{"id":34137,"date":"2021-11-02T01:04:23","date_gmt":"2021-11-01T14:04:23","guid":{"rendered":"http:\/\/www.campaignmastery.com\/blog\/?p=34137"},"modified":"2021-11-02T01:07:44","modified_gmt":"2021-11-01T14:07:44","slug":"budgeting-for-gms-and-others","status":"publish","type":"post","link":"https:\/\/www.campaignmastery.com\/blog\/budgeting-for-gms-and-others\/","title":{"rendered":"Budgeting For GMs (and others)"},"content":{"rendered":"
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Image by Chris Pastrick<\/a> from Pixabay<\/a>, cropped and lightly desaturated by Mike<\/p><\/div>\n

Today I’m going to attempt to make the world’s most boring subject – How I Manage My Money<\/em> – sexy.<\/p>\n

No, that’s going too far. I’ll settle for interesting.<\/p>\n

That might be asking too much, too – but there is RPG Relevance to the subject. The goal will be to not<\/em> make it boring, and not to be too self-centered. Those are going to be hard enough to make this a challenging subject, so apologies in advance if I stumble in either regard!<\/p>\n

With more than thirty subtopics listed to cover in the planned article, I don’t have the time to bog down too much along the way (I hope). Instead, each should be short and sharp. But there’s still a lot to get through!<\/p>\n

NB: I’ve used the Australian ‘cheque’ and not the spell-checker-suggested American ‘check’ because the latter means something else here and I wasn’t confident that it was correct usage.<\/p>\n

Background, Briefly<\/h3>\n

When I first moved to Sydney to attend university, I was on a government scholarship. This meant that once a month I got a cheque which I had to deposit; when the cheque cleared, I had cash. And that was all the money that I had for the entire month.<\/em><\/p>\n

Those conditions force you to get good at budgeting, with an emphasis on keeping it practical. I quickly learned to divide my money into several envelopes – one for fares (I bought a weekly ticket because it was cheaper), one for routine expenses, one for ‘other’ expenses (travel, birthdays, and Christmas mostly), and one each for each week’s spending money. Finally, there was an “emergency reserve” envelope.<\/p>\n

I started by taking out the money needed for fares and routine expenses and filling the relevant envelopes with what I thought I would need. That left 6-7 more (depending on how many Wednesdays were in the month, because the first Wednesday of the month was ‘pay-day’). So I divided whatever was left, as equally as possible, amongst those envelopes.<\/p>\n

The secret to the system was when money came out of those envelopes. On Sunday night, I put that week’s ‘spending’ into my wallet, including what I needed to spend on tickets the next morning to cover the forthcoming week. Gifts had a fixed budget of $10 each, or less – if I had a birthday or had to do Xmas shopping, the appropriate amount also went into the wallet, with a list of who I still had to buy for (if one was needed – yes for Xmas, usually not for birthdays). One quarter-share of the original ‘routine expenses’ amount also went into the wallet.<\/p>\n

That left only the “emergency reserve” – sometimes, there was a delay in processing the cheque (once, it got lost in the mail, for example). That was a cushion against needing to stretch my money an extra week, in ‘bare-bones batten-down-the-hatches’ style). It was also used from time to time for unexpected out-of-pocket expenses, like when I needed to buy a backpack or new pair of shoes. Whatever was left in that envelope at the end of the month became available for ‘luxury’ purchases over the course of the next month. It didn’t matter if I blew the lot on one purchase, or doled it out a little at a time on a number of smaller purchases; it was ‘extra money’ because the routine expenses were all covered already.<\/p>\n

That system was the one takeaway from my university days that lasted, outside of RPGs and some friendships that abide to this day. When I went to work in a bank the year after, I employed a variation on the scheme to essentially divide my money up into ‘regular expenses’, ‘routine spending’, and.’emergency reserves’.<\/p>\n

Background, Too: Bookkeeping<\/h3>\n

Much later, after my job as a systems analyst \/ programmer was outsourced, I started a second career strand as a bookkeeper. Many of the jobs that I undertook in this area were ‘odd fringes’ of the profession – forensic recreating of accounts in which some of the invoices were lost, some had gone unpaid, and some of the cheque stubs used to pay the invoices had been left blank, for example. Financial jigsaw puzzles that were each incomplete, but which generally told a complete picture when the overlapping parts were overlaid.<\/p>\n

