How do you budget your finances?

[ssimonvii]

Hi Everyone,
New member and happy to be here. I've recently switched to using sites like Mint/YNAB to manage my finances. It has been life changing as I am really in control of where my money is going. Things have been getting a bit tricky since getting the chase ink and buying gift cards. I have managed to find a system that works for me, but am afraid that as I get into the various different methods, it will be hard to track.

It seems like a lot of you are into finance and building wealth, so I'm wondering how you guys "budget". Do you somehow keep your accounts separated (one for personal spend, the other for accumulating points)?

Any advice would be awesome so I can keep it in mind as I learn more. Thanks and take care.

 

[Matt]

Personally I keep it all in my head. But try daily to share that data with the wife. I've written down what I do (nodes) but to track the flows would eradicate their return/value. As such, I just make sure that in the event that something happens to me, someone else knows to take a peek to see what the value of said account is on that day.

I don't budget real life either.

I think a budget is a powerful tool, but it is more of an 'event' than anything for me. I use a budget to get a snapshot of spend that may have escaped me, and I internalize value from any given purchase. I tend to ask myself:

Is the price good?
If the price is high, are the alternatives desirable?
What impact does this have on goals? Is it something that puts me behind on a weekly spend level (IE am I making such choices weekly) or is it a one off, hurts the year, but is 'worth it'?

Everyone should run a budget, reflect on it, and adapt based on it, but going forward, you don't need to track it daily/weekly/monthly/yearly based on maturity from the plan.

 

[agrippa472]

Yeah...my mom is the best budgeter I've ever known. I can't do it to save my life.
I'm a huge proponent of automatic saving. My retirement funding gets auto taken out of my paycheck and so does my rainy day account. The rest that actually shows up in my account is for bills and whatever else I feel like spluging on.

I am a huge fan of Personal Capital to track investments but I have a tendency to switch back and forth between PC and Mint. I think Mint does a better job of tracking credit card bills and notifying me if I happen to forget. Between the two it is really easy to see what balances I have on what credit cards and where my money is going. Mint does give you a credit score every 3 months if you're looking for that.

I've noticed though with so many credit cards active it is becoming a pain to track what bills are due so I have been paying off my credit cards more often (instead of once a statement) which has also given me the side effect of spending less.

 

[nickel285]

We've been using YNAB for a couple of years now and I love it. Some may think it's more work than something like Mint that pulls in your transactions automatically. However, I feel the the act of logging/tracking every purchase keeps my wife and I on track, simply because we see our remaining balance every time a transactions is logged. With something like Mint/Personal Capital we found it was too easy to not keep on top of our spending since we weren't logging in to Mint everyday.

Interestingly YNAB came out with a new web based app that does indeed offer the ability to pull transactions from your checking/credit card account. I've yet to give it a try but I may see if it can work for us.

Also, I like to use Personal Capital to track cash flow (savings rate), net worth, and investments.

To each their own!

 

[AndyP]

About once a month I look at all my accounts and track my earnings (job, cash redemptions etc.) minus expenses (regular spending + GC fees) and calculate what the change in my net worth should have been. Then I compare that to what the change in my net worth actually is to make sure I didn't misplace some GCs or money orders or have a hidden expense or failed deposit/transfer.

In terms of budgeting my spending I don't really do that. I've always just saved as much money as I could and spent only when necessary. It's also important to look for sales and consider opportunity costs when making a purchase. As my income has gone up, I've gotten slightly more 'free-spending' but still spend very little overall. Also recently began deducting 60% of my paycheck into a 401k.

 

[thedrills]

I love MINT.com it details out all of your expenses and trends. Some people are afraid of it because they ask for your bank login but its run by Intuit so I feel safe. additionally they say that they only use your login as a read only so there is no way they would be able to make any changes to your account. If you have a business account just create a read only login. The same way you might do for an employee who needs access and then give then that login info.

 

[Joshua C]

YNAB FTW STFU LOL ROFLMAO. But seriously, YNAB.

 

[notwealthy]

Like Matt, I also keep track of my expenses in my head. Personally I think it's a little unnecessary to keep two separates accounts (one for normal spend, one for points-earning), but it's probably a good way to force yourself not to "float" too much money you don't actually have available.

I think that once you have a system for understanding your "normal" day-to-day expenses, you should have a good picture already of how much monthly income you have, and how much you normally spend on a monthly basis. Based on those two numbers, and your running account balance, you should be able to have a gut feeling for "how much can I really afford to float right now into VGC?" Don't push this limit, and always try to liquidate ASAP. The most important part is not getting burned just from being too aggressive.

