I know you're not asking directly for advice, but if you'd be interested, I find the following is the easiest way of keeping a budget.
0. Forget about tracking things down to the dollar, or even the tens of dollars. That level of precision is unnecessary. If a coffee here or there is going to break your budget, it's already broken and you need to go in to panic mode.
1. Have a spreadsheet with vague monthly costs like 'transport', 'food' and the like. Combine that with your monthly income, and you'll know what your approximate monthly savings should be
2. Every month, manually record your savings.
3. Over time, compare your actual savings with your expected savings
4. If there's a discrepancy of a meaningful amount (however, remember step 0) then you might need to bury in to the details a little bit more.
Given that sort-of system, you have enough manual touchpoints that the budget is in your mind when you're making discretionary purchases, but not so much that it's stressing you out.
> If a coffee here or there is going to break your budget, it's already broken and you need to go in to panic mode.
I understand exactly what you are saying here, however, there have been several times in my life where buying a coffee here or there will break my budget. I know that's a level of poverty that most people on HN have never experienced before, but it's a reality for many people.
You don't really ever want to go into panic mode. Living on a very limited budget is not the end of the world. I actually chose my lifestyle. I had this idea that there are 2 ways to be rich: make more money than I need, or need less money than I make. Sometimes the second one involves a lot less stress (which is admittedly quite difficult for a lot of people to believe).
If you are on such a limited budget, it is quite important that you know whether or not that coffee on Monday means that you aren't going to eat on Sunday. At the same time, if you do have some wiggle room, it's quite important to treat yourself occasionally.
What is important to track as your expenses has nothing to do with absolute value. It has to do with the value relative to your total budget. If nothing you buy costs more than $5, then obviously you are going to track smaller values. On the other hand, one of the huge advantages of having no money is that it doesn't take long to count it ;-)
So I would rather say that if you need to track down to the level of individual dollars for a personal budget, something like GnuCash is probably not the appropriate tool.
I think the old addage "look after the pennies and the pounds will look after themselves" really applies.
Some people don't seem to mind not really tracking their spending down to an extremely granular level (ie everything) because they make so much money that small outgoings on their bank account are worthless, or they have to dedicate their time to their family and can't be bothered to track it.
That seems odd to me because they could be paying for things they don't need, or odd subscriptions they really could live without. Small subscription services rely on you not noticing the "small" amounts, but many small items make a big item.
I think a spreadsheet to track everything is really helpful to ensure that you are only spending what you need to spend, particularly if you wish to simplify your lifestyle (work less!) and do your proposed lifestyle 2 (need less money to live).
I have mixed feelings about this and overall I still want to engage in better financial tracking. However, the obvious flip side of the coin is that if I need several hours a month to keep proper track of the budget to save a few hundred more a month it might not be worth it, as I value more what I do with that time and not worry about a budget. The problem of course is that once I start tracking in detail I may find out we're wasting much more than that :(
I'm on the same page as you. I want to make sure my wife and I are not overspending (still happens on occasion), but I also don't want to waste time on it.
So I have a simple metric: Is my money (cash + investments) increasing each week?
If it is, then once every ~6 months, I take a look at my family's spending and see if there is anything we would be happy getting rid of.
I allocate items by credit cards, eg. "meals out" on one credit card, "food" on another, "fuel" on another. That's only 3 lines on a spreadsheet showing the budget.
If at the end of the month, the spend on each card is higher than those figures I've failed.
With modern apps for card balances, seeing if you're near your budget helps.
The alternative is to get money physically out of the bank and put it into separate envelopes and spend out of the envelopes. You'll be amazed at how your spending habits change when you have to physically hand over cash.
If you are finding that looking down a list of 50 purchases at the end of the month "takes up too much time", I would wonder how much time you spend watching TV and compare the time values. One is surely more important than the other.
Takes me about 20 minutes once a month to compare my bank's monthly PDF with my own records, and update anything I missed. One reason not mentioned so far is to identify payments I don't recognize, just in case someone got access to my account or a monthly charge suddenly tripled.
So far nothing big (some things on Amazon change price by a few dollars up or down after putting in the order), but I always wince a little when I see someone not bothering at all.
