How to keep budgeting simple?

[rnorwo1]

A couple of years ago, we bought YNAB, I posted and got very good responses regarding ALL of the budgeting categories possible, and I loved that I had every possible current and future expense accounted for. That lasted about 6 months. Since then, I've re-started a few times, but I rarely get through one month of continuing it. I'm trying to be more realistic this go-round. I need to know where our money is going (we only have a small mortgage and we have savings, but we should be able to save more than we are), but I can't find a happy medium between tracking enough and tracking everything.

Just wondering what the non-OCD budgeters do that is effective, but also easy. Thanks for any ideas!

 

[ellochka]

I don't know if our budgeting method is simple, but once you set it up it is rather easy to maintain and manage. It relies on using multiple accounts for different categories of expenses. This will take time to figure out and set up - and update when needed - but once you get a hang of it, the ongoing maintenance is minimal.

The categories are the following:
1. Bills. Mortgage, daycare, electric, insurance, etc. Recurring, predictable, non-discretionary. We have a separate checking account where these bills are paid from. I get eBills there, too, so it's super-easy.
2. Short term savings. This is for medical, car, and house expenses. Something that needs a paying a few times a year, unpredictable in nature, and is high amount. This is the type of expense that often gets overlooked in the budgeting process. For us, it is a checking account with a monthly deposit.
3. Specialized savings. We currently have just one for vacation savings (used to be another one for property taxes). It's an internet savings account. Vacations are usually booked on the credit card, then it's paid from this account.
4. True discretionary, like clothing, decor, entertainment. We used to budget for them and put the allowance into a different account. At one point, it got too fussy to manage, so we closed the account, and now pay from "regular" account. However, our budget is not very tight. If your budget is tight, this is the category to watch, and I would encourage you to have it separated.
5. Long term savings, retirement, and 529k. These are set up to withdraw money automatically after paycheck from our regular account.
6. Regular account. Groceries, gas, everyday purchases. We deposit the paychecks into this account and then make scheduled transfers out for all of the categories listed above. Another way to set it up is to deposit your paycheck into a savings account, and then transfer budgeted "everyday" amount into your regular account.

To figure it out, you need to calculate your expenses by category (I recommend Excel - have your expenses calculated as annual, bi-weekly, and monthly), choose your "hub" account where the money is deposited first (I recommend an internet savings account), choose your "satellites" where you spend your money from, and set up automatic transfers. You will also need to fund the accounts for the first two weeks because it takes time for the money to start flowing. At the end, you should have four cards in your possession - regular expenses, discretionary expenses, medical and "fixing", and a credit card to pay for vacations.

P.S. Many checking accounts nowadays require direct deposits to be free. The ACH transactions you make from one account to another will generally count as deposits for above-mentioned purposes.

 

[aliceindisneyland]

Simple would be the envelope system but since it's archaic to pay bills with cash (assuming you can even do that except for maybe utilities anymore!)why not just try ynab again?
Some people categorize every grocery purchase (type of meat, black vs red grapes, etc.) So they also have a built in price list. Some people lump all spending into "grocery". You can do what works for you, but any DIY will be as much if not more trouble than using ynab.

 

[aliceindisneyland]

sorry- double posted

 

[rnorwo1]

Thanks. I stopped all of the different accounts I used to use b/c YNAB can do the same thing virtually. I used to love using cash envelopes, but I often forgot to bring the envelopes to the store, sometimes I would lose an envelope... Great fun finding a filled envelope years later! I can be quite scatter brained YNAB is like a virtual envelope system, but I just can't seem to keep up with it. I don't find YNAB difficult, I just tend to be an all or nothing person. I was just wondering if there was a way to cover all expenses but with much fewer categories or something.

