Egads! just did a budget

[twobone]

I had some spare time and sat down and analyzed my households total financial out-flows.

 

OMG - our run rate on "non-discretionary" is about $4-5K a month and "discretionary" is running close to $3K. Turns out that's after disciplined forced savings, we are only just breaking even.

 

WAKE UP CALL!

 

Any wise words on personal approaches to budget management that works for you.

 

The funny thing is that we don't drink or go out much....its just death by a thousand little things.

[twobone]

I want to retire some day. Its time to get this under control.

[80-CU.IN.T]

$90,000 roughly a year after taxes - Surprised you don't live in Kalifornia.

I don't have nearly that many holes but but could easily if wasn't careful. Great wife helps. From most of the people I know, that is about average unless kids & private schools come into the picture. $15,000 to $35,000+ after tax money for schooling. I don't know how they swing it. I have obviously chosen the wrong line of work but I do love it so I shouldn't complain. I hope you are able to find a solution.

Roy

[Hank]

Both my wife and I have 2 jobs. Both of our primary jobs pay the bills and our second jobs pay for our hobbies.

[WestTexasS2K]

If you ain't got it don't get it.

We run a pretty tight budget at our house. We rebalance every quarter. My wife is a great money saver. We run relatively debt free except mortgage. We are working on paying off 20 years early.

We do without a few things not much though. We buy food in bulk. We have basic cable. We package phone, cable and Internet. I make my own fuel which saves me over a 1k a month. We are conservative with the house thermostat. My wife really sticks to her guns and she tells me no alot.

 

I run both of my businesses the same way. I try not to borrow money. I am a firm believer in borrower is slave to the lender. My truck has 150k miles I will make it last for 250-300k. It is tempting to drive by the new car dealer and look at those nice new trucks but I don't miss sending them 800 a month.

 

I follow most of Dave Ramseys teachings on money management the last few years it makes life much less stressful. Like he always says live like no other so you can live like no other.

 

That is why I haven't finished building my Ultralite. It isn't in the plan but it is getting closer.

[Mondo]

Money or free time... few have both

[Ian7]

...Turns out that's after disciplined forced savings, we are only just breaking even....

 

Wouldn't normally have been this blunt, but you seem sincere in your question...

IMHO, should someone barely breaking even own a $25000 toy ?

[Croc]

This is one area I know very well after having spent years working to keep/get companies financially out of trouble and getting "please save me" pleas from financially irresponsible relatives and friends.

 

 

 

 

Rules of thumb that I go by:

1. Every pay check you should be aiming to save 15-20% of gross pay (before tax is withdrawn) in savings. Of this it should be split roughly 3 ways:
   
   • short term emergency funds of roughly 2-3 months of living expenses plus saving for the cost of an annual vacation). Once this is funded then divert the savings to the saving categories below.
     
   • medium term savings - to cover significant purchases on the horizon (e.g. kitchen renovation, car replacement, etc). This could also be used direct to pay off the mortgage with extra repayments (I am referring to amounts over and above the scheduled mortgage payment here).
     
   • long term/retirement savings. Make sure you are maxing out any company match on your contributions plus any tax deduction benefit you may get (not sure if Canada has US-style 401K benefits?).
     

[*]Out of what is left you have to pay a tax bill and living costs.

[*]Living costs (rent, mortgage, property taxes, housing utilities - power, gas water) should ideally be around 20-30% of your gross pay. In some cities (e.g. NYC) then the range goes up to around 30-35% but should not exceed this as an extreme.

[*]The remaining is what you have to live on. Not much is it? At this point I would normally recommend that you spend a month keeping track of every little expense to see where the money goes and then you can work out a plan on where to save money. As you noted the costs are all little - there are no big outgoings left. Money leaks out in surprising directions and surprising amounts:

• Package cable and internet and consider dropping back from the top all-channels option to a cheaper option. For me this brought the costs down from $220pm to $170pm
  
• Shift from a landline phone to a cable internet based phone. For me this saved $100pm
  
• Cut internet access from a cell phone and limit text messages - saved $50pm
  
• Watch dinners out - this adds up quickly. For a couple, 6 nights out in a month could be as much as $300.
  
• Air con is a big cost in summer for me - it was easily $300-375 extra per month in summer. I now use ceiling fans and open the place up to get breezes in plus installed new double glazed energy windows. Think similar for winter heating costs and how to reduce electricity bills. My electricity bill was $26 last month and no I do not sit in the dark and I still run multiple laundry/dryer loads each week. I changed to LED lights and learn to turn things off when not using them.
  