Hope that helps!

 

[SanDiego1K]

It's important to keep track of expenses that are periodic, not monthly. You need to plan for them so that you hold back money in prior months to be able to pay those bills. I'm thinking of house insurance, car insurance, property tax, and perhaps income tax if insufficient is withheld on a routine basis. Travel could be another such expense as could Christmas for those who indulge in gifts. For years, I kept an Excel spreadsheet or a pen and paper journal that listed these expenses. It's not fun to be going along with inflow and outflow matching, then suddenly come upon one of those periodic expenses and not have planned for it.

 

[AndyP]

It's important to keep track of expenses that are periodic, not monthly. You need to plan for them so that you hold back money in prior months to be able to pay those bills. I'm thinking of house insurance, car insurance, property tax, and perhaps income tax if insufficient is withheld on a routine basis. Travel could be another such expense as could Christmas for those who indulge in gifts. For years, I kept an Excel spreadsheet or a pen and paper journal that listed these expenses. It's not fun to be going along with inflow and outflow matching, then suddenly come upon one of those periodic expenses and not have planned for it.

If you buy your car with cash that can be a major periodic expense as well. I don't save specifically for these periodic expenses, I just save as much as possible.

 

[jdlucas24]

I use a few different spreadsheets to calculate the amount I should save monthly (start with net pay input mortgage, other debt, etc. and then total monthly expenses). I then track actual vs. budgeted spend using a Google Docs spreadsheet. I have a fairly complex Excel spreadsheet to track projected cash flow and which accounts I make my CC payments from. I have considered using a second account for my miles related spend as the float from MS can affect your true savings level (positively and negatively)

 

[SanDiego1K]

If you buy your car with cash that can be a major periodic expense as well.

Agreed. We generally pay cash for cars. Also, early in our adult life, our house was furnished with early Salvation Army. We budgeted and carefully saved so we could buy furniture. We only bought as we could cover with savings.

 

[AndyP]

Agreed. We generally pay cash for cars. Also, early in our adult life, our house was furnished with early Salvation Army. We budgeted and carefully saved so we could buy furniture. We only bought as we could cover with savings.

Yes it definitely is important to keep these sorts of expenses in mind even if you are not planning in excel and doing all the math. Saving 3-4k/year is an illusion if you didn't have any large periodic expenses. If I buy a 15k car and resell every 5-7 years for 5k I need to be saving close to 2k/year just to save for my next car.

 

[LowHassleMS]

with all the credit cards and MS, I'm struggling to keep up with where i spend money. My mint is a mess with all sorts of transactions and fees.

I finally decided that I will put a fixed amount in my boa account every month and pay all REAL credit card bills & rent from that account. The cards I use keep changing b/c the rewards on them keep changing. So I don't really think i can stick to one card for let's say gas. If I have anything left at end of the month, I will move the same amount of money to a "fun money" account and then top off the BoA account with my monthly allocation.

Another thing with boa is they txt me if I have low balance (even negative) and I can make a cash deposit so that i don't have to pay any overdraft fees. But my plan is to keep $2k extra in this account so that I will rarely have to face this problem. Having 2k as buffer also makes it easy to calculate how much i have left (3k balance means 1k left etc.)

I'm curious what systems other poeple use to figure out how much they spent and where

 

[volker]

I use gnucash as my "reliable" source of expenses and the best annual overview by categories. I do not track my 401k and IRA in it. I only update it every 3-6 months. It can be a PITA due of the missing OFX direct connect of many US banks.

With gnucash I can have my own account "amazon giftcards", but putting Amazon purchases in spending categories is also more painful since you have to check your previous purchases in Amazon .

I use Mint and Personal Capital for a quick overview. PC is much better if you want to see your asset allocation in your entire portfolio.

I am not MS'ing yet. But if I do I plan to have their own accounts so I can separate this from personal expenses. This gives me the biggest headache so far.

Gnucash provides me much better flexibility and power but it can also be a little bit painful to manage. I use for many years, also before Mint and PC exists. I will stick to it at least for my personal finances.

 

[volker]

Another thing with boa is they txt me if I have low balance (even negative) and I can make a cash deposit so that i don't have to pay any overdraft fees. But my plan is to keep $2k extra in this account so that I will rarely have to face this problem. Having 2k as buffer also makes it easy to calculate how much i have left (3k balance means 1k left etc.)