Maybe I should go back to the different accounts and have transfers for things like vacation, and then just one general category for monthly spending for groceries, clothes, hair cuts, etc. or maybe I just need to work on my discipline

 

[mello]

I recently started YNAB for the first time, and so far I like it. We've been using a system much like ellochka described, and it's effective, for the categories we had thought of having accounts for (we hadn't thought of everything, like once-a-year expenses, or "rainy day" funds, and that got us into some pickles; hence the reason I went looking for another method). I think YNAB will ultimately be simpler for us than our current system for 3 reasons -

1. We can use the mobile app to record things as we spend.
2. The software will take the place of both my bill spreadsheet and my checkbook combined, so one thing to keep track of, instead of two.
3. I can set everything on autopay once I get my buffer, so I won't have to be constantly watching due-dates vs. pay-dates.

However, it remains to be seen how long we'll be able to stick with it, too...

So far so good, though. I tried not to do too many categories, so as not to get too bogged down in details. I think the less subcategories, the easier it will be to record stuff over the long-term. For more simplicity, I did not include things that come out of our checks automatically, like health insurance, 401K, taxes, etc, and I do not track externals savings accounts, investments, interest or any of that stuff. My categories are like this (fwiw):

Giving:
no sub category here

Savings Accounts:
These are accounts we already had set up on our previous method to save for specific things: ie; Christmas Club, DVC Dues, Vacation, etc. These sub-categories may change, depending upon what we're saving up for.

Rainy Day Funds:
Electronics Maintenance & Repair, Auto Maintenance & Repair, Medical Expenses (not incl. insurance), and Buffer. I tried to keep these pretty broad and inclusive.

Debt Reduction:
Student Loan & a Visa card we're paying off (I didn't bother with the whole "Pre-YNAB Debt" thing - I felt like that complicated things unnecessarily, so I just list this CC as a payment, off budget, and don't use it to charge anything)

Yearly Expenses:
For 1 time a year fees. No subcategories here either, but include stuff like Owner's Locker, Auto Registration, etc.

Monthly Fixed:
Regular Monthly bills that are always the same: mortgage, etc.

Monthly Variable:
Things like food, clothing, etc. that may change from month to month

Enjoying Life:
Eating Out, Starbucks, Events, Activities & Entertainment - all lumped together, again to make it less complicated. I did include one separate category for His/Hers Fun Money - so DH and I each get a small, equal amount that does not have to be accounted for in any way.

And that's it. We'll see how it goes...
Good luck to you! Maybe we ought to encourage each other here, periodically!

 

[ellochka]

We did lump together discretionary and regular for the same reason. It's just hard to decide which bottle of shampoo is discretionary, and which one is basic. To be honest, it's just two categories for me now - regular and medical/repairs. The rest are not used on a daily basis, and all bills are semi-automatic. We have done it for over 8 years now, and we no longer budget, per se (having our income grown had an impact on it, though). The main point is to recognize that some expenses are irregular but needed (car broke down, need a new a/c, got appendicitis), and some are irregular but are luxuries, like vacations. So we have a budget for both, especially if we want to make sure we ever go on vacation, and not on credit.

I am not a big fan of cash. I'd rather have 10 checking accounts

 

[dawnball]

What is it about YNAB that's hard for you? This isn't a snarky question - my husband and I had very different pain-points with our household accounting and those were the parts we focused on making easier.

Our categories ended up pretty loose, and based on the stores we shopped at, instead of what we bought. "Our Costco spending seems to be creeping up" or "There's been a lot of clothes shopping - are we done with that expense for awhile?"

 

[lovemygoofy]

Thanks. I stopped all of the different accounts I used to use b/c YNAB can do the same thing virtually. I used to love using cash envelopes, but I often forgot to bring the envelopes to the store, sometimes I would lose an envelope... Great fun finding a filled envelope years later! I can be quite scatter brained YNAB is like a virtual envelope system, but I just can't seem to keep up with it. I don't find YNAB difficult, I just tend to be an all or nothing person. I was just wondering if there was a way to cover all expenses but with much fewer categories or something.

Maybe I should go back to the different accounts and have transfers for things like vacation, and then just one general category for monthly spending for groceries, clothes, hair cuts, etc. or maybe I just need to work on my discipline

Are you trying to do all this budget because you want to save more? Are you trying to decide where the money is going?