• Do you know how much Starbuck/Tim Hortons charges for a frou frou mega large gourmet coffee these days. Not much change from $5 I bet. How many of these do you have a day and multiply it across the month - turns into a very large sum rather quickly. A relative of mine was spending $300 per month this way....ouch...and then we checked her husband and found another $180 per month.
  
• In a similar vein, how much do you spend on lunch at work. If you are buying it then where I am located in NYC you do not get much change from $10 per day. Think about making it at home and taking in with you.
  
• Are you using everything you own already or are there things in the closet that are spare and not being used yet you buy something else anyway, e.g. clothes, household items, etc).
  

[*]For discretionary spending ask yourself do you really need it or do you just really want it. I would love a 60 inch flat screen tv alas I cannot justify it. I would love a new stereo amplifier as mine was bought in 1998 but the current one works perfectly. If you do not have the money for it then do not buy it.

[*]Once you have your spending under control then you should make sure that your credit card is being used only as a form of cash payment - i.e. you pay it off each month in full.

[*]Look around the home - anything not being used that you want to sell on ebay and make some spare cash out of surplus assets. That was a winner for a family member of mine - thousands of dollars received from old kids toys that they had outgrown.

[*]Check that you have claimed all medical reimbursements due to you from your health insurance - general medical, prescription, optical, dental. See what other benefits you may be entitled to that you may be paying for separately without knowing.

[*]Look at what benefits you may not be leveraging on your credit cards - I save thousands each year by using points from a united airlines mileage credit card to pay for flights to Australia to see fmaily and for them to come and see me. I know I spend more on air travel than most given my remote family situation but in the last 10 years this card has saved me over $100k in air fare costs I would have otherwise spent. I also discovered a substantial sum of Amex membership reward points that were travelling below my radar - that will pay for some of the annual vacation or any household items needing replacing. Similarly I found last week that I have a substantial sum of Hilton hhonor points worth at least 2 weeks of free hotel rooms anywhere in the world (or 1 week in Maui!). Do an inventory of what you have and check to see how much it is worth as a benefit.

This covers most of the rules of good household finances.

 

A suggestion if you really want to get into financial analysis is to use Quicken or similar to help you analyze where the money goes. This software also has financial planning features where you can see how your savings will provide for you long term. I personally swear by Quicken as it tracks my mortgages, investments, retirement monies and bank accounts - it saves days of effort (for me) come tax return time and you can set up pretty much all accounts to one-touch download transactions into the register.

 

If you have questions beyond this then maybe PM me offline to give you some privacy.

 

oh and yes...one of my qualifications to provide this advice is that I am a Chartered Accountant/CPA.

Edited May 9, 2011 by Croc

[twobone]

Terrific advice from everyone

 

We are dialing back the discretionary and will also focus on chipping at the perceived "non-discretionary". I do save 12% off the top of gross...but find I often sell some of those investments to pay large visa bills.

 

Hence the need to refocus.

[HOTTTCAR]

Mike

 

Is Quick Books as good as Quicken?........See it alot in stores.

[Croc]

Mike

 

Is Quick Books as good as Quicken?........See it alot in stores.

 

 

It depends - they are designed for different markets.

• Quicken is for individuals and families - personal finances. It can even handle sole trader types of very small businesses. Refer to the following link:
  

http://quicken.intuit.com/

• Quick Books is designed for small businesses so it can produce invoices for billing, accounts receivable aging and other stuff that an individual does not need or want. Unless you were running a real business with employees then I do not think you need this for your own personal finances.
  

[HOTTTCAR]

It depends - they are designed for different markets.

• Quicken is for individuals and families - personal finances. It can even handle sole trader types of very small businesses. Refer to the following link:
  

http://quicken.intuit.com/

• Quick Books is designed for small businesses so it can produce invoices for billing, accounts receivable aging and other stuff that an individual does not need or want. Unless you were running a real business with employees then I do not think you need this for your own personal finances.
  

Thanks Mike

[Arya Ebrahimi]

This is one area I know very well after having spent years working to keep/get companies financially out of trouble and getting "please save me" pleas from financially irresponsible relatives and friends.

 

 

 

 

 

 

Rules of thumb that I go by:

1. Every pay check you should be aiming to save 15-20% of gross pay (before tax is withdrawn) in savings. Of this it should be split roughly 3 ways:
   
   • short term emergency funds of roughly 2-3 months of living expenses plus saving for the cost of an annual vacation). Once this is funded then divert the savings to the saving categories below.
     
   • medium term savings - to cover significant purchases on the horizon (e.g. kitchen renovation, car replacement, etc). This could also be used direct to pay off the mortgage with extra repayments (I am referring to amounts over and above the scheduled mortgage payment here).
     
   • long term/retirement savings. Make sure you are maxing out any company match on your contributions plus any tax deduction benefit you may get (not sure if Canada has US-style 401K benefits?).
     

