How do you budget?

[akaykay]

I need help budgeting, not because I'm a big spender but because I don't know how to allocate my money. I've tried one app and became disinterested quick.

Let's say for example as a pharmacist you make between 120 to 140k, single, no kids, no school debt but mortgage. What percentage do you give to living expenses, recreational and saving. Bogleheads don't really help..they can be way over mmy head at times

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[txpharmguy]

Pay yourself first. Set up a 401k and an IRA. You can put in up to 18,000 and 5,500, respectivelyrfor pectively forfor 2015. You wouldn't qualify for a Roth IRA, so contribute to a traditional IRA. Pay the equivalent of one extra mortgage payment a year. (Divide your mortgage by 1/12th and pay the extra each month).

 

[BMBiology]

How much is the mortgage? What do you spend your money on?

 

[Acid11]

I know you said you didn't like apps, but have you tried mint.com, etc.?

I agree with the responses above. With No kids, significant other, school loans, you should be saving more and perhaps investing! I don't "recreate" too often, so my living expense and recreational is very low. But I am always comforted by the fact that I can always increase my 'fun' budget in case I have a year where friends/fam take trips, get married, misc.....

 

[Momus]

I don't budget. I just pick the cheapest option to satistfy my needs. $17/mo cell phone plan for unlimited data txt mins, $30/mo liability only car insurance, $10/mo netflix, free all movie and music - torrent, 800/mo house expense n utilities, eat out occasionally with friends/girls. The rest goes to investment account. My left over money is usually at least about >4000 every month to save.

Single, with 1 rental property, pretty decent networth. 31 yo.

 

[pezdispenser]

I use the Dave Ramsey method which he calls the "zero-based budget". There is now even an online tool at http://everydollar.com to help you. The principle is to assign every dollar a use before the month begins, so that you set BOUNDARIES and have a GAMEPLAN. This doesn't mean that you go out and SPEND every dollar, because the categories include saving or debt reduction as well.

Dave Ramsey does give some recommended percentages:

Charitable gifts 10-15%
Saving 5-10%
Housing 25-35%
Utilities 5-10%
Food 5-15%
Transportation 10-15%
Clothing 2-7%
Medical/health 5-10%
Personal 5-10%
Recreation 5-10%
Debt 5-10%

However, the emphasis is on you to adapt YOUR budget to YOUR lifestyle and YOUR priorities. That way, you are in control of your money, and even if something unexpected comes up, you will realize you will either have to say no to that expenditure, or reassign money from a different category. You do NOT just whip out your credit card and figure it out later. Actually, the zero-based budget is just a small part of Dave Ramsey's book The Total Money Makeover, which is a comprehensive plan to get out of debt and build wealth throughout all stages in life.

 

[BenJammin]

Pay yourself first. Set up a 401k and an IRA. You can put in up to 18,000 and 5,500, respectivelyrfor pectively forfor 2015. You wouldn't qualify for a Roth IRA, so contribute to a traditional IRA. Pay the equivalent of one extra mortgage payment a year. (Divide your mortgage by 1/12th and pay the extra each month).

They would qualify for a Roth because 120 - 401k is below the threshold.

 

[confettiflyer]

I don't need to be told how to allocate my money because I already seek to minimize my costs across the board (it's just not useful) -- I usually just want something to tell me, on a quarterly basis, where my money goes.

So how I budget is by using my own custom spreadsheet which resembles a standard credit/debit ledger. I go forward 6 months with line items for things like utilities, credit card payment, expected income, etc... I use two credit cards (maybe 3, depends) to charge all my expenses on that I can and my primary card (AMEX) has classification tools built-in (remember, this isn't a high priority for me).

What this does is gives me a running day-to-day balance at any given time in the future. I can then make big picture decisions about where to divert money, or whether I should try harder to pick up overtime. I already max out on 401k/retirement accounts so it really becomes a question of how much can/should I divert to other things (fun money, after tax savings, etc...)

Regardless of when CC payments are due, I close up books monthly and pay at the end of the month that month's charges (keeps my accounting clean, expenses incurred in April are paid in April).