I think obviously having all the categories and the break downs isn't working for you and nothing wrong with that. You need someway to track even if it's just putting everything on one credit/debit card and then breaking down from there. I put everything on my credit card and pay it off every week instead of letting it build every month. My credit card actually breaks down the categories for me which is nice.

If you are wanting to save more, set up an automatic deposit once or twice a month depending on how often you get paid. You won't miss it if it is already taken out of your check and it will help you start living on a smaller budget.

We have just a few budget break downs: savings 1, savings 2, retirement, and everything else. I always have a good idea how much we are spending in groceries and eating out because it basically stays the same. Most people have a good idea how much their utilities and cable and things like car payments and mortgage.

Even my spending was out of control then I would track every penny and break it down but if you have a decent grasp on spending but just want to save more, have it done automatically for yourself.

 

[rnorwo1]

I honestly don't know why it's so difficult. We are naturally, frugal people. In fact, I tend to go over board and refuse to spend money that we have to spend. But, then we will swing to the other extreme and just spend whatever. We do the same thing with spending a bunch in one category, then it will switch to a different category. and then one day I will eye ball our bank account and can't believe that we've spent X amount on something. I know we have to track things to keep it straight, otherwise the spending just slips away from us.

So why don't I do so consistently? I think it's a combination of just pure lack of discipline and organization, along with not wanting to face the music. Vacationing, for example, is an obsession of mine. If I took the time to save for them monthly like I should, then I will have to admit that we shouldn't take as many as we do. So, I just book them and pay them out of our savings, which is supposed to go to other things and is now at the lowest it has been for years. If this doesn't stop soon, we will have none left. I can see us heading in the direction of starting to accumulate debt if, for example, we don't start saving for a new vehicle soon.

I guess I was just hoping to find a new technique that would solve this, but sounds like it's just that I have to change my laziness about doing it. Thanks for the advice, I do think adding a few new accounts along with simplifying the YNAB categories will help considerably, and I'll keep working on my denial!

 

[cpparrothead]

I tracked everything we spent for 6 months and then started losing interest. The 6 months of data was enough for me to see that food was our biggest area to concentrate on. I didn't have the discipline to track every category, and my partner didn't have enough interest to help out with it.

Now we only track how much we spend eating out (under $200 per month) and stick to a grocery list after making a weekly menu. I can handle tracking one thing that I know has the biggest impact, and my partner is on board now that there is only 1 category to focus on.

 

[lovemygoofy]

I honestly don't know why it's so difficult. We are naturally, frugal people. In fact, I tend to go over board and refuse to spend money that we have to spend. But, then we will swing to the other extreme and just spend whatever. We do the same thing with spending a bunch in one category, then it will switch to a different category. and then one day I will eye ball our bank account and can't believe that we've spent X amount on something. I know we have to track things to keep it straight, otherwise the spending just slips away from us.

So why don't I do so consistently? I think it's a combination of just pure lack of discipline and organization, along with not wanting to face the music. Vacationing, for example, is an obsession of mine. If I took the time to save for them monthly like I should, then I will have to admit that we shouldn't take as many as we do. So, I just book them and pay them out of our savings, which is supposed to go to other things and is now at the lowest it has been for years. If this doesn't stop soon, we will have none left. I can see us heading in the direction of starting to accumulate debt if, for example, we don't start saving for a new vehicle soon.

I guess I was just hoping to find a new technique that would solve this, but sounds like it's just that I have to change my laziness about doing it. Thanks for the advice, I do think adding a few new accounts along with simplifying the YNAB categories will help considerably, and I'll keep working on my denial!

So I don't think you have a budgeting problem. You have a spending/saving problem. Have you tried going to a zero bottom line budget? Break down say 4 categories of spending and when you get to zero for that month/week/day STOP SPENDING. If you have money leftover in a category, roll it into savings account even if it is just 20 bucks. To do this kind of spending you need to be realistic about how much you spend and how much you really should be spending.
Pay your savings accounts first before you spend. Create a savings account that has limited accessibility. We have a savings account that only has one card accessible to it. We transfer money into it every month but we have to make conscious decision and effort to withdraw from it.