These puzzles required logic, system, and detective work to reconstruct – an invoice or account statement might list the previous invoice amount and show a payment of a certain amount on that invoice, which might be the only<\/em> indication of the amount of the previous invoice (it had gone missing, and the cheque stub that matched the payment shown was blank; a bank statement told me the amount and the date the cheque had been presented). Only about three times was it necessary to pay to get a photocopy of the actual cheque from the bank, even though there were more than five years<\/em> of such holes to reconstruct.<\/p>\n

But this taught me to view money as a single ‘well’ from which pre-budgeted amounts could be drawn on a schedule, instead of dismembering the cash in advance. It made my envelopes ‘virtual’, in other words – just numbers on a page, and enabled me to transition from a physical currency to an electronic one (years later, when I went to work for an employer who paid cash-in-an-envelope, I was surprised at how archaic it felt).<\/p>\n

And that, to a large extent, is how my budgeting process still works – money coming in is divided into various virtual envelopes. These days I use a spreadsheet, which allows me to project budgets years in advance, because domino effects mean that today’s decisions can impact budgets years from now, but the principles are the same.<\/p>\n

Two Budgets<\/h3>\n

I maintain two versions of the spreadsheet in question – one labeled “Pessimistic” and one, “Optimistic”. Both labels are misnomers, as you’ll see before the article is complete. I always base my expenditures on the “Pessimistic” version, because it provides a reasonable ‘worst-case’ forecast, but base my budgetary decisions on both in combination.<\/p>\n

Military planners and Intelligence analysts use the same principle – multiple projections are extrapolated from what is known or strongly believed, with different underlying assumptions making the difference between the two.<\/p>\n

I apply the same principle to other aspects of life, too, especially to RPGs in various ways.<\/p>\n

Reality usually falls somewhere in between the two – but by budgeting based on the “Pessimistic” forecasts, I can live with reasonable certainty that the essentials are covered.<\/p>\n

The Big Three Expenses<\/h3>\n

My big three expenses are – in order from biggest to smallest – Rent, Food, and Electricity. <\/p>\n

Rent is a fortnightly deduction, taken directly from my Bank Account.<\/p>\n

Food is a discretionary purchase made through my credit card (which gives me the ability to exceed the budgeted amount if necessary or desirable).<\/p>\n

Electricity represents (in winter) the biggest single-invoice item, a quarterly expense that rises dramatically in Winter and falls in Summer. The winter bills are far in excess of available funds from any given payment of income – I have to save up to pay for them for weeks or months in advance.<\/p>\n

Assorted Other Expenses<\/h3>\n

On top of the big three, there are various other expenses that occur either regularly or as discretionary expenditures. My budget attempts to forecast when those will occur to a reasonable statistical certainty.<\/p>\n

These include telecommunications, health care (especially pharmaceuticals), stationary, media, subscriptions, takeaway food, Christmas & gifts, paying down my credit card debt, Campaign Mastery, and the occasional luxury.<\/p>\n

Focus: Income<\/h3>\n

I assume that I will make no money from Campaign Mastery – even though I do, every now and then. I also assume no income from sales of Assassin’s Amulet, even though those also occur from time to time.<\/p>\n

My primary source of income is a government disability pension, and the first difference in assumptions can be found here. In theory, this goes up twice a year by the amount of the six-monthly inflation percentage (unfortunately, many of my expenses are not so indexed, or life would be a lot simpler).<\/p>\n

Until the Pandemic, inflation in Australia was running between 3.4% and 4.3% per annum. During the pandemic, that inflation rate plummeted, but in an election-sweetener, the government payed a 6-monthly increase of 1.9% anyway (which works out to an annual rate of about 3.84%). My optimistic forecasts assume that my income will continue to rise by 1.9% every 6 months. My pessimistic forecasts drop this to 1.7% – which makes a big difference as they accumulate.<\/p>\n

$500 (a nice round number), increasing 1.9% every 6 months for 4 years, becomes a projected income of $581.25. At the lower rate, it’s just $572.18 – a difference of more than $9 a week, or more than $235 over the course of a six-monthly cycle. If that discrepancy is maintained over the full four years, the accumulated difference in budgetary bottom-line is almost $1900.<\/p>\n