I do keep parallel spreadsheets that tracks all my monthly recurring/budgeted payments (like groceries), but this is represented by one CC payment line item on my main spreadsheet. I'll look at it from time to time (quarterly), again not a high priority.

It's actually a pretty convoluted system now that I write it out, so it's probably not for everyone to use. I think the real big picture take away is to have as much of your money taken out first to go toward retirement accounts & savings, then allocate the remainder.

 

[Dred Pirate]

I use moneydance (sounds like something you do at a strip club) to track all of my expenses and investment performance. I actually use a good ole excel spreadsheet and put in every dollar I spend - I use my cc for everything, and only take out like $60 a month in cash.

 

[akaykay]

Pay yourself first. Set up a 401k and an IRA. You can put in up to 18,000 and 5,500, respectivelyrfor pectively forfor 2015. You wouldn't qualify for a Roth IRA, so contribute to a traditional IRA.).

I do contribute max to both. Now the hard part is figuring out investment. I hate reading Bogleheads it's cluttered and I'm not interested in a financial advisor

I don't budget. I just pick the cheapest option to satistfy my needs. $17/mo cell phone plan for unlimited data txt mins, $30/mo liability only car insurance, $10/mo netflix, free all movie and music -

What kind of phone plan is this? And isn't liabily only insurance taking a risk?

After reviewing my monthly statements I save about 7500/mo. I work some per diem shifts but this will be ending soon so I expect to save about 4000/mo. I don't really spend much on recreation things besides eating out and drinking with friends

 

[confettiflyer]

I do contribute max to both. Now the hard part is figuring out investment. I hate reading Bogleheads it's cluttered and I'm not interested in a financial advisor

I love bogleheads...it really dives deep, isn't that the point of reading it, so you don't have to hire a financial advisor who will dig just as deep?

 

[Ackj]

My budget isn't really all that sophisticated, but I'll walk through the process I take. I start with take-home pay (401k already taken care of) for 2 paychecks (the months with extra paychecks are just bonus, don't worry about that now). Subtract the mandatory payments: rent/mortgage, utilities, car, insurance, student loans. Try to minimize these, but those aren't really going to vary for the most part, it's more of a matter of buying a cheaper car, cheaper apartment, etc. Then you've got your variable payments: groceries, gas, entertainment. This is where you can really play with a budget and set boundaries or find extra savings. The rest of the money after that goes toward a goal: loan payoff, retirement, investment, vacation savings, etc.

I'm pretty strict with my spending, so I usually make some "goal" stuff into fixed expenses, and then also put the excess into those again at the end of the month (ie extra $1000 toward loan and $500 for mortgage down payment up front, and then if I didn't go out much/spend much on groceries, I can throw a few hundred extra too.) but if you're just looking for an intro to budgeting, I like the order I wrote it out, since you can see what you've got left over and then put it somewhere.

If you want to know about how to allocate your investments, I'd recommend buying the Boglehead's Guide. The second edition just came out last summer and it goes over everything simply enough. I do agree that at first, reading the Boglehead forum is very intimidating because there are so many in-depth and detailed discussions. Start with the book and do a simple portfolio, and as you gain knowledge you can tweak your holdings.

 

[Momus]

I do contribute max to both. Now the hard part is figuring out investment. I hate reading Bogleheads it's cluttered and I'm not interested in a financial advisor

What kind of phone plan is this? And isn't liabily only insurance taking a risk?

After reviewing my monthly statements I save about 7500/mo. I work some per diem shifts but this will be ending soon so I expect to save about 4000/mo. I don't really spend much on recreation things besides eating out and drinking with friends

I have Cricket. I refer 10 people/year to Cricket and get $250 free money/year. Monthly plan is $35/mo after subtracting $250 free money it becomes $15/mo.

