I'm ditching my budget.

[mariogreymist]

I just read "Automatic Millionaire" by David Bach and I'm sold. I know I make more than I need to get ahead. I'm going to automate everything and stop worrying about money - period. I changed my 401K to a percentage today, and I'll be scheduling my bills through my automatic billpayer for paydays 6 months out. That way I can stop worrying about whether I have money for this or that - I can just go about my business and be happy. I was doing plenty of the stuff anyways - I need to work on debt and homeownership, but I'm on the way.

A great book that you can read in less than 3 hours.

[sweeps]

I guess Ramseyism is dead... It's time for the rise of Bachism.

[mariogreymist]

It's a more realistic approach, if you think about it. Most of us don't really like to figure out how so save every possible cent on this that and the other thing - we do it to achieve our goals. We are far more likely to fail in those goals if they rely on activities that go against our nature - like walking around the grocery store with a calculator in hand to ensure we don't exceed our weekly grocery budget. Our behaviors can adjust to circumstances, and if the circumstance is a slightly smaller paycheck that has money already moved to retirement savings, we have done ourselves a great favor.

[cptacek]

ooh, be careful. While I agree with "Automatic Millionaire" on most points, you still have to "worry if you have money for this or that."

For instance, upping your 401(k) is good! Good for you! But, you will have less in your paycheck, and if you keep spending like you did before, you will overdraw your checking account.

Putting your bills on automatic payment is good too...IF you keep enough money in the account. Just because it is automatically scheduled doesn't mean that you can forget to make sure there is enough money in there.

I've gradually come to pay most things automatically. My 401(k) comes out automatically from my paycheck. My mortgage, student loan, 0% interest credit card, insurance, investments, anything that is the exact same every month, comes out automatically. Other variable bills, like electric, water, gas, etc, I pay every month, so I can monitor how much I am using. But I had a hard time with this until I split my "bill" money up from my "spending" money.

Here's how I do it. I have two checking accounts. I have my paycheck split up into two chunks of money...one chunk goes to the bill account. The automatic things and the variable things I mentioned above come out of here. I have it budgetted until next February right now...I took my highest total I've gotten from each bill in the previous year and budgetted for that in this bucket. If the bill for this month is less than what I budgetted for, the difference goes to savings.

The other chunk of money goes into my "spending" checking account. I buy gas, food and other misc stuff from here, and I can keep track of what I have left for the pay period easier. If, at the end of the payperiod, I have money left over from here, I transfer that to my savings. So, I am kinda forcing myself to live paycheck to paycheck, even though I have money left over after (almost) every paycheck.

When I tried to do the automatic thing from the same account as the misc spending thing, I couldn't keep track. Others might be able to, but I couldn't. But splitting it up has really helped my peace of mind, and you are right...it is much easier to have so much automatic.

[puck36]

I too have read the "Automatic Millionaire" and do agree with most of was talked about in the book. I also agree with cptacek. Its good to have stuff set up automatically but you sill have to make sure you have the money in the account to do so. I have my 401k, mortgage, savings (EF) all set up automatically. Every month when I get my bills I put them in bill pay online, so that I know when its paid and how much I have left in the account. When the bills are paid I keep so much in my checking for other things. The way I keep track of it all is I have a note pad that I write down everything I spend and the balance in the account. Then 3 times a week I update the spreadsheet and check it with the bank to make sure it is right.

[mariogreymist]

I'm not actually putting more into 401k yet - I just changed it to a percentage. I'll gradually increase that percentage over time.

And, of course I'll keep track of what's in my accounts. I'm not about to start paying overdraft fees. The vast majority of my expenses are more or less fixed, and I don't need to think about them monthly. I will have to schedule my phone and electricity bills myself each month, as they do vary somewhat. That will allow me to keep tabs on my balances and ensure I don't get into trouble.

The plan - Pay off my cc right away. Pay off my revolving Discount Tire account before the interest kicks in. Make an extra $90 payment every month on my $10k vacation club loan, greatly reducing the interest I pay. This will allow me to have enough for my lifestyle and still build a decent EF within a year and set up a path to retire by my mid 50's, worst case scenario.

