How do you guys manage your finances?
1) Do not actively keep track of finances but only spend when necessary - no fixed savings but controlled expenses
2) Do not actively keep track of finances and spend as you wish - no fixed savings
3) Keep track of finances and creates "budget envelopes" for different classes of spending i.e. bills, meals, entertainment, etc. - consistently set aside fixed savings
4) Keep track of finances by using daily limit i.e. spending for that day do not exceed income for that day or ensure that overbudget is managed over restriction over few days. - quite similar to (1) but has more visibility on expenses
There are definitely more but just curious to know how you guys manage yours.
I was (4) when I first started working, and is now (1) as I am making enough to cover my basic expenses and some at least weekly pamperings (restaurant meals but not electronic gadgets) so I don't really watch my spending anymore.
Not so rational but I don't miss out so much in life now.
For me, its a mixture of (4) and (1).
I do keep track of every cents I paid (down to the 10 cent I pay to use the public toilet!). For that I used mobile excel to keep track of my expenses and make sure I can account for the things I spend out of pocket and the monies I withdraw from the ATM.
I do not really controlled my spending very much cos I'm not much of a spendthrift to begin with. So controlling my expenses and saving has never been a real problem for me.
I think before deciding on an approach, you really must understand yourself well. If you are the type that is an impulsive and compulsive spender, then you would really need to have a system to budget and discipline yourself.
If you dun have issues with managing your finance, then maybe you dun need to have such an elaborate budgeting system. There's probable no 'one-size-fits-all' approach. Its up to the individual.
For myself, I budget using a spreadsheet for the month's expenses, and add in all the automatic payments (e.g. GIRO). For one-off ad-hoc expenses, I will key them in and do a rolling forecast to ensure I have enough funds to cover me for the month.
I also practice "paying myself first" by allocating about 50% of my take-home salary to a separate account, and then managing with what I have left in my spending account.
To keep the story short, there is intensive budgeting and updating to do almost on a daily basis where I have to update the spreadsheet. I only key in items such as recharge EZ Link card or withdrawals but do not go "micro" into detailed spending per day. At the end of the month, as long as I have enough cash left over then I know I have not over-spent!
I guess I do something of a #3.
I envelope a portion of my savings that goes into my investment portfolio each month. For spending, I don't really track. Tried to do that once but gave up since I'm not that disciplined. Good thing is that I don't spend much so I've never spent more than I earn on a net basis.
Watching spending is quite a pain. So (1) is the best for me.
But basically, for food and transport, I think it is a hassle to track them.
Normally, I will be more cautious on big item purchases like hand phone, TV, travel etc.
At the end of the year, I will start to compute all my big items' purchases, payments, allowances to parents, insurance payment, taxes etc and compare with my passive income to see if I can survive with it
I used to watch my expenditure tightly, when I had tuition fee loans after my graduation to take care of. I realise it works best when you have a defineable target that you want to achieve, so that accurate and committed savings projections can be made. I managed to pay back the entire loan within 1.5 years. That's easily 45-50% of my take home pay back then. Considering I owned a motorbike then it was not an easy feat I guess.
These days I don't track my spending budgeted under necessities as I think it does not value add that much to savings increment, considering they are necessities to start out with. I do make it a point to "pay myself first" though, setting aside at least 40% of my pay, for savings and investments. I categorise insurance as a form of spending though. I also review my bills/spending periodically to make sure I am not being extravagant, and if there are any areas I can refine. During adhoc spending i.e. meals, I will also ask myself if I think I am paying for value or whether it is worth it.
The value of some items cannot be measured in monetary terms though, hence I will exclude them from my "rationalization exercise". An item that would fall under this category would be my purchase of a car to ferry my wife and future little ones that I planned for. I deliberated over this for a long time but decided there are things that cannot be measured by dollars and cents, and thus should not be so.
Yep I agree with Blackjack, when I eat nice meals I also don't think too much about it; neither do I budget for it. It becomes too excruciating if the budgeting process is taken to extremes.....
LP said in his blog another way to solve your problem is when you outgrow your problem. Someone earning a five figure salary doesn't make sense to budget meals unless he or she eats at posh restaurants everyday.
Depends on circumstances I suppose.
For now, mainly 1.
If I am unemployed, then 4. And I think a lot of us do this when just starting work.
I only give myself a mental boundary of how much disposable money I should spend per month. Excessive budgeting is pointless unless u really need the money to meet obligations. Time is better spent on how to make more and to cultivate oneself