[*]Out of what is left you have to pay a tax bill and living costs.

[*]Living costs (rent, mortgage, property taxes, housing utilities - power, gas water) should ideally be around 20-30% of your gross pay. In some cities (e.g. NYC) then the range goes up to around 30-35% but should not exceed this as an extreme.

[*]The remaining is what you have to live on. Not much is it? At this point I would normally recommend that you spend a month keeping track of every little expense to see where the money goes and then you can work out a plan on where to save money. As you noted the costs are all little - there are no big outgoings left. Money leaks out in surprising directions and surprising amounts:

• Package cable and internet and consider dropping back from the top all-channels option to a cheaper option. For me this brought the costs down from $220pm to $170pm
  
• Shift from a landline phone to a cable internet based phone. For me this saved $100pm
  
• Cut internet access from a cell phone and limit text messages - saved $50pm
  
• Watch dinners out - this adds up quickly. For a couple, 6 nights out in a month could be as much as $300.
  
• Air con is a big cost in summer for me - it was easily $300-375 extra per month in summer. I now use ceiling fans and open the place up to get breezes in plus installed new double glazed energy windows. Think similar for winter heating costs and how to reduce electricity bills. My electricity bill was $26 last month and no I do not sit in the dark and I still run multiple laundry/dryer loads each week. I changed to LED lights and learn to turn things off when not using them.
  
• Do you know how much Starbuck/Tim Hortons charges for a frou frou mega large gourmet coffee these days. Not much change from $5 I bet. How many of these do you have a day and multiply it across the month - turns into a very large sum rather quickly. A relative of mine was spending $300 per month this way....ouch...and then we checked her husband and found another $180 per month.
  
• In a similar vein, how much do you spend on lunch at work. If you are buying it then where I am located in NYC you do not get much change from $10 per day. Think about making it at home and taking in with you.
  
• Are you using everything you own already or are there things in the closet that are spare and not being used yet you buy something else anyway, e.g. clothes, household items, etc).
  

[*]For discretionary spending ask yourself do you really need it or do you just really want it. I would love a 60 inch flat screen tv alas I cannot justify it. I would love a new stereo amplifier as mine was bought in 1998 but the current one works perfectly. If you do not have the money for it then do not buy it.

[*]Once you have your spending under control then you should make sure that your credit card is being used only as a form of cash payment - i.e. you pay it off each month in full.

[*]Look around the home - anything not being used that you want to sell on ebay and make some spare cash out of surplus assets. That was a winner for a family member of mine - thousands of dollars received from old kids toys that they had outgrown.

[*]Check that you have claimed all medical reimbursements due to you from your health insurance - general medical, prescription, optical, dental. See what other benefits you may be entitled to that you may be paying for separately without knowing.

[*]Look at what benefits you may not be leveraging on your credit cards - I save thousands each year by using points from a united airlines mileage credit card to pay for flights to Australia to see fmaily and for them to come and see me. I know I spend more on air travel than most given my remote family situation but in the last 10 years this card has saved me over $100k in air fare costs I would have otherwise spent. I also discovered a substantial sum of Amex membership reward points that were travelling below my radar - that will pay for some of the annual vacation or any household items needing replacing. Similarly I found last week that I have a substantial sum of Hilton hhonor points worth at least 2 weeks of free hotel rooms anywhere in the world (or 1 week in Maui!). Do an inventory of what you have and check to see how much it is worth as a benefit.

This covers most of the rules of good household finances.

 

A suggestion if you really want to get into financial analysis is to use Quicken or similar to help you analyze where the money goes. This software also has financial planning features where you can see how your savings will provide for you long term. I personally swear by Quicken as it tracks my mortgages, investments, retirement monies and bank accounts - it saves days of effort (for me) come tax return time and you can set up pretty much all accounts to one-touch download transactions into the register.

 

If you have questions beyond this then maybe PM me offline to give you some privacy.

 

oh and yes...one of my qualifications to provide this advice is that I am a Chartered Accountant/CPA.

 

I didn't think I was doing all that well, but I'm in line with all of those suggestions and am debt free(except the mortgage).

 

Guess I'm doing alright

 

Kids will probably change that :willy_nilly: (not that they're coming any time soon)

[80-CU.IN.T]

I didn't think I was doing all that well, but I'm in line with all of those suggestions and am debt free(except the mortgage).

 

Guess I'm doing alright

 

Kids will probably change that :willy_nilly: (not that they're coming any time soon)

 

Private schooling in Kalifornia - $15,000 to $35,000+ a year.

 

My Brother had triplets last year (3 Girls). (His wife stile wants 2 more) He is selling most of his toys & investing for future school tuition. ( 2 more:svengo: )