When you are spending, are you shopping because you're bored? Are ya'll out just buying because you can? If you are out vacationing more than you really think you should be, then you know you need to reduce the amounts. It really is discipline and getting into a spending habit.

 

[barkley]

Thanks. I stopped all of the different accounts I used to use b/c YNAB can do the same thing virtually. I used to love using cash envelopes, but I often forgot to bring the envelopes to the store, sometimes I would lose an envelope... Great fun finding a filled envelope years later! I can be quite scatter brained YNAB is like a virtual envelope system, but I just can't seem to keep up with it. I don't find YNAB difficult, I just tend to be an all or nothing person. I was just wondering if there was a way to cover all expenses but with much fewer categories or something.

Maybe I should go back to the different accounts and have transfers for things like vacation, and then just one general category for monthly spending for groceries, clothes, hair cuts, etc. or maybe I just need to work on my discipline

dh may disagree-but I use different accounts w/auto transfers set up and it makes budgeting fairly easy for me. here's my set up if you want to give it a try.

I have 5 accounts at my credit union (they have a great on-line banking system that lets me look at all at once as well as each individualy). all of our income is direct deposited so my budget works strictly with 'net income'. here's how it works:

I know my fixed monthly expenses-life insurance, cell, directv, garbage, phone, and electric (I do the balanced payment plan so at worst at the end of the year I may owe a bit-but usually I have overpaid a bit so I end up with the same or reduced monthly payment for the following year). these I add to my "household expenses" (gas, food, paper goods, toiletries, entertainment...basically what I know we tend to spend and CAN AFFORD to spend each month).

5 accounts-

#1-"holding account/emergency fund"-all income direct deposited into, all budgeted income set up with auto transfers out of. mortgage payment used to* auto pay from this as well. I keep it at a fixed minimum balance that's there for unexpected larger expenses that my household budget won't cover.

#2-checking account (set amount transfers in from #1 each month)-any automatic payments like life insurance and Netflix are set up to pull from this account. I give dh cash every couple of weeks to cover small items of need (a fixed amount but that way he doesn't have to track the spending and I don't have to try and figure out debit purchases he might space on telling me about). I take enough cash for a couple of weeks and put it in my wallet-I'm not dogged about tracking what went to food vs. groceries vs. a meal out....so long as monthly we're on budget we're good.

#3-reserve account (set amount transfers from #1 each month)-these are expenses that occur less often than monthly (auto/homeowners insurance-twice per year/once per year, propane-twice per year, pest/yard service-quarterly, Sirius radio-once per year, generator inspection-once per year). I divided the total of all of these for a 1 year period, divided by 12 and that's the amount that goes into it monthly. when one of the expenses comes up I transfer that amount to checking to pay it.

#4-christmas/gifts-take the amount I'm comfortable with spending for the entire year, divide by 12 and the result is auto transferred from #1. when a bday or other gifting event occurs I transfer the amount I need to checking.

#5-savings-set amount each month based on established budget, and it gets auto transferred from #1 as well.


everything gets looked to at least quarterly (if not monthly) b/c some expenses go up so there may need to be adjustments. on the other hand some go down, and herein is what * above refers to- we got into a habit several years ago that really paid off for us. when we refinanced our home the payment went down, and since we were already used to that higher payment we went ahead and set it up so the difference in payment amounts auto transferred to the principal balance of the mortgage payment (to further reduce it). as we would get small raises (maybe $50 a month), we increased that auto transfer accordingly. if an expense increased in one area (health insurance) we would look to see if it had decreased somewhere else to offset it before we reduced what we threw at principal, and often we found we could cover it. though we don't get huge tax refunds we threw those at the mortgage as well. throwing that extra $$$ at the mortgage made a HUGE difference (and didn't decrease short term or long term saving goals). we ended up paying off our mortgage MANY years early (15 year mortgage paid off in 7).