I like Ally here that doesn't let me go into the negative but can pull money from a dedicated savings account for that. Checks will never bounce this way. Money transfers between accounts also transfers in seconds and not days like at some other banks. The only negative is that they seem to interpret government rules much harsher. As result I can only make 10 withdraws/moves from a single savings accounts per month -- or have to pay a penalty. That also applies for the automatic transfer from the savings to the checking account to prevent overdraws.

 

[DRD]

I have been using mint for about 6 years or so. I have been doing the mileage game for about 5 years. Depending on what I am doing, I have different categories for spending for other people or manufactured spend. Most of the time for MS, i change the transaction to hidden and when I deposit the money into the bank I hide that portion of the deposit. Doing this will hide your cost to MS but it keeps your budget from looking screwed up. I try to keep a minimum amount in my accounts so I don't have to worry about the cost to MS.

I also set up a spreadsheet with all my cards, their balance and the due dates. I input payments on the spreadsheet and the dates I am making the payments. On a separate tab I have todays date listed and dates for each day for the next say month and a half (cell A2 = Cell A1 +1). I have a debit column (column B), a credit column (Column C) and a balance column (Column D). My spreadsheet automatically pulls in all of the credit card payment dates from tab 1 and lists them correctly on my tab 2. So I input my paychecks, any expenses i have going out and any other deposits. Each line calculates the projected balance for each future date for a month and a half. Then I have a MIN command to find the minimum balance for the column D. So by doing this I can look out a month and a half and see if I have any issues in my account. If my accounts get low or go negative, I start looking to see if I am missing some money somewhere. Its kind of hard to explain it without seeing it first hand but hope that helps.

 

[DRD]

From above talking about paying cash for cars..... I bought my wife's car on a credit card, then paid it off with cash. Free points. They didn't like me doing this, it took a few hours and they came up with an idea to try and prevent me from doing this. They said I could only put $2500 on each card (probably assuming I was like most people and only had 1 or 2 cards).

 

[volker]

From above talking about paying cash for cars..... I bought my wife's car on a credit card, then paid it off with cash. Free points. They didn't like me doing this, it took a few hours and they came up with an idea to try and prevent me from doing this. They said I could only put $2500 on each card (probably assuming I was like most people and only had 1 or 2 cards).

One big car brand dealer in the area said $2500 max with CC. Another one no CC payment. The $2.5k was based on some legal rules. The rules itself seem to be all across the place. One required a certified check or wait period til our check would have cleared, the other dealer couldn't care less and only wanted a simple check.

Was it a new or used car? Brand dealer or small business dealer?

 

[DRD]

It was a used car at a Ford dealer. I told them I would be back in a few years to buy a truck and wanted to put it all on cards. Lady running the cards said she had one guy that ran $20k or so on cards so unless this has changed they may let me do it. Mine was only about $10k since I had a good trade in. But like all things, this will probably change when I go back up there.

 

[Cytraveler]

We are definitely in the camp of not close tracking of expenses, but just being careful about how we spend. There's no doubt that as our income has gone up, our spending has - I don't get all my furniture at Salvation Army anymore - but we still keep a lid on. I don't use Mint because I don't want to spend the time to closely track things.

For cc, including some light MS, every new card, I set up to pay in full the statement balance from my PNC bank account. We have a home equity loan from PNC at 3.49%, and if for some reason money didn't come in quite fast enough to cover things, it just automatically pulls from the HELOC with no fees. It's my short-term-I-won't-ever-be-overdrawn backup. It's just pulled a couple of times for a few hundred dollars, but it gives me peace of mind with no tracking required by me. I love it.

 

[volker]

I don't use Mint because I don't want to spend the time to closely track things.

You don't necessarily need it for details. In mint I only care about incoming vs outgoing money.

For cc, including some light MS, every new card, I set up to pay in full the statement balance from my PNC bank account. We have a home equity loan from PNC at 3.49%, and if for some reason money didn't come in quite fast enough to cover things, it just automatically pulls from the HELOC with no fees. It's my short-term-I-won't-ever-be-overdrawn backup. It's just pulled a couple of times for a few hundred dollars, but it gives me peace of mind with no tracking required by me. I love it.