[LivingAlmostLarge]

I backwards budget. Same thing but I decided how much I could spend on things based on needs I prioritized as important.

[boefixepa]

I was recently screened for a commerical for Bach (FYI I didn't get chosen...bummer...no free trip to New York!) and guess what. They are taking the Mvelopes system, giving it a new name, and packaging it with his Automatic Million book, which I to just read!

I'm all for the concepts of AM, but you can mess it up to, just like everything else. Spening is still going to be an issue no matter how much you take off the top for savings. You still can not spend more then you have. Mvelopes helps you keep tabs on your spending automatically to. It does have a 'budget' like set up, but it also allows you to stay on top of it day to day. So you might want to check out this new thing he's coming out with. They are shooting the commerical and stuff this friday, Nov. 16, so I am thinking it will be out towards dec. or Jan. when everyone realizes they spent to much on Christmas and need a New Years Resolution to get out of debt!!!

[Ima saver]

I like his books too. I have always used the envelope system and it has always worked for me.

[mariogreymist]

I was recently screened for a commerical for Bach (FYI I didn't get chosen...bummer...no free trip to New York!) and guess what. They are taking the Mvelopes system, giving it a new name, and packaging it with his Automatic Million book, which I to just read!

I'm all for the concepts of AM, but you can mess it up to, just like everything else. Spening is still going to be an issue no matter how much you take off the top for savings. You still can not spend more then you have. Mvelopes helps you keep tabs on your spending automatically to. It does have a 'budget' like set up, but it also allows you to stay on top of it day to day. So you might want to check out this new thing he's coming out with. They are shooting the commerical and stuff this friday, Nov. 16, so I am thinking it will be out towards dec. or Jan. when everyone realizes they spent to much on Christmas and need a New Years Resolution to get out of debt!!!

So what is the "Mvelope" system, in a nutshell?

[skydivingchic]

Mvelopes is a subscription budgeting program - here is a link.

Basically you set up your envelopes in the program - one for each budget item. You set a spending plan that funds each of those envelopes. Then the program automatically downloads transactions from your spending accounts (credit cards, checking accounts, savings accounts, etc). You assign each of those transactions to the appropriate envelope and it subtracts that amount from the amount available in that envelope. If it is a CC transaction, the program takes it out of the assigned envelope and puts it in a "money for CC" envelope. That way when your statement comes, you have the exact amount sitting in the envelope waiting to pay the bill.

I've been using the program for about 10 months now and absolutely adore it. It has plugged the leaks in my budget, helped me save up for those erratic bills like car repair, and really helped me understand where my money goes and what I would have to sacrifice in order to meet a savings goal.

[Broken Arrow]

They are taking the Mvelopes system, giving it a new name, and packaging it with his Automatic Million book, which I to just read!

Oh, that's an interesting development. Thanks for sharing.

[humandraydel]

I backwards budget. Same thing but I decided how much I could spend on things based on needs I prioritized as important.

I think this is the best method. Figure out how much you take home, then figure out how much you want to save each month. The rest you can spend! Figure out what goes to recurring bills, and whatever is left is "fun money." Then, all you have to do is track fun money and things that are potentially variable such as groceries. Literally all I track is groceries and fun money - the rest is already taken care of automatically (including savings).

[LivingAlmostLarge]

Me too. The thing is it makes certain things important. Like when we bought our house, we first put in our maximum retirement. Then we looked for a house that was 25% PITI. Then we put in ESPP and other savings. It's a little tight but we've grown slowly into it.

Then I put in utilities, car insurance, repairs, etc. Then it really was just misc and spending money.

[disneysteve]

The one thing we do regarding putting things on autopilot is having as many bills as possible charged automatically to our rewards credit card rather than deducted from our checking account. That accomplishes two things. It gets us reward points for bills we'd be paying anyway - home phone, cell phone, alarm monitoring, auto insurance, etc. And it eliminates the need to constantly monitor the checking account balance to be sure there is enough in there to pay the bills. This way, when the credit card bill comes, I can pay it right away or, if needed, can wait until I shift money around into the checking account and then pay the bill.

Of course, this method is only for folks who have a good handle on their spending and will pay the CC bill in full each month.