The reality is that most<\/em> six-monthly increases will be greater than the forecasts, but some may<\/em> be smaller. But if they are larger, it probably means that expenses have risen by as much, if not more, than this percentage – so using the smaller amount as my budgetary basis actually allows for that.<\/p>\n

Focus: Rent<\/h3>\n

My rent is just shy of $300 a week. Before getting the disability pension, my rent was actually more than my weekly income by a whisker – which meant that I was completely dependent on what outside income I could scrape together <\/p>\n

My optimistic budget forecasts that this will increase by $5 every year. My pessimistic budget assumes a 4% increase every year, rounded up to the nearest dollar, or about $12 a year.<\/p>\n

The reality is that there are a lot of rental properties available in my area, at the same rate or less, which acts to suppress rent increases. I’ve been at this address for more than 10 years, and had only two increases – of about $10 each, from memory – in that time. I’m probably due for another one, or would be (if not for the Pandemic), which has stifled the purchasing of new rental accommodation as an income generator, which is one of the primary causes of rental rises. But the budget prepares me for an increase, when it comes, and releases money back into my ‘pot’ of available cash each time one doesn’t eventuate. And that’s true of both budget versions.<\/p>\n

Focus: Electricity<\/h3>\n

A while back, when electricity prices were ‘out of control’ (according to the government), they were rising at about 4.1% a year – against and inflation rate of mid three-point-something. Government pressure, and policy changes, and the increasing level of renewables in the energy ‘mix’, have reduced prices steadily, to a net increase of two or three percent.<\/p>\n

Nevertheless, my pessimistic budget assumes that 4.1% per-annum increases over the previous year’s bill will start with the next bill due. My optimistic budget assigns a smaller increase of about 2.5%.<\/p>\n

Both of these are pessimistic. The real rate, down from the high point, is about 1.5%. What’s more, these increases compound year-on-year, so the gap between projected invoiced amount and likely reality keeps getting bigger and bigger – to about $2000 a year in 4-5 years.<\/p>\n

Each time an actual bill comes in, that gets fed into a table within the spreadsheet, updating the estimated invoices for the entirety of the predicted timetable. It also calculates the difference between the forecast amount and the actual; if there’s a trend of that getting smaller or larger, it means the increase percentages need revision.<\/p>\n

On top of all that, one year is not like the next, weather-wise; a late winter can have a massive effect on the electrical bills, or an early one. To allow for that, the pessimistic budget adds $200 to the projected amount of each invoice and then credits it back the following fortnight, while the ‘Optimistic’ budget allows $100 and then credits it back. This makes sure that I have the funds on hand to pay any reasonable electric bill by the due date (because there is a penalty for late payment, or more specifically, a discount for early payment that has been factored into the estimates).<\/em><\/p>\n

The net result, since I budget to the pessimistic budget, is that I get between $50 and $200 back into my pocket on top of<\/em> the credit amounts, every quarter. The further into the future I project the budget, the greater these amounts become. By the time the projected invoices hit about $1200, the resulting ‘extra in my pocket’ is likely to be $300-$400.<\/p>\n

I’ve tried many simpler approaches, only to be caught short when an unexpectedly high bill comes in. So both budgets are conservative to the point of pessimism in this area, only varying in the degree of pessimism.<\/p>\n

Focus: Groceries<\/h3>\n

I buy groceries in 4-5 week lots, because the supermarket that I use gives free or almost-free deliveries above $300. On top of that, I will use my discretion (and what I feel like) along the way to ‘pad’ the groceries stored. I’ve found that longer periods mean that food has gone off before I consume it (I hate throwing money away) and anything less adds expense and inconvenience.<\/p>\n

Despite all this, to keep the budget more-or-less balanced, the pessimistic model only allows for $260 a ‘grocery shop’ – so I routinely go over-budget, but make money back by not needing to do another one for a week or more longer than forecast. If I can squeeze an extra week out of four successive grocery shops, that’s a whole grocery shop that I haven’t had to make – so I have spent about $200 over budget to save $260, putting an extra $60 into my pocket.<\/p>\n

