Disclaimers :-), I'm not a fiduciary or a personal finance expert, there are a myriad of people online giving really good financial advice like Dave Ramsey. If you want specific customized advice I strongly recommend getting a financial adviser, in Canada there are certified portfolio managers, to review your position and help you plan for your goals.
Over the years I've kept myself sane with a few processes and a specific tool called Buxfer*. When I went looking for software a few years ago I was still living in Barbados and since local banks don't connect to the information sharing services that North American banks do, it was difficult to synchronize my information. Buxfer has always had a robust import function and for a relatively small fee did forecasting so it suited my needs. The time saved was enough for me to shift from updating a spreadsheet on a monthly basis and eventually I wrote a macro to help automate the process.
From a process perspective I keep a few budget buckets:
- Transportation
- Food
- Groceries
- Entertainment
- Misc
- Joint (the marriage tax)
Those combined with pre-planned expenses (Recurring monthly/annual bills) create my expected spend per month and with the forecast tool I can then estimate if my spending is over/under my income during that period. The budget tool also helps, and I imagine this is standard in budgeting software, by giving an 'expected' vertical line that gives a rough idea if spending is on track.
I also forecast out on individual accounts to have an idea of how much, for example, my credit card balance will potentially be on a specific day. This lets pick a saving target for a month up front based on money I'm most likely going to spend instead of spending and then saving the remainder. It's not as good as the 'pay yourself first' model but that automatically happens for retirements savings. This approach allows me to save a target amount plus extra so if unexpected expenses pop up the following month, or two months later, there is buffer. I've found personally simply paying myself first is too rigid beyond retirement saving and then spending the 'extra' money I could have saved is more tempting.
The budget 'buckets' are the ways I account for spending money in a somewhat predictable manner but again not too rigidly. So my budget for food is say $100, I may spend more than that and it's OK if overall my spend is low but if I go over my total budget then chances are I won't meet my minimum saving goal for a month.
So my overall approach allows me to figure out if a purchase beyond my usual spending will put me in a difficult situation and when I can make it, if it all. It helps me save when I can and helps me understand how I'm spending my money to determine if I need to make changes.
Getting this to make sense will take a few swings so I'll leave this here for now and for the next parts I'll probably:
I also forecast out on individual accounts to have an idea of how much, for example, my credit card balance will potentially be on a specific day. This lets pick a saving target for a month up front based on money I'm most likely going to spend instead of spending and then saving the remainder. It's not as good as the 'pay yourself first' model but that automatically happens for retirements savings. This approach allows me to save a target amount plus extra so if unexpected expenses pop up the following month, or two months later, there is buffer. I've found personally simply paying myself first is too rigid beyond retirement saving and then spending the 'extra' money I could have saved is more tempting.
The budget 'buckets' are the ways I account for spending money in a somewhat predictable manner but again not too rigidly. So my budget for food is say $100, I may spend more than that and it's OK if overall my spend is low but if I go over my total budget then chances are I won't meet my minimum saving goal for a month.
So my overall approach allows me to figure out if a purchase beyond my usual spending will put me in a difficult situation and when I can make it, if it all. It helps me save when I can and helps me understand how I'm spending my money to determine if I need to make changes.
Getting this to make sense will take a few swings so I'll leave this here for now and for the next parts I'll probably:
- Setting up pre-planned expenses and expense categorization (budget buckets)
- Creating goals/plans and updating my budget
- Forecasting and decision making
* Full disclosure if you click the link and do sign up I get a whopping $1 of upgrade credit.
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