If Boglehead approach is too complex for you, you are beyond hope. They recommend a basic 3 funds, some Bogleheads will say that you don't even need 3 funds, if you are young, get a longest maturing Vanguard target date (1 fund). Everyone has a great capacity to learn, this is one of the easiest read about investing. Do you want to be told and follow blindly by whoever where to invest or do you want to make informed decision where to put your money? If you don't have a conviction, you can NOT invest in anything. You will be pigs. They get slaughtered.

Budgeting is silly. It takes a lot of time/energy, best to just keep expenses down, after maxing 401k + Backdoor ROTH, you can throw left over money every month to an asset allocation you like, and you are done. It's that simple...

The concept of insurance is because you want to insure certain things you can't afford to replace/pay (homeowner/ malpractice / car liability / life insurance). Once your asset exceed certain threshold, there is no need for certain insurance. I can buy a new car if mine totaled. My 2008 honda accord getting old also, it is now only worth $11k.

 

[Guilded_Age]

Live for the now. Only sissies budget. I'm taking nothing with me to the grave. You deserve the best in life. Always live above your means.

 

[Dred Pirate]

If Boglehead approach is too complex for you, you are beyond hope. They recommend a basic 3 funds, some Bogleheads will say that you don't even need 3 funds, if you are young, get a longest maturing Vanguard target date (1 fund). Everyone has a great capacity to learn, this is one of the easiest read about investing. Do you want to be told and follow blindly by whoever where to invest or do you want to make informed decision where to put your money? If you don't have a conviction, you can NOT invest in anything. You will be pigs. They get slaughtered.

Budgeting is silly. It takes a lot of time/energy, best to just keep expenses down, after maxing 401k + Backdoor ROTH, you can throw left over money every month to an asset allocation you like, and you are done. It's that simple...

The concept of insurance is because you want to insure certain things you can't afford to replace/pay (homeowner/ malpractice / car liability / life insurance). Once your asset exceed certain threshold, there is no need for certain insurance. I can buy a new car if mine totaled. My 2008 honda accord getting old also, it is now only worth $11k.

1. The target retirement funds are a "set it and forget it" - I have all my money in Vanguard 2045. Could I maybe try to beat the market, time buying and selling, then also remember to reallocate? yes - but that is too much work and likely won't make much, if any difference.

2. I agree for some people. I don't really budget, but track my spending. Budgeting is necessary for those who cannot control themselves, or who are living closer to paycheck to paycheck. I do like to know where my money goes. If for some reason this month or two I spend way to much going out to eat - I know I should work on packing my lunch more, etc.....

3. Yes, this is what insurance is about. I personally would insure a 11k old car - but can see why some wouldn't., but it is simple to know for sure. How much are you saving each year by not buying insurance? This will vary depending on where you live. If you are only saving $200 - that means you would have to go accident free for 55 years to pay for it. If it saved you $1000 - you would have to go 11 years accident free. Also, if you have a loan on the car, you would have to get insurance. If it is paid off? It is up to you on the risk. That is why I buy travel insurance. I have never been in a situation where I would have used it, and I have saved enough money to go on many of trips

 

[txpharmguy]

I do contribute max to both. Now the hard part is figuring out investment. I hate reading Bogleheads it's cluttered and I'm not interested in a financial advisor



What kind of phone plan is this? And isn't liabily only insurance taking a risk?

After reviewing my monthly statements I save about 7500/mo. I work some per diem shifts but this will be ending soon so I expect to save about 4000/mo. I don't really spend much on recreation things besides eating out and drinking with friends

Put $1K path per month in Vanguard 2045 fund like Dred said. As others have said, budgeting is for those who have spending issues. Give to charity if you feel compelled. Enjoy the rest of your money!

 

[SClENCE]

I don't really think having a budget is necessary unless you have spending issue or are living beyond your means. The key to accumulating wealth is rather cost reduction and saving/investing in my opinion.

