Tuesday, May 19, 2009

How I Budget

Here’s the big “secret”: You will do just fine financially, if you spend less than you earn.

I think the biggest difference in approach between what I suggest and what is offered by many budgeting tools is that I say: don’t budget for categories, budget for short time periods.

We intended to stop consuming our savings and deteriorating into unmanageable debt, and instead spend less than we earn and grow our savings. We started our approach, which is detailed on this site, around 2005. We changed our course together as a family. As individuals we had no problems - but as a married couple we had to agree on our money approach together.

This page has been ported from my previous blog "withinmymeans.blogvis.com", some links will direct you back there. Eventually I intend on bringing that content into my current blog "Thrifty Trend".

Details of our approach

I suggest you click on the post links to learn more about our “secret”

(Some links to old blog might not work, I will work on this soon - it seems the old blog host is no longer active. Sorry)

  1. Download our budget spreadsheet and place it on sheet.zoho.com.
  2. Figure out how much you should spend each month, start recording your spending
  3. Don’t buy anything if you’re out of money for your 10 days budget
  4. Talk about it at home - don’t hold back
  5. Bridge the perception gap between yourselves regarding money as a couple to achieve financial zen
  6. Never cease the search for knowledge.
  7. Seek goals - there’s no reason to hold money to keep the bank happy.
  8. Make a long term plan to become wealthy (or sufficiently - not poor)
  9. Implement your money knowledge and the plan by sticking to an investment strategy that will keep your money safe
  10. Be frugal while investing - seek the lowest fees and commissions.

How did we come up with our “System”?

As mentioned in the posts, we decided to read about personal finance together. We agreed on goals and dreams. We agreed on where we want to be 10, 20 years from now and even on what kind of retirement do we envision (while we were at our 20-s). These aren’t spontaneous conversation topics - those arose from reading the books.

The books - however helpful they were - did not touch on a core subject for us - how do we track our spending together, and how do we do it without offending each other, or one side appearing cheap and nagging the other on how much money we don’t have left in the bank (or reasonably payable monthly credit usage). While I used to check our financial statements from banks and credit cards on the web frequently, my wife would do so rarely.

We agreed on the “short term budget for anything” system in principle. Initially my wife suggested we use a dry erase board positioned in a location we both view regularly, and contentiously update it. That means calculating, summing up and redrawing from scratch every month. It was a good experience as far as working together, but was very annoying as far as the required work.

We then moved to a spreadsheet on our main computer. This proved difficult because we actually use the laptop more than the main computer, and usually at work I sit in front of a different computer. The next step was obvious to me - work on a shared spreadsheet on the web.

Would you be surprised if I tell you the system has worked well for us thus far?

While I can credit the books and websites for inspiring us and providing us with many ideas - our implementation of our own ideas is what gave birth to our system. We improved upon the wealthy guru authors to use online spreadsheets to budget from anywhere we are and to spend on anything we like, whenever we like, as long as we acknowledge our limitations and live frugal when we can’t (for a maximum of a few days).

In this site, I end most posts with a big


Because we need to enjoy this life and live richly within our means. There are very few problems too complicated to resolve - and one always has to seek the light at the end of the tunnel. Cheers!

Sivan Segev

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