I know many who figure out every line item-food, paper goods, cleaning supplies, toiletries, tolls, gas, eating out, movies, kid's allowances-for me I was stressing too much over it. coming up with a general fixed amount monthly makes us (I think) more conscious of what we are spending b/c if we are contemplating doing a pizza run and I look at what's available for the whole household budget that needs to last another 2 weeks I'm much less likely to overspend (when I tried envelopes it was too easy to say 'oh, we've got $30 left in eating out money, it won't hurt if I just take another $10 from the grocery envelope to cover it).

 

[barkley]

I honestly don't know why it's so difficult. We are naturally, frugal people. In fact, I tend to go over board and refuse to spend money that we have to spend. But, then we will swing to the other extreme and just spend whatever. We do the same thing with spending a bunch in one category, then it will switch to a different category. and then one day I will eye ball our bank account and can't believe that we've spent X amount on something. I know we have to track things to keep it straight, otherwise the spending just slips away from us.

So why don't I do so consistently? I think it's a combination of just pure lack of discipline and organization, along with not wanting to face the music. Vacationing, for example, is an obsession of mine. If I took the time to save for them monthly like I should, then I will have to admit that we shouldn't take as many as we do. So, I just book them and pay them out of our savings, which is supposed to go to other things and is now at the lowest it has been for years. If this doesn't stop soon, we will have none left. I can see us heading in the direction of starting to accumulate debt if, for example, we don't start saving for a new vehicle soon.

I guess I was just hoping to find a new technique that would solve this, but sounds like it's just that I have to change my laziness about doing it. Thanks for the advice, I do think adding a few new accounts along with simplifying the YNAB categories will help considerably, and I'll keep working on my denial!

vacations can be a huge budget buster-and to be honest we haven't done a 'big' one (anything more than a couple of nights somewhat local to us) more than 3x in the past 7 years. I know-seems like torture-but it does make us appreciate them all the more when we take them.

one thing that's helped us offset the cost is kind of a spin on the good old 'change jar'. we bought one of those big plastic water bottles (like you see on office coolers) as a family gift one Christmas. dh and I got $100 in $1 bills and stuffed it before we put it in the gift bag. when the kids opened it we explained it was our 'big vacation jug'-and while we budget a little bit of money for these, the faster the jug filled-the sooner/more frequently we could go. for some things like easter, in addition to their easter basket the kids would get a note saying '$10 has been donated in your honor to the jug', same deal for birthdays. we toss in any rebate money we get (including the decent sized amount from our Costco American express each year), and if I manage to be under budget on the household expenses in a given month-that gets tossed in as well. it's gotten to the point that if the kids (or us) want to do something entertainment/dining out wise that we know in a given month we can afford-we may ask ourselves 'do we want to spend x to do this-or take half of that and do y so we can put the other half in the jug?'-it's surprising how often the kids tell us to 'just put it all in the jug'

I LOVE VACATIONS-but our financial situation changed drastically downward about 10 years ago so we had to change our habits. even when our finances were better i'll admit to overspending on vacations-and regretting it after the fact. I much prefer taking them less frequently, knowing we can fully afford them so that when I get back I can look forward to the next one (vs. grumbling to myself over what I need to cut back on for the next several months to reimburse our savings)>

 

[fairy8i8]

I believe YNAB makes you enter everything in? At least that's what a friend told me. Yes it's nice, but I didn't really want to take the time to write everything down and then split amounts when I went to big box stores like Walmart and bought several things in different categories.

I use Mint.com. It's not perfect, but the fact that I can set up a budget and things automatically get posted is really nice for me. Most of our bills are on auto payment with our bank, so having Mint just match them is really nice. Even if I don't look at it (like the past 2 months), things still post, and I can go back and check things to see where my spending has been. I like that it accounts for both the bank account and our credit card. We have a miles card, so we do most of our daily spending on it to rack up miles. This saves us over $1000 in flights each year and paid for flights to Disney this year. It helps me make sure that my spending on the credit card is within budget and that I have enough cash to pay the balance off every month, which is important to me.

My other suggestion is that you simplify your budget and lump some categories together. For Mint, I can separate all of the regular bills, which I do. However, I have changed from having separate categories like Food, Office Supplies, Baby needs (diapers, etc.), Toiletries, and Cleaning Supplies to lumping those all together because I tend to buy them all at the same store and realistically, I am not going to go through my receipts and separate them out. Now my Food budget is larger, but is also incorporates the those other things.

