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I cannot think of a better cure for my occasional insomnia than to stare at my electronic 2024 checkbook and analyze our spending for the prior year.
I’m looking for how much money came in, and how much came out to pay bills and buy stuff, and how much went back into savings and investments.
Social Security and two dinky pensions are what I refer to as our spending benchmark. In an ideal world our spending will never exceed the benchmark. The last couple years have been benchmark busters, with 2023 being so bad that I didn’t bother doing the math. I described 2023 in a prior article, Our Spending Spree. That year we built a house and bought lots of new doodads to go into it.
2024 was better but we still missed the mark due to things like landscaping and some really cool additions to my man cave/garage.
Here’s our income stats, expressed as percentages.
Our total spending for the year equaled 107% of benchmark income, requiring us to use about half of our IRA distribution to make the ends meet. The unused portion of the IRA distribution went back into a non-qualified money market and brokerage account.
If I were a teacher assigning a grade to last year’s spending, I think I’d give it an A-. We may have missed our benchmark, but the extra spending only equaled 1.5% of our IRAs. I anticipate this year’s spending will come in at less than 100% of the benchmark. At age 73 I am very comfortable with that.
This is as close as I will come to using what Webster’s Dictionary and HumbleDollar’s own grumpy old man would call a budget. As long as our spending requires such a modest IRA withdrawal I don’t see any reason to rock the spreadsheet by preparing a real budget.
I think of budgeting/spreadsheets in a similar way as tracking calories I consume. If I’m maintaining or losing weight, I’m doing fine and have no need to track every bite. But if I start putting on a few pounds, it’s time to pay attention again. Or if we’ve got a big trip planned and I either want to look good in my outfits or have some margin for error when I eat more than usual, maybe I manage and track calories more meticulously for a couple of months before the trip.
Similarly, if our income is covering our bills and other priorities (saving and giving), we don’t need to track every penny of it. But if we started dipping into savings more often than I’m comfortable with or have a big expense coming up—or, worse, actually run a balance on a credit card—then I’d better get a reality check and tighten things up.
My situation is very similar since I started collecting SS at 70 a short time ago, except I already owned a nice paid-for ranch-style home in a million-dollar setting in a LCOL region.
This man-who-has-everything he wants actually should spend more, because for what other reason did I build that nice nest egg? Travel? I did a ton of it over the decades, and now regard air travel as the place people go for eternity if they’ve been bad. 🙁
The young ‘uns will be happy some day (already are on Christmas. 🙂 )
This man-who-has-everything he wants actually should spend more, because for what other reason did I build that nice nest egg?
I think this is a question that many HDers struggle with.
Great idea. I budgeted all my life, for 50 years, then in retirement, I flipped the situation and went to NO budget. Fortunately, our SS and our RMD together cover all expenses. So for the last 7years, all has been working out and the fruits of our labor have paid off. I use Quicken so I can get a snapshot of anything at anytime. Everyone should use the method that works for them.