The optimistic model is more generous in allowing for more grocery shopping, stealing back about $2600 a year from the money saved.<\/p>\n

This is one area of the budget that is changing rapidly; my grocery bills have been going up as the supermarkets shift from being cheaper than the competition to being ‘greener’ than the competition. That makes it easier to get to the $300 target but harder to stretch the resulting food. Enter a new supermarket (almost) right across the road from me – a little more expensive, but a lot more convenient for perishables and day-to-day needs.<\/p>\n

This means that I can focus on buying such commodities from them most of the time, permitting me to space primary shopping further apart and stocking up more on things that will last. So this budget area is evolving in response. If I can spend $120 to squeeze an extra two weeks out of each major grocery shop, I will bring the grocery budget back to where it was before the stores changed policy. So far, I’m not quite managing that, but I’m getting close to it.<\/p>\n

Bottom line: I shop when I need more. I can probably survive for a month without buying more of anything if I have to. It might not be the most comfortable or indulgent month, but it wouldn’t be intolerable.<\/p>\n

Focus: Telecommunications<\/h3>\n

My biggest expense in this area is phone and internet, which cost me roughly the same amount every month. But the pandemic has forced me to get a smart phone, and data charges mean that it’s costing me about $35 every three months on top of that fixed monthly amount. This isn’t currently in my budget, something that I have to rectify at my next opportunity.<\/p>\n

While these costs will undoubtedly rise over time – all expenses do – neither version of the budget assumes that they will; instead, they assume that the budget will get redone when there’s such an increase.<\/p>\n

Focus: Health Care<\/h3>\n

My primary health care cost is pharmaceuticals. I keep track of how long each packet or bottle of each should last, how much they should cost, and use that to get a fairly accurate total of my health-care costs.<\/p>\n

The most expensive medication is about $86 every four months or so. But some<\/em> of these purchases are subsidized by the government so that they only cost $5.60. I assume that all but one of the annual purchases will be at the full price, but the reality is that half (sometimes 3 of the 4) are subsidized, returning $80 to $160 to my pocket annually.<\/p>\n

Both pessimistic and optimistic budgets use the same numbers in this area.<\/p>\n

Complication: Two more Budgets<\/h3>\n

There are other costs that are greatly reduced as a result of that medication. Which means that prudence demands that I make allowance for it going away, or ceasing to work, without notice.<\/p>\n

This changes the frequency of a recurring purchase from twice every 5 weeks to every 2 weeks. It won’t happen overnight – there will be a slow progression from one to the other – but I maintain two variants on the budget (one ‘pessimistic’ and one ‘optimistic’) which assume something close to this worst-case scenario.<\/p>\n

Adding to that, the price of these expenditures is being artificially inflated every quarter by the government. So there is a disproportionate impact to the sudden loss of this pharmaceutical weapon, of up to $4000 a year.<\/p>\n

I don’t use these budgets at all, except to plan my response to the headline change in assumptions. Suffice it to say that my quality of life would take a massive hit, and that damage would worsen with time.<\/p>\n

Focus: Reserves<\/h3>\n

I deliberately budget to keep $100 reserve in my bank account at any given time, and $100 in my pocket. These ‘cushions’ mean that I can go about my life without worrying over every penny spent, but also keeps the amount of damage that I can do to the budget with impulse purchases to a reasonable level.<\/p>\n

There have been times when I have experimented with increasing or decreasing these reserves, but both acts seem to result in budget instability for different reasons. Right now, this is a ‘sweet spot” that helps me cope with the unpredictability of life.<\/p>\n

The reserves stay the same in both versions of the budget.<\/p>\n

Focus: Stationery, Subscriptions, Takeaway Food<\/h3>\n

Every now and then, I have to buy stationery for various reasons. I budget about $65 for this every 12 weeks or so. The reality is that it costs a little less sometimes (but earlier than predicted) or it costs a bit more (but less frequently). Over the course of a year, the average would be statistically fairly accurate, but in the shorter term this is a wild-card element within the budget that is only marginally tamed.<\/p>\n

Every couple of years, I have to pay half of a subscription that I share with a friend of mine. This hasn’t changed in quantity very often and is reliable in the time sense. This year, we were able to take advantage of a special offer to renew early, saving money in the long run. If that happens regularly, the budget will need revision.<\/p>\n