Not sure if we're talking about the same thing. I do look (more than once a month probably) to cc statements for unexpected charges. I do not keep track however of how much I spent on categories such as subscriptions, clothing, groceries, take in, dining out, toys and then trying to come up with a budget for each and stick to it. That's more work than 20 min a month.
I don't think so! It's just a different point of view. For a lot of people, having to scrape by with a small amount of money is a really frightening situation. And truly if you are in debt (especially if you are in a cycle of debt), it can be absolutely crushing. So there are definitely times where you need to engage emergency measures. But a lack of money (from a Western perspective) is not in itself reason to worry, per se. There is enough money and there is not enough money. Where you draw that line is surprisingly flexible. Especially in these difficult times, it's something that I would like people to understand.
> 0. Forget about tracking things down to the dollar, or even the tens of dollars. That level of precision is unnecessary. If a coffee here or there is going to break your budget, it's already broken and you need to go in to panic mode.
Yes and no. Late last year I did track everything to the cent (well, to the grosz, the fractional part of Polish złoty) and used ledger (the CLI double-entry accounting tool) to analyze it. My main discovery there was that most of our spending was so thoroughly distributed across every category that there was no easy wins to be had. Pretty much the only things we could do that weren't serious lifestyle changes involved garbage-collecting some subscriptions and instituting monthly limits on $favourite-foodstuffs. But before doing a high-granurality trace of expenses, I was sure there were trivial cuts to be made. Turns out, they weren't.
Doing this level of tracking is probably not sustainable in the long run (unless you're in emergency mode), but doing that for couple of months is a great opportunity to reevaluate all spending in your life.
I and wife have been tracking our expenses (and income) to a penny for more than 10 years now. It's easy when you don't have a lot of cash expenses and have a habit of entering them every night you make them. Dealing with card and other electronic transactions is even easier. Convenient software also helps a lot. We use KMyMoney, but there are many good choices.
I just stop spending money unless I absolutely have to. A cup of coffee and a bit of candy at the gas station every other day (2+4 euro) * (365/2) * 10 years. Thats ELEVEN THOUSAND euro I could probably be doing something more interesting with. At 7 euro/kg and 30 gr/liter 11k is 52380 liters of coffee or 314285 cups or 86 cups/day for 10 years. 2/3 was candy (we are not buying that) so we only have 28 cups left per day. At 2 cups per day (which is 4 times as much) it still is 140 years of coffee every 10 years.
I pick 10 years because its short. If we take 50 years it is 55 000 euro. Now imagine throwing money around like that all day long.
Think about that when you get a free coffee.
I know it doesn't sound very convincing but most people manage to match their spending with their income. It really doesn't matter how much you earn. Real wealth is in not spending it.
Also, if you hoard enough cash and enough discipline it eventually stops making sense to work. More time to enjoy life! (jay!) Also, that bag of candy is probably killing me. If I'm hungry I must have planned things poorly.
What if I enjoy life by buying a fancy coffee & drinking it on my walk to work?
The downside of your formulation of "why buy coffee? you could be enjoying life instead!" is that this worldview encourages people to feel guilty about buying coffee. Extreme frugality has its place, but remember that "your life" that you have to enjoy isn't something that starts in 5 years or 10 years or once you save $x, it's what's happening right now, all the time. I might not be alive in 5 years, none of has that guarantee. So I enjoy my coffee.
It sounds like you enjoy frugality for its own sake which is fantastic, and more power to you. But I think most personal financial planners would suggest that you have a goal you're working towards rather than "hoard cash." What's the point of that? "Thats ELEVEN THOUSAND euro I could probably be doing something more interesting with" figure out what that "something more interesting" is and it might make sense to forgo your daily coffee. Hoarding cash is not a goal.
> If we take 50 years it is 55 000 euro.
Yippee! I'm 85 years old (assuming I haven't died already) and I have an extra €55k. Am I allowed to drink coffee now?
I say this in order to share constructive feedback, because I know a lot of people on HN are not great at "tone" and sometimes appreciate an explanation why their comment might accidentally offend:
This comment is very condescending and pointlessly critical. You suggest that I do not know how to enjoy coffee correctly, and am instead perhaps "confusing convenience with enjoyment." Rest assured that, I, along with basically everyone, can be trusted to know what they themselves enjoy or do not enjoy, without your advisement.
