for one month. To save extra for the credit card. We made it for a month and recommitted for another. Our larger goal, in this case, is to buy only necessities until the card is paid off. We left a little room for little wants, such has eating out, books, gifts, dates etc. as long as they fit into the weekly expense account. However, if our tv dies, we will live without one until the credit card is paid off and we have the cash saved to pay for it.

Now all this is just temporary. When the credit card gets paid off in June, then the money we were putting on the card will then go into a long term savings. This will be 10% of our income. When DH gets his raise this Spring and can change his 401K, we will bump it from 6% to 10%. So, with both our long term savings and retirement we will then be putting 20% of our income into long term savings. We can also count part of what we pay in life insurance, because DH’s policy pays us back every ten years or so if it isn’t cashed in. If you add on our short term savings for emergencies we would then be at more than 25%. So then we would only have less than 15% more to go to meet our 40% goal. Which we will probably divide up between adding more to our short term savings and some to long term savings for purchasing a new vehicle, buying new furniture or a swing set for the kids.

I hope this gives you enough detail. I tried to work in percentages like Erudite was doing with the $1,000, but just couldn’t get the numbers to come out right. DH is actually the money man. He does better with keeping track of expenditures and all the categories. In fact, he still inputs everything into quicken. This way we will be able to look back on where all our money has gone, when we re-evaluate, due to raises or changes in our financial obligations arise. We make an excellent team, because his brain works with categories and tracking and mine works by making challenges to insure our expenses aren’t more than our income.

Dia

Erudite · #6 01-31-2008, 02:41 PM

You answered all the questions I had for now. I was wondering about those "set" expenses (like mortgage and utilities and so on) and the 60/40, but it sounds like you count them out. I think that's what would work best since they are monthly and a weekly sum wouldn't take them into account. Ok, I'm sure I'll have more questions when I start working on this with DH, but for now, I have enough to get started. And it sounds very wise! Thanks for sharing!!!!

Dia Minha · #7 01-31-2008, 02:43 PM

I forgot to add, taxes can become a part of your yearly savings % as well. Of course you can only estimate how much your return is going to be, but by planning on putting that directly into one of your savings accounts, you can add that % back into your 40%. We also have a savings program set up with our cash back rewards. This too can can be averaged and added into our 40%

Dia

Dia Minha · #8 01-31-2008, 02:47 PM

Quote:

Originally Posted by Erudite

You answered all the questions I had for now. I was wondering about those "set" expenses (like mortgage and utilities and so on) and the 60/40, but it sounds like you count them out. I think that's what would work best since they are monthly and a weekly sum wouldn't take them into account. Ok, I'm sure I'll have more questions when I start working on this with DH, but for now, I have enough to get started. And it sounds very wise! Thanks for sharing!!!!

Actually Erudite those "set" expenses are part of our 60% spending plan. Let me try putting it like this:

60% of our income is spent on monthly outgoings, including: tithing, house payment, utilities, insurance, car, groceries, clothing, gifts, etc. 40% of our income goes into savings for retirement, emergencies and unexpected costs, or purchasing high priced items such as vehicles, furniture, vacations, or Christmas presents.

Does that help?

Dia

Erudite · #9 01-31-2008, 03:27 PM

Ah. Yes, it does. Thanks!

Ok, I came up with another question. How do you work it between the two of you? I spend, he spends. Do you just kind of report to each other so you know where the family is on spending for the week?

Most of our expenses are planned, but the big "if" is groceries. We're ALWAYS over, unless I watch ever single penny, and now that he does all the shopping and I'm not watching any pennies, I'm guessing we're monumentally over. But I did go to Costco today to pick up something and you know you never go there without spending more than you planned...so I spent more than was planned and...well, he might have done the same thing. So how do you work out spending between the two of you?

I hope that's not too personal a question...

Dia Minha · #10 01-31-2008, 03:41 PM

Nope not too personal at all. The only amount of money I keep track of is the weekly allowance. DH pays all the bills and transfers the money into savings. I have a little notebook I keep in my purse that I use like a check register. DH turns all his receipts into me daily. Now sometimes this requires me to ask him if he has made any purchases, but usually I can do this by instant messaging him at work or if I have sent him down to the store I just ask for his receipt when he gets back. I make a little note of the date and place next to the amount so I can double check just to make sure I got them all in. I record mine immediately. I keep him updated on a regular basis and check with him before the week starts to see if he has any needed purchases to make, like gas, if he is driving carpool, or a washing machine part or replacing the tub faucet that broke last week. This way as I make my purchases, I'm able to keep in mind that he will need an estimated amount for those items. So far we are doing great. It sounds like a lot of time communicating, but it really isn't. Some days we don't make any purchases, and even the days we have 4 or 5 reciepts between us it only takes a minute or two. I always check my balance before finalizing my grocery list and before making any purchases. DH does the same. If he is needing to purchase something we hadn't already discussed, he will contact me to find out if there is enough in our balance.

Dia

Erudite · #11 01-31-2008, 03:48 PM

That makes a lot of sense. We've tried to collect the receipts in one place so they can be entered, so we're already in that habit. We'll need to be better about it though to keep it up on a regular basis.

Ok, next question. Did you decide to do away with all categorization? I noticed the article mentioned doing some categorizing for tax purposes. Another reason for categorization is to make sure you're not over spending in any one area over time. I guess that would be clear even in a little notebook, though, yes?

I do love the idea of doing away with it all, but I can see the wisdom in keeping some of it too. Just curious on what you decided worked best for you.