When gaming happens at my place (which happens regularly these days), I will frequently get takeaway food at the same time that the players do. This is an indulgence. I bake it into my budget every fortnight, but the actual amounts spent are usually less than forecast. Balancing that, any takeaway treats that I pick up during the week also come out of this budget – which, in turn, helps stretch the interval between grocery deliveries.<\/p>\n

All these tend to be very similar between both versions of the budget.<\/p>\n

Focus: Christmas & Gifts<\/h3>\n

I do a lot of shopping for gifts online through my credit card. I sometimes do a lot of it in-store in cash.<\/p>\n

I accommodate this by adding the Xmas Budget to my ‘cash in reserve’. If I buy something with cash, it comes out of the $100 reserve ‘in pocket’ which is then replenished with a withdrawal from the bank. If I buy something with the credit card, I transfer money from the reserve to the card. Either way, the amount in reserve gets dropped as purchasing proceeds.<\/p>\n

If I spot a gift during the year, I buy it and reduce the amount to be officially set aside later in the year. I also allow myself a Christmas budget to buy a gift for myself, and some extra food, and a birthday gift for myself as well.<\/p>\n

The amounts set aside for both these are different in the Pessimistic and Optimistic budgets – Optimism means that I have more money to spend, so this spends more of it, by a few hundred dollars Australian. I have a well-earned reputation for being a canny shopper in this area – and of always buying for the person receiving the gift (easier with some than others). I also often shop ‘to budget’ – allowing so much for each individual (not necessarily the same amount – couples get allocated as ‘1-and-\u00bd people’ instead of two, for example. But these are used as guidelines and strong recommendations – if I spot something that looks perfect, I’ll buy it if it’s anywhere close to the budgeted amount.<\/p>\n

Focus: Credit Pay-down<\/h3>\n

I freely admit that I use my credit card to absorb budgetary bumps along the way. But almost all my discretionary budget goes into paying down my debt because otherwise, interest eats my budget alive. But I’m neither a monk nor a saint; the temptation to indulge myself is ever-present. There are times when it, quite honestly, gets the better of me. It’s to fight those pangs off that I budget for those indulgences mentioned in the previous section. It doesn’t always work, but it helps.<\/p>\n

Every version of my budget is aimed at first, paying off the credit card debt, and then keeping it controlled thereafter while that discretionary budget becomes savings, into which I can dip as necessary.<\/p>\n

The date at which the card is paid off varies, and sometimes (to cover an electrical bill AND a grocery shop) I have to let the debt grow again for a little while.<\/p>\n

Focus: Campaign Mastery<\/h3>\n

Campaign Mastery doesn’t cost very much to maintain – it’s about A$210 every couple of years. I maintain a separate bank account for it, with a cash reserve. When an expense comes in, I dip into that reserve and then rebuild it a little at a time as necessary – which is the same way that I built up the reserve in the first place.<\/p>\n

Any money that I make from Campaign Mastery first contributes to that reserve, and second, adds to my spending on discretionary indulgences. Usually, I split such income 50-50, but if there’s been a big hit to the reserves recently, they may get more of the bonus..<\/p>\n

Guideline, not straitjacket<\/h3>\n

I generally consider my budget to be a guideline, not a restriction. If the credit card is getting out of hand, in interpret the budget in a more restrictive way for a while, though, or if there’s a big unexpected expense (those two often go hand in hand)..<\/p>\n

Most of the time, if I really want something, I can buy it – but if I do so, it’s borrowing disposable income from the future (specifically, from a time when the credit card is paid off). So I don’t do so completely casually; in fact, a lot of my budgetary process is aimed at permitting a certain level of indulgence while keeping the finances under control. My reserves are there to be used as necessary.<\/p>\n

Straitjacket, not Guideline<\/h3>\n

All that changes when big bills ore other expenditures are on the horizon. I grow less indulgent approaching and during Winter, for example, and at the tail end of Winter, Christmas Shopping starts. The absolute bottom line is that I always need to have enough money on hand to pay the important bills – rent, electricity, groceries, telecommunications, transport (which I didn’t mention earlier), and to include a minimum Christmas spend in that total. Once those are covered, I can afford to be relatively casual about the rest.<\/p>\n