To clarify, I am using "fancy" as a shorthand for "expensive," i.e. a $5-6 coffee rather than a $2 coffee.
Yeah... well... I'm terrible at that. Recently I learn many more purchases can simultaneously be investments. The topic now makes me wonder if this 7000$ vintage espresso machine is robust enough for another 20 years of service. https://coffeemachinewarehouse.com.au/product/gaggia-vintage...
> What if I enjoy life by buying a fancy coffee & drinking it on my walk to work?
haha, are you asking for my permission here? We are different people! Thank god! Imagine if our hard worked grand-design for life turned out exactly the same. Now that would be truly terrible.
> this worldview encourages people to feel guilty about buying coffee.
I don't feel guilty when I don't, I feel stupid when I do.
> Extreme frugality has its place, but remember that "your life" that you have to enjoy isn't something that starts in 5 years or 10 years or once you save $x, it's what's happening right now, all the time.
Right, dopamine is going to happen. Don't worry about it. I resist the cravings also because I don't want to become an instinct and emotion driven creature.
> I might not be alive in 5 years, none of has that guarantee. So I enjoy my coffee.
If you skip this one the next one will taste at least twice as good. Eventually you sit there clamping onto the cup with both hands and making conversation with it.
The thing with bodies is that they always want something. There is no end to it! (haha)
> It sounds like you enjoy frugality for its own sake which is fantastic, and more power to you. But I think most personal financial planners would suggest that you have a goal you're working towards rather than "hoard cash."
Of course! They wouldn't have a job if they didn't!
> What's the point of that?
I'm not hoarding cash. There is no point in that for me!
> "Thats ELEVEN THOUSAND euro I could probably be doing something more interesting with" figure out what that "something more interesting" is and it might make sense to forgo your daily coffee.
I just want to be able to live without ever worrying about money.
> Hoarding cash is not a goal.
Money doesn't make you happy but a lack of it is just awful. Hoard enough until it stops making sense.
> > If we take 50 years it is 55 000 euro.
> Yippee! I'm 85 years old (assuming I haven't died already) and I have an extra €55k. Am I allowed to drink coffee now?
haha, thanks for that. I can live comfortably on 1000 euro so the 55 k would allow me to reduce my earnings to 500 euro for 110 months spread out over the 50 years or 11 months every 60 months. If I brutally cut 5 more corners like this I could spend most of the 50 years reading HN poke peoples mind like this (and better)
I agree with the "I will teach you to be rich" (it's a book) approach a bit more than "i can't buy a $5e coffee daily".
Their approach is more like a performance engineer. You look at the biggest costs first and reduce it down. I.e. Ask for a raise, refinance your place, find a cheaper place to rent, etc.
When you get down to the coffee you would be faced with: is it cheaper to make good quality coffee, or am I paying for the experience?
Personally I tend to view these re-occurring costs and I try to look at a way I can amortize them over a longer period of time. It's easier to justify the cost of a 200+$ espresso maker if I'm really that big of a fan and already have a defined habbit.
I love the IWTYTBR philosophy too. My favorite part is the concept of "guilt-free spending". Once you get the "big wins" down like you talked about, you can set aside 15-20% of your monthly net income to be spent any way you like. This seems intuitive at face value, but the example Rami uses with buying a $150 pair of cashmere sweatpants brings it home. It was inside his $500/month or whatever "guilt-free spending" budget, so it doesn't matter if it was a good deal or not. You just have to want it. He says his friends all commented how it was a dumb purchase and he could have gotten regular sweatpants for $20 instead, but that's missing the point.
I've taken the same approach, and this month some of my guilt-free spend went to a nice burr coffee grinder to replace my old blade one. But I'm not going to try to calculate the amortized joy per $ or long-term savings I'll get out of it, I just love brewing coffee, this makes it better, and I could afford it.
>Once you get the "big wins" down like you talked about, you can set aside 15-20% of your monthly net income to be spent any way you like.
