How do you budget? (A just for fun post)

DannyB

When I first started using QS I had to make some changes in how I thought about budgeting. What helped trigger even the idea of needing to rethink my money dance as I worked thought setting things up in QS. (I have noted in this forum, I wasn't the only one affected by the QS process.)

Since my initial engagement with QS I have considered several different money dance styles, so to speak, and have played around with a couple of them in relation to how QS plays the music.

1. The first dance style is Topical budgeting. This is not what I called it, I just called it "budgeting" and "assumed" it was just how budgeting was done - but this is how one of my go to personal finance gurus describes this method. Anecdotally, I would guess this is the most common method used based on the preponderance of comments and questions raised in this forum about QS and budgeting by new and even longer-term users.
   1. Topical budgeting organizes expenses according to specific topics. I.e. Housing, Transportation, Insurance, Food, Recreation, etc. Each of the Topics (Categories) will then have any number of sub-categories of expenses that the budgeter wants to keep track of. I.e. Housing: Rent/Mortgage; Housing: Utilities; Housing: Maintenance; etc.
   2. For some certain sub-categories may be broken down even further, i.e., Housing: Utilities: [individual utility service]. (Of course, QS only allows one level of sub-category so someone using sub-categories deeper than one level would need to raise any third or fourth level categories to the first sub-category level.)
   3. Indeed, this is how my Settings: Categories & Tags: Categories are structured. I have 9 top categories with most of these having several sub-categories.
   4. The two "advantages" of this method are:
      1. Good for more extensive granularity and data mining.
      2. Somewhat intuitive.
2. The second dance style is Time Horizon budgeting. I've never used this method and only just recently became aware of it but wish I had heard of it way back when I first tried to take get a handle on my chaotic stumbling around and change it into a refined or even just a predictable, controllable dance. This method is easy enough - you break down your expenses by… wait for it… time horizon:
   1. Daily expenses
   2. Weekly expenses
   3. Monthly expenses
   4. Annual (and semi-annual) expense
   5. Long term or irregular expenses
3. The third dance style is Fixed & Flexible budgeting. I learned about this money dance style about year or so ago and in my mind, I saw this style to be very fitting for how my beloved QS Spending Plan basically works. This method breaks your expenses into two major groups - you guessed it - Fixed expenses and Flexible expenses.
   1. Fixed expenses are what we currently find in the Bills, Subscriptions, Transfers and Savings sections under Income after bills and savings.
   2. Flexible expenses are those variable expenses we now included in Planned Spending.
   3. Other Spending creates space for stuff to land so it's not lost in the overall dance.

Super Big Disclaimer: That none of this is original with me goes without saying but I'll say it anyway (I have never claimed to be an original thinker as much as I would like to be) and my source is a gal named Hannah and I won't be surprised that some of you have seen her YouTube videos.

So, how do you budget - what is your money dance style?

How does Quicken Simplifi help improve your money dance flow?

UrsulaA

I do a combination of 1 and 3 - sort spending by categories for reports and track fixed (nonnegotiable like rent and insurance) and variable (sometimes under subscriptions or planned spending). QS works for both as I do look at reports by categories over time to see where do I have more leeway or where do I need to cut back. The spending plan is great for monthly spending, watchlists are good for 12 month trends and averages.

RobWilk

My main budgeting strategy is not category-specific, but my goal would be to spend less than my income. Or at least not go too far over. I don't like category-specific budgets, because I feel like I "have to" spend so much in certain categories when I do that. My spending is also not "that" robotic (same thing every month).

My ideal monthly budget would be to set aside $500-1000 for savings each month, and still spend less (factoring in savings) the income (that is, spend $500-1000 less than income). I can do this some months, but it takes discipline.

The spending plan helps.

-Rob

Flopbot

Thanks @DannyB for sharing this post. Interesting information. Since Quicken Desktop, I've always used #1 (Topical Budgeting) mixed with hopes, prayers, and dead reconning. As a tool, Quicken Simplifi has certainly improved my tracking when it comes to budgeting, but I fear that my topical budgeting just isn't topical enough. There have always been a lot of 'topics' that simply don't get covered…and I don't know how to cover. I wonder if this is one of the downsides to #1…that realistically, it's challenging to make enough money to cover all the good things that need covered.

SRC54

I start with income, then recurring bills, add one time bills as they occur. I then have categories for Food & Spending, Automobiles, Extras, Recreation and Home. I keep these budgets about the same each month but will tweak them as the month goes on. I like to end up with money left over.

As long as my bottom line is a savings of $3K or so, I am happy.

DannyB

@UrsulaA I use a hybrid of #1 and #3 too. I tried going with a "strict" #3 last year, but it was unwieldy and ended up returning to my current category structure for classification purposes but love the "fixed and flexible" set up of the Spending Plan for planning purposes. I am now looking at the number of bank accounts I am using and considering consolidating to one checking account period. The reason for this is that all my spending is "regulated" by my Spending Plan and not by my bank accounts. It doesn't really matter at all where my actual funds are held, only the planned usage is what matters and that can/should be controlled by my Plan and not by my account(s) balance(s), but perhaps that is a different conversation.

@RobWilk From time to time and more seriously lately I've thought about ditching all sub-categories and going with a few top-level categories only. Actually, I could get away with basically two spending categories: Housing Expenses and Everything Else with the same goal as you - have less outflow than inflow each month. The only expenses I need to keep track are housing since these are the only expenses that impact my federal and state tax returns. I don't have enough deductible expenses to make itemizing useful anymore so no real need to track even charitable giving, medical expenses or any other deductible expenses allowed.

@Flopbot I love the "…mixed with hopes, prayers and dead reconning." Those were mainstays of my budgeting process for a number of years. One thing that seems to get left out in many conversations about, let's call it stewardship, whether its stewardship of time, talents or treasure, as my faith tribe described it, is the reality of the stages or seasons of life. How I steward these things very much differs during different seasons. It's important to remember that… well, maybe I should say it's important to hear that since you can't do any remembering until you've been through something in the first place so as to have a memory to remember.

Wedo778

I've been a longtime Topical budgeter. But ever since having to move to Simplifi I've been rethinking how I approach budgeting and am taking up more and more elements of Fixed & Flexible to mix in. I still have all my little buckets but I roll them up into a few top level categories that are each either fixed or flexible spending and allocate average monthly allotments there instead of at the granular level.

UrsulaA

I used to track budget versus actual with more granularity in Mint, now I plan spending for a few large buckets instead of many subcategories.

DannyB

https://community.simplifimoney.com/discussion/comment/39956#Comment_39956

When I set up Simplifi coming from Quicken Classic, I did the same reducing my granularity. I'm now in the process of eliminating all child categories and going with just my parent categories.