The HELOC is an interesting option. Is there a monthly limit on how often you can take money from the HELOC?
With Ally and some other banks you can choose a savings account for such a kind of overdraft protection. But the amount how often you are allowed to to this is limited to the amount of allowed transaction for the savings account. Ally charges for example a fee if you transfer -- manual or via automatically via overdraft -- more as 10x a months money out of a single savings account.
In some countries in Europe most checking accounts come automatically with a line of credit (usually with a ~7-15% fee) so you do not have to deal with ridiculous overdraft fees. I saw already 1-2 bank accounts here in the US with a similar option but not as much as I would like to. The HELOC is a nice hack for that.

 

[Cytraveler]

You don't necessarily need it for details. In mint I only care about incoming vs outgoing money.



The HELOC is an interesting option. Is there a monthly limit on how often you can take money from the HELOC?
With Ally and some other banks you can choose a savings account for such a kind of overdraft protection. But the amount how often you are allowed to to this is limited to the amount of allowed transaction for the savings account. Ally charges for example a fee if you transfer -- manual or via automatically via overdraft -- more as 10x a months money out of a single savings account.
In some countries in Europe most checking accounts come automatically with a line of credit (usually with a ~7-15% fee) so you do not have to deal with ridiculous overdraft fees. I saw already 1-2 bank accounts here in the US with a similar option but not as much as I would like to. The HELOC is a nice hack for that.

There are no limits (at least that I know of) on how many times I transfer money to and from the HELOC and my checking. It transfers instantly, automatically backs up for overdrawing account, and no additional interest (beyond the 3.49% on the HELOC). No fees whatsoever.

I do really like it for simplifying things. If you live in Pittsburgh, you don't have branches for any of the major banks (no BoA, no WF, no Chase, no Citi). PNC is the big dog here. But for lots of reasons - like this one - I do like PNC a lot.

 

[DRD]

There are no limits (at least that I know of) on how many times I transfer money to and from the HELOC and my checking. It transfers instantly, automatically backs up for overdrawing account, and no additional interest (beyond the 3.49% on the HELOC). No fees whatsoever.

I do really like it for simplifying things. If you live in Pittsburgh, you don't have branches for any of the major banks (no BoA, no WF, no Chase, no Citi). PNC is the big dog here. But for lots of reasons - like this one - I do like PNC a lot.

I have a few questions on your HELOC, there ae some people that say you can use a heloc to pay off a mortgage faster by essentially using the heloc as a checking. You put 100% of the heloc on to your mortgage and then deposit your paychecks into the heloc and live off the heloc. I don't have any insite on how interest is calculated on the heloc but I can't see how this will work. Either way your getting charged interest that looks like it will pretty much net out close to 0. Do you have any thought or insite to this? This may need to be a new thread.

 

[Matt]

I have a few questions on your HELOC, there ae some people that say you can use a heloc to pay off a mortgage faster by essentially using the heloc as a checking. You put 100% of the heloc on to your mortgage and then deposit your paychecks into the heloc and live off the heloc. I don't have any insite on how interest is calculated on the heloc but I can't see how this will work. Either way your getting charged interest that looks like it will pretty much net out close to 0. Do you have any thought or insite to this? This may need to be a new thread.

It means all the money in your checking account is earning the imputed rate of the HELOC rather than of checking/savings. So if you have $1000 in checking and $5000 in savings, you are saving $6000 at 3.49% APR.

 

[DRD]

Lets assume you have a heloc for $10k, and you apply the entire heloc on the morgage. So you just moved debt around. Now you take the $1000 in checking and $5000 in savings and apply it to the heloc. Your balance on the heloc is still $4k, and your paying interest (Caculated daily). I dont see how your coming out that much ahead on this.

 

[Matt]

$4K at 4% is less than ($10K @4%)-(~0%*$6K)

That's about it.

 

[Cytraveler]

Yeah - you'd be using your checking/savings money to reduce the amount of debt on a fluctuating basis. But somehow it feels risky to me, like the bank would start not liking it (you'd be always having overdrafts). I don't like messing with my bank account.

The advantage might also depend on if your mortgage rate were higher than your HELOC rate - mine are very very close (mortgage 3.5, heloc 3.49); in that case it could help to transfer more of your heloc to the mortgage. But the heloc does function as a backup, where the mortgage money is inflexible; you can't just pull money back out. I do use the unused portion of my heloc (which is most of it) in place of an emergency fund, but that's mainly because I have a very, very low chance of losing my job. You have to be disciplined to not use the heloc as a piggy bank, and using it in the way you describe would make it easy to do that if you weren't very disciplined.

 

[thpalex55]

Good read, thanks!