The other nice thing is that sometimes you have a one time expense, and you can set up a budget account just for that.

Anything Mint doesn't know how to attribute, it sticks into an "everything else" section. This is the most valuable part to me because I can see where my spending is that doesn't fit into my current budget, or I have to mentally assign something to a budget. We have a "Family Fun Day" budget, "Personal Money" budget, and "Date Night" budget, so for things like eating out, I assign it to the relevant budget, or see that I am not cooking at home as much as I should, and could save money there. It just takes about 2 clicks to assign a budget, so this is easier for me than typing in the details. The details are already there.

Some people like the accountability of YNAB where you are typing everything in. If you are in the habit of staying up with it, that's great. However, it sounds like you are more like me, and so Mint might be a better option because it's fast and keeps going even when you forget it for a bit.

 

[ellochka]

Yes, you should save for vacations and have a separate account. We deposit $300 every two weeks into ours. Once I book the trip (usually months in advance), I pay off the credit card from this account. If I feel like we are running short on the vacation fund, we just spend a little less in the regular account, and transfer the extras to the vacation fund. Also, we are allowed to use our regular account for cash and small expenses while on vacation (naturally, we don't use the regular account much while away, so there are some savings). For example, I will be draining our vacation fund dry when the bill for November trip to Cancun is due at the end of this month. We are going to Russia in July, and because our daycare bill will be much lower in July, we are allowed to spend the overage while there.

If I were to pull money out of regular saving for vacation, I will have to set up a "catch up" transfer, and not vacation until there is enough money saved. The bottom line, however, is to know how much you want to spend, and fund your account fully.

 

[rnorwo1]

Our credit union is not compatible with Mint, unfortunately... I did look at it before buying YNAB, it does look great. I really appreciate all of the advice. I think I will give YNAB another go, but I won't have all of the bills in it, just a few of the categories that y'all mentioned, like the groceries (we hardly ever eat out, buy clothes, etc). I think if I go back to some extra accounts for the different savings, that will help tremendously. I'll also stop trying to split those dang receipts up, bc things like that were so frustrating. Maybe I'll just have a walmart category, for ex.
I'll also try to work on my organization and discipline bc that's most of the problem! Thanks again!

 

[lovemygoofy]

Our credit union is not compatible with Mint, unfortunately... I did look at it before buying YNAB, it does look great. I really appreciate all of the advice. I think I will give YNAB another go, but I won't have all of the bills in it, just a few of the categories that y'all mentioned, like the groceries (we hardly ever eat out, buy clothes, etc). I think if I go back to some extra accounts for the different savings, that will help tremendously. I'll also stop trying to split those dang receipts up, bc things like that were so frustrating. Maybe I'll just have a walmart category, for ex.
I'll also try to work on my organization and discipline bc that's most of the problem! Thanks again!

Are you keeping the receipts because you are paying by cash? Could you take an hour every Sunday or so and reconcile from your bank account/credit card statement and enter that way.

Example:

Gas-$85
Walmart-$225
Utilities--$600

If you are just coping from one screen to another without keeping up with paper, that could help you keep track unless you need to just spend in cash.

 

[rnorwo1]

Are you keeping the receipts because you are paying by cash? Could you take an hour every Sunday or so and reconcile from your bank account/credit card statement and enter that way.

Example:

Gas-$85
Walmart-$225
Utilities--$600

If you are just coping from one screen to another without keeping up with paper, that could help you keep track unless you need to just spend in cash.

No, I use my cc for most things, so I usually have both the bank and cc screens up. And many months I've used more than one cc, bc I get better rewards on certain categories. That's a perfect ex of what gets me frustrated and I lose my interest/motivation to do it

 

[mello]

here's my set up if you want to give it a try.

Barkley, your system looks very well thought out and useful. Our old system was similar (one direct deposit account that fed into others), but we did not think through our categories as well originally. Nicely done on paying off your house in 7 years too!