Budgets & Big Purchases

I might have mentioned before that my wife and I don’t really keep a household budget. We used to be very, very diligent about it, but over the years we just stopped. I could tell you what we roughly spend each month, but not without actually adding it up.

I only really know if we are spending too much by looking at our long-term net worth. Luckily, over the last 5 years, our balance been going up faster than our original FIRE plan, so I guess we are not over budget. There’s no sense in spending time on something that’s not a problem.

Similarly, we don’t really save up for big things we want to buy anymore either. If we want something, we just get the $$$ from savings.

The biggest things we might buy are cars or vacations. I put together a spending plan for both of these when we first retired, but we’ve pretty regularly underspent in both categories.

For cars, our plan was to buy vehicles that are a year or two old – with the warranty intact – and then keep them until they are 6 years old or 100K miles. That was the plan. In reality, my wife’s car is now 9 years old and probably only has 65K miles. Every summer she says she wants to look around for a newer one, but there isn’t a rush since hers is in such great shape.

We’re going to the car show in our metro area today. They are holding it outside on our State Fair grounds to deal with the pandemic issues. It should be a nice sunny day to see what she is most interested in. Since we don’t have a budget, I might just look to trade mine out early too! 🙂

How discipline do you have for budgeting & making big purchases?

Image: BMW Munich

11 thoughts on “Budgets & Big Purchases

  1. Chief, like you, I’ve learned to take a long view. I still adhere to“three principles” of financial life. The first, from my mom, is “spend less than you make.” Now retired from NYC for 9 years, we have a stable (and conservative) monthly/yearly flow of income from assets. By spending less than that, we build “savings” for large expenditures (cars; paying for weddings). Annual expenditures for vacations & trips are budgeted in one big bucket. We didn’t go anywhere in 2020, nor do we have plans to do so in 2021. So that money is “banked” for future travel (or can shift to other buckets). Mostly, we live modestly. It suits us & works.

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    1. Smart & steady wins the race, as always! We went to Florida for 6 weeks already this year and may be going out to California this summer. We don’t have any travel plans beyond that.

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  2. We are in a similar boat. I am actually earning much more in retirement from consulting than I ever imagined. In addition my wife begins to draw social security in August. Yes, a good problem to have. We are learning to not wince when spending a lot of money such as today.
    Today we put down a deposit for April 2023 a mega trip to Jerusalem, Cairo, Nile Cruise and Jordan/Petra. Business Class airfare. This is more than we have spent on a new car.

    Time to live, we can afford it.

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    1. Wow – that sounds like a GREAT trip! How long will you be away? We’ve done those spots on two separate trips. Fantastic history to see up close and quite an eye-opener at how different the world really is for so many people.

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  3. We have always zero-based budgeted. It’s just how we’ve always lived, so every dollar is automatically assigned an accrual bucket each month (ex. Autos, Groceries, Travel, Maintenance, Entertainment, CAPEX, Insurances, etc.). Spending just comes out of each bucket monthly or continues to accrue. Even big ticket items like the stone outdoor fireplace that we are currently building was accrued over the last year and a half. We typically purchase all of our normal day-to-day stuff on a rewards visa and pay it off from the buckets each month. The rewards cash automatically transfers straight into a brokerage account. Bigger stuff like autos and CAPEX items accrue until needed. We typically buy three year old cars because (I’ve read somewhere…) that’s the point of maximum depreciation for price vs value. Like you guys, my wife’s suv will be ten years old this summer and it’s time to trade it. Fortunately, the money is already accrued for the purchase. It sounds like a lot of work, but 99% of the process is automated, so glancing over the budget balances typically takes about 15 minutes each month as I’m scheduling the visa bill for payment. It’s nice because I always know where we stand on items, so spending, when things like cars or refrigerators go bad, doesn’t cause and pain or anxiety because I know it’s already accrued to pay for it. I’m sure it’s because I’ve run businesses my whole life this way, but it works well for us!

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    1. That would be great if it was automated. I used to use Quicken (and later, Mint), but after a program crash, I lost all of my data. Too much work to set up again – especially since my wife still pays a lot of bills with paper checks! I would e-pay bills by now, but that’s her ‘chore’ responsibility. 🙂

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      1. Look into personalcapital.com – much better than Mint. Much more stable and able to update itself regularly. For tracking net worth, and your bank account trends, it can’t be beat. It’s free.

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      2. Yeah being an ex-IT guy, my personal finance setup is a combination of Excel and auto feeds from various sources, so it’s pretty hands off after years of development. Unfortunately, it’s so personally customized, that I could never sell it or give it to anyone, but it works great for me. My rental real estate system is even more slick! Again, this is what happens when an old IT guy doesn’t get to write code anymore! I probably could’ve put a small amount of work into my real estate package and retired ten years earlier!!

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      3. Our son is a software developer currently working from our lower level. Maybe I need to have him automate our finances! 😉

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