 

[mgarph]

as others said I like mint.com, but lately I prefer personalcapital.com, it is similar but better analysis on spending/investments

 

[Muse600]

I have a budget thread!

man was that a lot of work...and I fell off the horse

here's my thread:

http://forums.studentdoctor.net/threads/help-paying-off-student-loans.1047214/

here's a sample post for my monthly expense tracking:

the middle 1/3rd of "Millionaire Next Door" says: Budget! which for me, translates to:
(1.) track ALL my expenses - for skipped expenses, I'm really just lying to myself
(2.) know my daily and monthly (and even yearly) budget goals
(3.) be consistent
(4.) put the rest into my loans

February Budget: I disgracefully spent $3,466 last month: A single guy, no kids, no house, no BMW, did not "go out and party every weekend"...I only attended 1 kids bday party.

That includes these mandatory expenses:
- $975 (rent)
-$180 (gas)
-$200 (church)
-$369 (student loans - this is low because I changed my payment plan...so the regular $1088 got pushed to next month)
-$25.20 (ebay fees for items I sold + $10 to see W2 electronically)
-$82.98 (utilities: gas, refuse, electricity, internet)
-------------------------------------------------------------
$1,633.82 - is what I spent after accounting for "fixed" mandatory expenses.

Random Monthly Money Eaters:
1.) The front right wheel bearing fell apart on the car! I couldn't do it myself, so I had Pep Boys do it...when they were in there, they said the left one was on its way out...so they did both: total charges (using all the coupons I could find online) $360.18. Add +$23.82 (oil change) + $41.42 for tools (I got a combo hydraulic jack and jack stands on sale so I can do my brakes next month) = $425 spent this month on auto maintenance.
2.) I had a lingering $455 bill from the ER visit I had in december...

So after those 2 "random monthly money eaters", I still spent $753 on controllable expenses!
-$148 was recreational eating ($42 w' friends, rest @ work) - each meal ranged from $2-$9....groceries $80 = total monthly food cost $228
-$7.63: clothes
-$70.33: motorcycle (bought a ramp, chocks, and brake lever)
-$30: quarters for laundry
-$34.77: household items/toiletry
-$137.23: "other" people expenses: wrapping paper/gifts for little kids' bday parties, surprise gifts, meals for a couple hobos, helping random people
-$68.08: My rental car + food from my Sacramento trip didn't post until Feb
-------------------
$175 - I have no idea where I spent this - these were cash withdrawals that I did not record the spending of

So March goals:
-track everything!!!
-spend less on food!! Set budget to $150/month! Eat more from home!
-cut back on spending money on hobo's/random people...helping multiple people adds up. Try only helping 2-3 people/month. Stop "surprising" friends with food. Make it @ home & drop off tupperware instead of ordering out.
-hopefully: won't end up in ER for anything, won't need to spend $$$ on car repairs, won't need to take any flights

 

[Guilded_Age]

as others said I like mint.com, but lately I prefer personalcapital.com, it is similar but better analysis on spending/investments

This. It's for the big players.

 

[ExpressMaiL]

I think it's important to have a goal. You need a reason to save. Aimlessly saving works too but setting an attainable goal (savings or spending) can help because a lot of us naturally want to reach a goal.

It really comes down to how hardcore you want to be when it comes to saving petty cash. When you have a few monthly obligations you can really save and you'd be surprised as to how quickly your efforts show. Personally speaking, I don't believe in having more than a sufficient amount of a rainy-day fund in my bank, which is why I've invested extra funds back into my business or into a safe vehicle that can be written off properly. OP said no school debt but for those who have it, many startups are offering insanely low rates for fixed 60/120 terms which are below 4.5%

 

[fewaopi]

Gnucash is actually pretty cool if you're tech savvy and have the patience to go through the learning curve.

You Need a Budgest (YNAB) is actually a pretty popular tool on other forums dedicated to these types of topics. Probably one of the most popular ones out there.

Mint.com is also recommended as a close 2nd. Though the thought of putting more financial data on the web and some of the limits to mint, not to mention the site and need for a web connection, turn me away from mint.com. I don't like getting email clutter or having to deal with another app. To me there's just way too many apps out there to consume and most don't have any long-term real utility. Most just take up space and I use it once and it just makes managing everything more complicated.

