Managing Monthly Budget with Savings Goals

I can’t find a thread on this: I have my monthly budget set up as well as savings goals for future expenses, which include expenses that occur every other month, quarterly or annually.

What I’m trying to solve for: I just need a clean way to look at what I’ve spent this month against this month’s budget. I don’t care if I’ve under or over spent in a savings goal category because there’s a slush fund to cover those (the reason for savings goals). But currently, categories that appear within those savings funds appear in my monthly budget. So it’s a game of subtracting out Savings Goal expenditures from the rest of the monthly budget so I can see how I’m really pacing against categories that month. I do realize that while I don’t want to see Savings Goal expenditures against that monthly goal, Savings Goals transfers to actually fund these savings is directly related to my monthly budget–I have to subtract (transfer) monthly to fund these goals like a debit.

Here’s an example of the problem. I have a home in a very hot area of the country so summertime electric bills can be $600, while winter bills around $100. So let’s say to offset the hot summer months, I transfer $200 each month to my electric fund…I’m replenishing this fund during the winter months when I don’t really tap into it, but build a nest egg for the summer months when I do need it.

If in August I pay a $600 electric bill, it will look like I’ve spent more than my budget can handle because of this huge bill. But I’m going to be using the Savings to pay for it. I don’t need to mess up my monthly snapshot of how I’m performing against my overall August expenses due to an anticipated bill that’s already covered.

Apologies if this is a topic already listed, but I searched and can’t find it. And perhaps I just need a different way to read/think about my monthly budget with Savings Goals as I’m not an accountant.

Thanks.

Hi @dkushla,

I am assuming that you are using the Savings Budget template and are setting categories such as Utilities as Savings.

I use pretty much the same methodology of budgeting over time to compensate for erratic spending. To use an example from my own budget, I allocate $75/month for our monthly phone bill (Google Fi), but actual spending rarely goes over $60 so I am accumulating savings in that category most months. This month we bought a new phone for my wife which puts us well over our normal phone spending, but accumulated savings was able to reduce the overall overage. The rest is compensated with a savings transfer from a Discretionary Spending “slush fund” as you call it. My monthly phone budget is untouched and remains at $75, but the savings (residual and transferred) offsets the extra spending.

Another example would be our auto insurance which is billed twice annually in April and October. We pay roughly $450 every 6 months, so we budget $75/month for auto insurance. So for 5/6 months, there are no expenses in the Auto Insurance category, but come April or October there is a $450 expense. Because the previous months’ budgets roll over into savings, the actual spending balances with the overall budget.

The goal is to get a better picture of budget (expectation) versus actuals (reality). A graph of budget and actuals that are identical (cashflow = 0) is not very useful and might as well only show the actuals. That $600 spike in electricity spending you see in the middle of summer is real and significant and seeing that variation graphically helps establish your overall budgeting strategy. It’s perfectly fine if that graph shows you overspending your monthly budget, so long as it is balanced with savings.

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Hi @dkushla, which budget template are you using?

I do basically the same thing as @cculber2 with my budget, and he makes a good point about the usefulness of not hiding a spike in the actuals. But I do understand your position, you don’t want to look at the numbers and think you’re overbudget when really you planned ahead for this situation. For that I would recommend paying attention to the “Available” column. In your example, in the hot months your electric bill will be over budget, but you can see in the Available column how much Savings you have left or if that used up all of the available Savings.

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What @matt and @cculber2 said…

The Savings Budget is a great solve for your electric bills example. We have a similar biannual auto insurance to @cculber2 and solve for it in the same way. We also build some large expenses (e.g. new computer) into our budget and the savings approach is a great help when those expense don’t hit in the exact month we expect.

I switched over to the Savings Budget this year and I do find the approach is great both generally and also for the example scenarios listed above.

That said, there are occasionally some categories that just kind of drift into large favorability or unfavorabilities and it can be hard to make sense of them. I think the solution is to just trust the budget over the year to sort itself out.

Let us know what you decide to do and how it works out, @dkushla.

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I love all the feedback! Thank you all. Some questions to answer: I’m using the Foundation template with Savings Budget, not the legacy envelope system.

If I’m reading everything correctly, the aggregated answer is that the Savings Budget allows to view and managed money from an annualized perspective so you can predict and prepare for lump sum types of expenses (or the opposite in times of extra cash, save it for the expensive months). And it does sound like everyone agrees that things get wonky when you start to focus in onto the specific monthly goals.

The problem, for me, with looking at the Actuals column is that it will always positive (OK hopefully it will always have cash in there!). I save in so many different categories (33 different “funds” if you will), that even if I get hit with a $1000 electric bill (hopefully not), the actuals summation of savings goals will always cover that cost.

What I need is to manage those variable expenses on a monthly basis. Example: I don’t have a savings goal for food or gas, or going out to the bar (when that can happen again!). I just have monthly budgets for those since I don’t save for them–I know I have to eat or get gas. Those are the red flag categories that I have to constantly monitor. Sure, I can look at those categories and see how I’m pacing (and there are more than just those three). But isn’t the point of the Monthly Budget to quickly look at the Spending Budget vs Spending Actual graphs and see how I’m doing? The graphs go out the window with savings goals messing up the math.

If that does make sense, maybe there’s a way to hide Savings Goals from the budget as to not mess up pacing, BUT the sheet would take into account that my monthly transfers into these savings goals would be a monthly anticipated deduction (part of the planned cashflow).