In fact, I think no matter what your budget is like, it's important to have at least some "doesn't have to be justified" budget set aside, even if it's just $5 a month. If your monthly "doesn't have to be justified" budget is $5, and you decide to blow that $5 on an expensive coffee every month, that's perfectly OK and you shouldn't feel guilty.
I think there's a distinction to be made between "guilt-free" and "dumb/wasteful" spending. I can totally understand spending $150 on a pair of sweatpants if they "bring you joy" and are useful and will last you a decent amount of time. But just because you're willing and able to spend your money without guilt, doesn't mean any and every purchase is a good one. At the very least, spending a lot of money on a series of low quality items that you end up having to replace is a sustainability issue.
And that doesn't preclude you from getting a good deal either. That doesn't mean you should spend days shopping around for a few dollars off every purchase, but "voting with your wallet" is always worth doing.
No, I think the point is that you shouldn't make this distinction with respect to your budget. It's saying that if you take care of other wasteful spending, get your big wins, then plan for $500 of spending, then it doesn't matter if you make a dumb purchase. Don't feel guilty that you didn't get the best deal, don't feel guilty about the concept of a "good" or "bad" purchase, it just was within your budget, you wanted it and someone was selling it. You can't always do this comparison and avoiding dumb/wasteful decisions.
Yes, I am exaggerating a bit, but I think you missed the point.
I don't feel guilty at all. I feel fantastic not buying the sweatpants. I [quite specifically] don't want the joy from them. I just need clothing and I like to look sharp. A month ago I visited a second hand store. It was really well maintained, the experience was much like visiting a museum. They had a lot of second hand clothing all washed, ironed and nicely folded / on coat hangers and it was all nicely sorted by size.
I buy 8 pants for 3 euro each simply because they look fantastic on me. If it was a [new] clothing store I wouldn't buy 8 but I'd spend 100 euro on 5 of them and at most 50 for the other 3 if I ran into them there. I just didn't put myself in a [new] clothing store type of situation. I prefer to expose myself to (usually not very nice) second hand clothing at some interval. Sometimes they have something nice. Parts missing I buy new.
I see some wonderful old leather chairs too, the best one was sold regrettably. I also consider buying a really heavy suitcase massage table that I absolutely do not need but it looked really awesome, was in mint condition and was absurdly cheap. A fun day.
Clothing stores nowadays strike me as if everyone is going to a funeral. By comparison its a depressing experience but sometimes you have to. I wouldn't be able to sell those cloths at those prices, I'm paying for their ability to sell me things. (fool me)
If I have the time I do like to browse used merchandise, as well as find stuff on craigslist etc. that I know I can fix up or deal with rather than buy a new one.
Often it's cheaper given the bigger picture just to buy a new one, though. But, finding some old tech t-shirt in a thrift store is fun!
You know, I had a technical job interview a few months ago where the interviewers told me I spent too much time on the little details and ignored the big picture. I didn't get what they meant until this comment, so thank you!
> It's easier to justify the cost of a 200+$ espresso maker if I'm really that big of a fan and already have a defined habbit.
That's exactly what I did:
Started a small spreadsheet to work out how long it would take to pay off a $400 espresso maker. Turned out I would make my money back within a year.
Then there's the added bonus that I now own a decent espresso maker which has been great for making guests coffee/showing off. I also get to choose the beans and milk which means that if I wanted to, I could substantially lower the price of my self-made cup of coffee if I was ok with lower quality beans/milk (turns out that I am not ok with that, so no savings there :().
> It really doesn't matter how much you earn. Real wealth is in not spending it.
Have to add on that this is definitely not correct. Yes you must not simply inflate your spending to match your 100% of income if the latter increases, but while there's a limit to how much you can decrease outlays, income increase has no exact limit. Bob makes $60k, never buys coffee, brings lunch from home every day, stays focused on his personal finances, saves $5k/yr on lunch & coffee expenditures. Alice makes $60k, buys a $5 latte every single day, spends $12-15 per workday on lunch, focuses on job skills & networking, and negotiates a $10k raise upon switching jobs. Who comes out on top in this situation?
My point is not that budgeting or frugality isn't useful, but that focusing on changing outlays and considering income fixed or even irrelevant, as you suggest, is not a useful or accurate way to look at things.
