Saturday, May 04, 2013

How I Budget

Grab a cup of coffee…this is going to be a long one!

I love our budget.

There, I said it.  I love our budget.  We don't always follow it, but I love looking at it and knowing that we at least have a PLAN for where our money should go.  Sometimes we're impulsive and go wildly over in some categories (I am, after all, a compulsive grocery shopper, and my husband can't get within 10 miles of an electronics store without deciding that SOMETHING needs upgrading).  But, through it all, I have my little spreadsheet that tells me where, when we're paying attention and giving it thought, everything should go.

My budget is...complicated.  It's long.  It's detailed.  It requires daily maintenance.  It is accompanied by 14 (yes, 14 - I just counted them again) different savings accounts that ensure that we have money set aside for big purchases, special projects, and expenses that come around less frequently than once a month.  And I love it.

I get paid twice a month.  My hubby gets paid every other week.  I thrive on consistency, so I have built our budget around my pay schedule, rather than a calendar month.  So our budget month runs from the 8th of one month to the 7th of the next. 

My budget is divided into two sections.  One for the first half of the month, and one for the second.  Some budget categories, such as utilities, show up only in one section, because we only pay it once a month.  Others, like groceries and gas, show up in both sections, because we spend on those throughout the month. 

Here are my budget categories:

1st half of the month:

           Garbage Bill
           Gas Bill
           Water Bill
           Gift Fund - auto transfer to savings
           Clothes/Dry Cleaning –auto transfer to savings
           Car Repair/Replace –auto transfer to savings
           Eating out
           Misc. Household Stuff
           Home Improvement Fund- auto transfer to savings
           Pet Emergency Fund - auto transfer to savings
           Phone Bill
           Day Care
           Dog Food
           Weight Watchers
           Car Payment
           Vacation fund - auto transfer to savings

2nd half of the month:

           Auto/Earthquake Insurance - auto transfer to savings
           Gift Fund
           Eating Out
           Life Insurance - auto transfer to savings
           Electric Bill
           Day Care

I have this worked out so our expenses are basically balanced about 50/50 between the two. 

You probably noticed quite a few categories marked as “auto transfer to savings”.  As I said, I have 14 savings accounts.  Early on I decided it was going to be too difficult for me to keep track of all our separate funds on paper with all the money in one account.  So, I started working with an online bank (which pays slightly higher interest than my regular bank) and set up a separate account for each of our different savings needs.  Then, I took the annual amount we anticipate spending, divided it by 12, and set up automatic transfers from checking.  The only exception to this is our gift fund, which transfers weekly.  All money for birthdays, Christmas, and other gift-giving occasions throughout the year comes from this fund – I just transfer it back as I need it.  I realize there aren’t 14 accounted for here – I have some others that I put money in from time to time, and others that have built up so much money that we’ve stopped transferring till we need it. 

All of this is set up in a spreadsheet.  Every day, I write down what we spent the day before, and check our checking account and credit card to make sure we’ve accounted for everything and haven’t had any unauthorized charges.  Leftover money at the end of the month (we always budget to have padding) is transferred to our general savings account. I add new columns each month, so I can go back and easily look at our spending over time.  It sounds arduous, I know, but it really only takes a couple of minutes.  I find that if I don’t do it daily, I don’t do it, so I’ve just worked it into my morning routine.  Get up, get my coffee, check the bank account.  It works for me. 

And really, that’s the important thing.  Find something that works for you.  Some people use cash and the envelope system.  We’ve decided not to do that because we enjoy getting points (traded in for gift cards or cash) from our credit card, which we pay off weekly.  Also, I find it easier for cash to slip through my fingers without a record – at least with my credit card or debit card there’s a note on my account if the receipt disappears. 

This past month I’ve been challenging myself to stay within our budget (it’s been a while).  We’re not going to make it, but we’ll be close.  I’ll be posting next week about how we did, where we went over, and why. 

How do you budget?

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