I can certainly create a pivot table and use tags to manage variable expenses (or use my more limited knowledge to make vlookups and other formulas (so I can compare spending vs budget data, which live in two different sheets) but brought this to the forum to make sure I wasn’t going crazy with how I managed the Monthly Budget sheet, and if anyone else had my issue!

Thanks al!!

@dkushla ok, so it sounds like what you’re looking for is a very quick way to gauge how you are doing on a subset of your categories. One way to do that is to put them all in one (or just a few) groups, and then just look at the group totals. I know a lot of people have something like a “Discretionary Spending” that does a lot of the work in this area. But I imagine that you have your own groupings that you don’t want to give up.

I’m curious about how you’re managing your savings goals, and why things like food and gas aren’t treated the same way. For example, if I budget $200 for gas but I am under-budget, the extra amount gets rolled over as savings. If I’m over, it gets rolled over as negative savings. This is useful for me because I don’t spend the same amount in each category each month, but overall it will even out over time. and if it doesn’t, I know I either need to change my spending or my budget.

Also, when you say you have savings funds, do you mean a category that is separate from the spending fund? For example, do you have an Electric Bill Category separate from the Electric Fund Category? You’re mentioning a lot of transferring money around but I do very little of that the way I have it set up. I just have one Electric bill category, but it serves as both savings and spending. If I take the amount I expect to spend in a year and divide it by 12, that’s what I put as my monthly budget. Then in the winter the savings will build up (using the electricity example again) and in the summer it will get spent. Maybe this is already what you’re doing but if not I’m curious how you set it up. Because the way I do it it doesn’t make sense to have savings separated from other expenses since all of my categories have savings. But of course, my way isn’t the only way to do things.

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You mention saving in “33 different “funds””… I’m not sure what the mechanism you’re using for creating the “funds”. With the Savings Budget, the idea is that your categories can function as “funds”. Essentially, every category that is set to “Track” - “Savings” will behave as a mini savings account. Not sure if this helps conceptually…

Another thing… if you have categories where accrued savings aren’t meaningful (e.g. if you go out drinking with friends less than anticipated in February, it doesn’t necessarily mean you need to make up the difference in March), you can turn off the savings functionality by clearing the “Track” column for that category. This workflow will allow you to measure actuals against budget every month and avoid the distraction of large rollovers where they are meaningless. The downside of this approach is that it is leaky with cashflow.

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@randy - I’m following your design by using 33 different categories (category tab) that make up these savings goals. (I watched your video how to set up, and the Group is called Savings Goals).

@matt I’ve played with the Groups before. Maybe I’ll go back (I had one that has variable spend vs monthly spend). The problem is it gets sloppy when you want to look at overall picture of your finances by the true Group: Auto, Home, Utilities, etc. Example: gas vs car note. Both should fall under a Group called Automotive, but what you’re suggesting (and what I’ve done in the past) is that Car Note falls under Monthly Automotive and Gas falls under Variable Expenses.

Also, I love the idea of rollover gas or food. I just can’t get it to work for me as a human being (that darn human element messing everything up!) I somehow ALWAYS overspend in one category in a month (this month I spend $300 in gas, not $250, but am under by $50 in groceries)…so because of that, I look at the variable spend in aggregate per month. If that grand total is $1000 for the month, and I overspent in gas but not food or haircut, or whatever, then we’re good.

Oh and also, I don’t do a lot of transfers ;-). I do two transfers per month: 1) mid-month I transfer what I “owe” my savings goals, which is usually a fixed amount, and 2) at the end of the month I’ll go and deduct from my savings accounts what I’ve spent in those categories for the month to pay the credit cards. That’s what makes the Savings Goals budget so handy for me–it does tell me what I’ve spent in those savings categories, and adds up how much I need to transfer out.

Net-net: I tend to think microscopically at times and that can be dangerous, that’s why I initially did this outreach to make sure I wasn’t looking at this from the wrong angle. But it does, indeed, sound like there’s a fundamental issue: if you chose to use savings goals, you’ll capture any “leaky” monies, but the monthly budgeting tool go out the window as any large purchase in a savings goal will mess this up on a monthly basis (yearly will be fine).

Is there a way to rethink about this and leave it as two separate budgets? If I use Hide then I can’t track the savings goals. But maybe “Hide only from Monthly Budget” were added so the data can be used in the Savings Goal tracker? (And then I’d just create a placeholder transfer line item to in my monthly budget to capture the funding of the savings goals?)

@dkushla haha that darn human element can be a real nuisance! It sounds like we just prefer slightly different approaches to budgeting. I don’t use separate categories for savings goals, I just use the “Savings” feature to let money that is budgeted but not spent roll over to the following month. So I don’t ever have to transfer to or from funds. That is simpler for me, at least. Transfers twice a month may not be a lot for you, but it’s more than I want to do!

I have thought before about how it could possibly be useful to be able to hide categories (or accounts, but that’s a different issue) from specific sheets. But that would be a complicated solution to a problem that I’m guessing not that many people have. I’ll leave it up to the Tiller team to gauge how popular a feature like that would be. If I have the time, though, I’ll try to look into how to make it work.

EDIT: I just realized that it would probably be easy to hide categories on specific sheets. @randy, If I just added a column to the Categories sheet Called “Hide from Budget A”, and then in the Savings Budget template changed cell BD20 to the appropriate column number, that would do it wouldn’t it? I’ll test it out when I have time but I think that’s all it would take.