> * it really doesn't matter how much you earn. Real wealth is in not spending it.*
didn’t remind me of extreme frugalism (in which case I would side with your argument) but with my encounters in the workplace: No matter how much most people increase their income, they also increase their spending. And some manage to par their spending increases with with their income increases.
Like many in tech, I‘ve made great income progress and during that I saw and continue to see colleagues struggling financially even though they‘re in the top income decile.
10 cent coffee (12 euro/kg 30gr/liter) + 20-50 cent sandwich (5 cent slice or 15 cent bun, a 10 cent egg and/or 25 gr cheese 25 cent, 5 cent butter) is 30-60 cent. Lets say 40.
1300/40 = 32.5 while Alice only got a 17% raise. The extra 5k doesn't buy her anything. She will just favor the 15$ lunch which is 20% more expensive(!)
Coffee was just an example of course. Bob wont be able to save this much on everything while some things will be even cheaper. There are other perks like growing your own food and making your own stuff.
But the real kicker is perhaps that Alice could [naively] spend all of her savings on a big purchase, get fired and turn her life into hell on earth. If Bob does that he can be reasonably certain he will figure it out. His big purchase is also more likely something that can be converted back into cash.
Agreed, and that whole "oh just ignore purchases less than $10" is what causes people to go into debt without realizing it.
Buying $8 daily coffees, lottery tickets, in-app purchases for crates of Candy Crush tokens, and subscribing to all kinds of useless subscription-delivery services (razors, shirts, Japanese candy, etc) adds adds up even if you're on Silicon Valley salaries.
You are pretty much buying shots of endorphins. You get those anyway. You can get more of it for a short while but then sensitivity is dialed down and you have to buy candy crush crates forever. I really enjoy turning down the offers.
I think I phrased my comment poorly. I agree that a daily coffee is probably worth considering at ~$3x5x50 = $750 a year. (actually in my case I have multiple coffees throughout the day so if I were to purchase them it'd be more like $1500 or more). What I mean is the _occasional_ coffee is not worth bothering about.
I think any recurring payment is worth recording, but where you set the level is pretty personal
While I agree that recurring costs should be accounted for, I'm trying to get a bit of balance in my approach.
To put it in perspective, it's not out of the realm of possibility that I could switch jobs and make $11k extra this year. It's also not out of the realm of possibility that I have an injury that puts me out of work for the next 2 years. (Or, hypothetically, a global pandemic that reduces or increases my hours)
I deal with that level of uncertainty by only tracking the broad strokes.
> 0. Forget about tracking things down to the dollar, or even the tens of dollars. That level of precision is unnecessary. If a coffee here or there is going to break your budget, it's already broken and you need to go in to panic mode.
I'd suggest considering using a separate payment method for those things, and only those things, that you just think are going to be just a little expense here or there that doesn't need detailed tracking.
Track the total spent via that payment method every month on your budget. It's then easy to tell at a glance if you were right about not needing to track these things in detail or if you have missed some things that you should be tracking in detail.
My bank has this feature where the same card has two PIN codes. The PINs are coupled to different bank-accounts, the PIN determining which account will be charged.
So groceries I pay with 111222, coffee-to-go with 333111...
My bank does the rest. All easily analysable and exportable.
Have you actually seen disabled PIN pads? I have seen places refusing cash (which I believe is illegal), but the PIN pads are easily wiped down between uses.
Yes, in Poland I have seen a few shops where the clerk and the PIN pad are behind a sealed glass barrier and there is no way to hand the PIN pad over to the customer. The clerk holds the card reader up to one side of the glass, you hold your card up to the other side, and the contactless transaction manages to reach across the glass.
Also, refusing cash is perfectly legal -- and increasingly common -- in a number of countries.
> 0. Forget about tracking things down to the dollar, or even the tens of dollars. That level of precision is unnecessary. If a coffee here or there is going to break your budget, it's already broken and you need to go in to panic mode.