A Dynamic Process<\/h3>\n

It’s important to observe that my Budget is a dynamic process, not a fixed set of numbers. I revise it every fortnight and whenever a significant quantity changes – income varies every six months, for example, and utility bills arrive quarterly (usually later than the date estimated in the budget, which only defers the credit repayment).<\/p>\n

I always revise the forecast numbers to the actual as soon as they become known. That means that the budget can be viewed as a model simulating what my finances will look like at a future point in time if I behave in a certain way.<\/p>\n

In fact, the reason I don’t project more than 4 years into the future is that beyond that point, the increase in utility bills become budget-breakers, something not likely to happen in real life – so the budget becomes an unreliable guide. Originally, I only projected two years into the future – that was when the electrical bills were rising rapidly – then I extrapolated that to be ‘whenever the credit card was paid off’, which at one point last year was 2025 under some pessimistic assumptions. That was when I realized that it was giving me false guidance, and began cutting back the forecast period.<\/p>\n

Complications: Book-buying<\/h3>\n

I’ve almost finished describing it before moving onto some analysis and then making all of this relevant.<\/p>\n

One complication is that I have a friend who uses me to buy books for him, since he doesn’t have a credit card. So he occasionally gives me money, which gets spent as though it were my own, and the books then become gifts. I make no money from acting as a go-between, but some of the books become resources used for RPGs. That includes the occasional Kickstarter that we back.<\/p>\n

Until it gets spent, this becomes money in my account that I treat as not belonging to me<\/em>; I logically partition it off. On top of that, I track how much it will buy in both Australian dollars and US dollars (approximately), given various fees and shipping charges.<\/p>\n

We haven’t done anywhere near as much of this as we used to, due to changes in Amazon’s policies – that’s their loss.<\/p>\n

The Pessimism in Optimism<\/h3>\n

It’s clear that there’s an element of Pessimism in the ‘Optimistic’ budget – it aims to strike a realistic balance between what is likely to happen and what might<\/em> happen. Because it is the actual working instrument, the one that determines what can be spent and when, and what has to be accumulated toward a future invoice, it can’t be blindly optimistic, or even completely ‘realistic’; it has to prepare for the possibility that things will be worse than either of those.<\/p>\n

The Optimism in Pessimism<\/h3>\n

Nor is the ‘Pessimistic’ budget a description of the worst-possible case; Electricity and Rent don’t increase by 5% a year, for example. That’s because the worst possible case is completely unmanageable, and so improbable that it becomes misleading. Instead, it compromises its pessimism with what it realistically the worst-case scenario that is likely<\/em> to apply.<\/p>\n

I’m always refining these models to make them more useful. Until earlier this year, for example, the pessimistic model assumed that there was no<\/em> increase in income levels, but that became increasing unrealistic – to the point where it was of no value as a planning tool, and that is it’s primary purpose.<\/p>\n

Do Good GMs Budget Better?<\/h3>\n

Well, a budget means being able to abstract and simulate; it means understanding the differences between realism, optimism, and pessimism, and how to use all three to moderate and control expenditure; it means being able to cope with deadlines and logical structures, being able to recognize patterns and use them as indicative predictors of the future.<\/p>\n

All of those are either useful abilities or attributes that contribute to the success of a GM. They may not be the totality of requirements for the role, but they are a good start, especially if you throw in a little imagination. Certainly, to be a good GM you should have all those qualities in some measure.<\/p>\n

So I would argue that the answer to this question is yes, absolutely – if they have learned how to apply their GMing skills to the budgetary process..<\/p>\n

Money In The Abstract<\/h3>\n

Right away, then, there’s an obvious point of relevance – but actually, it’s more like a Window; a connection to a range of points of relevance applying the principles of my budgetary process in various ways.<\/p>\n

First, though, you need to make the logical leap to thinking of money in the abstract. Once you’ve done that, it becomes a manipulable commodity, and you can use the same tools and principles used to handle monetary budgets to handling anything else that can be treated in the abstract.<\/p>\n

And that’s the window to relevance.<\/p>\n

The Principles<\/h3>\n

Before I go there, though, it’s probably worth the effort to expound the basic principles that I’m talking about:<\/p>\n