Dia Minha · #12 01-31-2008, 03:50 PM

For any of you that are interested in the original idea of this budgeting plan, here is a link to the article I read. He is very clear and precise in how he uses this plan and why. You will also be able to see how we are adjusting his idea to meet our needs. I think the biggest thing I have learned from all this is, there is not one plan or idea that is going to meet the needs of each and every household. However, if we have only been taught one way to do something, whether it works for us or not, it is still the only way we know how. The more we learn, the more we are willing to try someting different, the more we will succeed.

[Only registered and activated users can see links. ]

Dia Minha · #13 01-31-2008, 03:55 PM

Quote:

Originally Posted by Erudite

Ok, next question. Did you decide to do away with all categorization? I noticed the article mentioned doing some categorizing for tax purposes. Another reason for categorization is to make sure you're not over spending in any one area over time. I guess that would be clear even in a little notebook, though, yes?

I do love the idea of doing away with it all, but I can see the wisdom in keeping some of it too. Just curious on what you decided worked best for you.

Yes, DH still categorizes. I get lost when he does this, so when I am done inputting the weekly receipts into our weekly allowance, they go back to DH. He takes them and inputs them into Quicken. This way if we start struggling again, we have knowledge of where all the money has gone and can readjust or set goals in spending less on any one category.

Dia

Dia Minha · #14 01-31-2008, 04:00 PM

Just to clarify. We will eventually only have three categories to maintain a balance on; set monthly expenses, weekly allowance, and savings. However, when DH gets the receipts, he still enters them into Quicken using all the same categories as before; tithing, mortgage, car, grocery, clothes, restaurant, etc., to keep track of where the money is going.

Dia

Erudite · #15 01-31-2008, 04:08 PM

That's what we've used for years and in all these years, I think we've looked at only one category over time...tithing. We have a report that tells us whether or not we're up to date with our tithing. We look at the rest of the spending over the month, yes, but we don't really fix the problems because we looked at them, so what was the point of looking at it over the month? Well, we do a little, but only on the "fun" stuff. It's not like you can put off paying the bills.

For me, I think I'd drop it down to just a few categories even in Quicken. I do the books in our house (until recently) and there is just too much to keep track of and make it all work too. So I really like the idea of fewer categories, though I see the wisdom in some categorization. Personally, I'm thinking of revising how we do quicken to make these ideas work for our family. This has been so awesome to think about!

Dia Minha · #16 01-31-2008, 04:16 PM

Yeah I can't keep track of all the categories that DH does. I don't know how he does it, but the more categories he can come up with the happy he his.

I am so excited that you have found it helpful. It has actually been a really scary thing for me to share. I'm always afraid of having the knowledge, strength or maybe it's more power to stand up for, defend, or maybe it's more testify of something that seems to go against the majority. I know I shouldn't, and Diva has helped me a lot, so, really she is the person to thank.

Dia

Dia Minha · #17 01-31-2008, 04:51 PM

Ok just a note. When dividing our monthly income into weeks, essentially we needed to divide by five not four. There are 4 weeks and several days, actually closer to five weeks in a month. Thank goodness we took out a whole extra weeks amount for savings and that is why this didn't mess us up. So you might want to keep that in mind when figuring your weekly allowance.

Dia

Erudite · #18 01-31-2008, 04:52 PM

Oh! That was a question I was going to ask. Thanks for answering it!

Erudite · #19 01-31-2008, 05:02 PM

Quote:

Originally Posted by Dia Minha

I am so excited that you have found it helpful. It has actually been a really scary thing for me to share. I'm always afraid of having the knowledge, strength or maybe it's more power to stand up for, defend, or maybe it's more testify of something that seems to go against the majority. I know I shouldn't, and Diva has helped me a lot, so, really she is the person to thank.

Dia

Dia, this is SO timely for me. I've been concerned about it, mostly because I've lost track of it, but I'm discovering, as the guy in the article says, that our monthly expenses are slowly rising as our kids grow. The groceries are more and someone ALWAYS needs clothing of some kind every month. It used to be that was something we added to our budget every few months, but I just said to DH last week, that we need to find a way to have it a part of the budget every month, because it just comes up that often with 6 of us.

Now with that in mind, this system fits in perfectly. I can fit a new package of socks or another pair of school pants into a weekly budget, but I didn't see how I was going to fit in $100 a month into all the other categories. In reality, I wouldn't need that much in some months and would need more in other months, but sometimes it is needed so it was going to be budgeted for, because I didn't have another way of thinking about it. The way to do that is to have a weekly amount to keep track of and adjust buying some things when socks are needed as well. When the big school clothing buying goes on, I have a savings budget for that...I can see that.

It's you who has been down the path aways and so I thank you for traveling it and letting the rest of us know what it looks like. Never think that your experience is inferior just because it could be different. Often, as is the case now, your experience is just what someone else needs to understand. While we may or may not choose to walk the exact same path as you, your view of that path is beneficial to understanding the new surroundings we find ourselves in. Give yourself the credit you deserve! And THANK YOU!

**5ft Diva** · #20 01-31-2008, 05:04 PM

This thread has been great even though I've only gotten through about 2/3 of it. I'll have to come back and finish it later. I've learned a lot already. (Dia, after reading all of this I'm even more excited to start our "group therapy" tonight.)

Anyway, what I wanted to most comment on was that I love that you and your husband have sat down and made these goals together, Dia. You have come up w/ this plan together - it isn't just all you or all him, so it compliments your marriage. This is synergy at its best! It's been fun for me to read this. I'm quirky, I know. I just like seeing stuff like this happen between people. Like I said on another thread - I'm totally a Steven Covey fan!!!