I use Homebank[1] which has pretty useful auto-assignment rules. I then have vague categories - think groceries, lunch & dining (e.g. buying lunch is more luxurious than buying lunch and dining is even more extravagant)
Every couple of weeks I import my statements and have a quick look at anything that wasn't auto-assigned - there's usually a couple of things and I add these, based on the merchant name or description, never to worry about again.
I figure this gives me the best of both worlds.
The only reason this small amount of work works for me is that I don't have to pay cash for much. When I do, it's unique enough I remember and categorise it, no biggy. I understand this wouldn't work for most though.
I wouldn't want to lose track of the small things, as they do add up! Keeping the categories loose (and not caring about the difference between coffee and a sandwich) makes it work.
"Look after the pennies and the pounds will look after themselves." as my grandma always says.
When all the financial aggregators (Wealthfront, Personal Capital, Yodlee) fail me and I need to get a clear understanding of my finances, I always regress to something like this.
My way is as follows. Have three accounts: current, savings and retirement. The first two are cash, the third is something more long term. First work out the percentage of your income that you need to go into your retirement fund to maintain your current lifestyle when you retire. I plan to retire at 50. Your salary will get paid into your current account periodically. When it does, you check how much was still in your current account from last month and (hopefully) move the correct amount to your retirement fund. Whatever is left after that goes into your savings account. You can spend your savings on things you don't need like car, holiday etc. But never spend it all as you don't want to liquidate your retirement in an emergency. You'll know you always have enough in your current account for your essentials (bills, groceries). You never have to worry.
0. and 1. is exactly why I built myself a 'this-should-be-aspreadsheet' webapp to estimate my expenses to have a rough budget. I only update it once in a while and check if it's somewhat accurate. I'm quite happy with that approach.
> 0. Forget about tracking things down to the dollar, or even the tens of dollars. That level of precision is unnecessary. If a coffee here or there is going to break your budget, it's already broken and you need to go in to panic mode
I strongly disagree. Entering every penny, and tagging every transaction correctly, lets you see where your money is going very quickly. A coffee won't break my budget but now I can see that I'm spending $x/month at my local cafe, etc.
Also, for most of the vast middle-class and below, an inability to track your spending down to the dollar is itself a sign that your budget is broken. Most of us don't have so many transactions coming in and out that this should be difficult and it's a possible sign of dysfunction if you do.
some years back I started working on an app to track finances in that kind of way. No micro-management, just macro-management of budgets and categories. It would also forecast considering past data and future predictions and see where you would attain goals or go broke! :)
I like the idea, but I would be wary of it for this reason: the people who would like to use it are probably the most miserly members of /r/personalfinance. The kind who are likely to quibble about the $8/mo plan compared to the $9.50/mo plan. Basically the worst customers you can imagine.
>0. Forget about tracking things down to the dollar, or even the tens of dollars. That level of precision is unnecessary. If a coffee here or there is going to break your budget, it's already broken and you need to go in to panic mode.
A coffee is $5 give or take.
If I have one every day that's $1,825 a year. If I splurge and have two every other day that's $2,737. That's a lot of money.
The simplest way to budget is to just give yourself a set amount of cash every morning and keep spending it until you run out. You get immediate feedback because you can see how many banknotes you have left.
Funnily enough I think that's the main reason why there's a war on cash.
Yes a coffee every day is worth tracking, my emphasis was more on 'here or there'. I would say any ongoing payment is probably worth tracking unless it's truly trivial
0. Forget about tracking things down to the dollar, or even the tens of dollars. That level of precision is unnecessary. If a coffee here or there is going to break your budget, it's already broken and you need to go in to panic mode.
1. Have a spreadsheet with vague monthly costs like 'transport', 'food' and the like. Combine that with your monthly income, and you'll know what your approximate monthly savings should be
2. Every month, manually record your savings.
3. Over time, compare your actual savings with your expected savings
4. If there's a discrepancy of a meaningful amount (however, remember step 0) then you might need to bury in to the details a little bit more.
Given that sort-of system, you have enough manual touchpoints that the budget is in your mind when you're making discretionary purchases, but not so much that it's stressing you out.
I've made a sheet that does basically the above with example budgeting for what I'm familiar with in Sydney - https://docs.google.com/spreadsheets/d/1KW3i-m8BtJ2O9lKurhJr...