I personally just use a simple excel sheet that tracks all my accounts and make sure I reach my short and long-term financial targets. Keep all costs low and hit your targets, then there's no need to really budget. Budgeting is more if you have real poor habits and you are trying to identify areas in your spending that can be remediated. Once you cut things to the point where you can save a decent amount of money into a 401K, IRA, and a taxable brokerage account, then there's no real point to budgeting unless you're always trying to improve your savings rate, which eventually becomes impossible as you do have to spend at some point. Focus on just cutting costs and think about what you need vs what you want. Don't worry about keeping up with the joneses. Don't do things like spending hundreds of dollars on shoes lol. Keep your spending to a minimum. Go to thrift stores, eat less meat, eat out less, eat less, tackle debt aggressively, etc.

 

[confettiflyer]

.

Did I tell you to turn your hobby into a business so you can deduct all those expenses? Just file Form 5213 within 3 years of the start of business activity or if the IRS sends you a letter saying it's a hobby loss not a business loss. That way you can get a full five years of business activity and game it so you only earn a really small profit 3 of those 5 years.

 

[awval999]

I don't budget. I have an excel spreadsheet of my expenses so I know how much fun money I have each month.

Honestly, no matter what you budget there is only 3 things that really, truly matter. If you screw up one of these it doesn't matter how many lattes you omit or if you eliminate cable or only shop at Goodwill.

1. Student Loans
2. Mortgage/Rent
3. Car

The big three. And I see way too many pharmacists hang themselves on these.

 

[samuricool]

I pay the bills. Pay off everything every month. Maybe have credit cards for traveling. Tell my wife to stop spending money. Some of those strategies work better than others.

 

[Dred Pirate]

I don't budget. I have an excel spreadsheet of my expenses so I know how much fun money I have each month.

Honestly, no matter what you budget there is only 3 things that really, truly matter. If you screw up one of these it doesn't matter how many lattes you omit or if you eliminate cable or only shop at Goodwill.

1. Student Loans
2. Mortgage/Rent
3. Car

The big three. And I see way too many pharmacists hang themselves on these.

this is so true - you could add traveling to that as a number four, I pay more for travel than any of these, but that is entirely my choice.
1. Loans $422 a month (was 570 until I paid one off)
2. Rent $750 a month
3. $396 a month

I easily pay a grand a month in travel expenses

 

[Eichhoernchen]

I don't plan on much budgeting (just being smart about my spendings), but I plan to put at least 500$ towards loans a month. Eating at home is not very expensive at all. Rent and utilities are a huge portion and then most of everything else goes to savings for travel and fun/go out money. I will use my old Toyota as long as I can and public transport.. I never understood the obsession of my pharmacy colleagues to buy the best car possible right out of school and soon after that settle down with a house. Never appealed to me.. Maybe cause I am European, maybe age, I don't know.

 

[Ackj]

I don't plan on much budgeting (just being smart about my spendings), but I plan to put at least 500$ towards loans a month. Eating at home is not very expensive at all. Rent and utilities are a huge portion and then most of everything else goes to savings for travel and fun/go out money. I will use my old Toyota as long as I can and public transport.. I never understood the obsession of my pharmacy colleagues to buy the best car possible right out of school and soon after that settle down with a house. Never appealed to me.. Maybe cause I am European, maybe age, I don't know.

I hope you're planning more than $500/month for loans. Even if you owe relatively little (under $100k), your minimum payment is probably going to be higher than that.

 

[SClENCE]

My undergrad loan alone is 300 a month minimum

 

[Dred Pirate]

I hope you're planning more than $500/month for loans. Even if you owe relatively little (under $100k), your minimum payment is probably going to be higher than that.

What is interest rate now days? My stafford load was at 96k I think, my payment was $422, but interest rate was %1.7

 

[SClENCE]

My undergrad loans average out to around 4% - haven't taken out the unsubsudized loan for pharmacy school yet but I'm pretty sure it's over 6-7%

 

[Eichhoernchen]

Mine range from 3.4 % to 6.8 %. I still haven't decided whether I should consolidate