Thursday, January 20, 2011

Rethinking Budgeting

One of the main issues that I have, and I think most people (anyone can correct me, I won't be offended) also have this issue, with budgets is that I create my budgets this way:
  1. Income
  2. Fixed Expenses
  3. Variable Expenses
  4. Debt Repayment
  5. Savings 
Which means you decide how much you think you have to spend in the Variable Expenses categories before getting to Debt Repayment and Savings. Not to mention that "Planned Spending" isn't in that list at all. Of course, we are still supposed to plan for these "unexpected" expenses in our budgets, but realistically, how many people actually do this when creating a budget? I always think, 'what do I typically spend on X in a typical month?' and enter this line on my budget. This, of course, doesn't take into consideration that you may only spend $40/month typically on eating out, but, oh, February has Valentine's Day in it, planning on eating out that night? Not to mention large clothing items (coats, shoes, etc) that need to be replaced and birthdays.

So, my budget for 2011 was worked out this way:
  1. Income
  2. Fixed Expenses
  3. Debt Repayment
  4. Savings
  5. Planned Spending
  6. Variable Expenses
I decided ahead of time what my Debt Repayment and Savings goals where first before looking at what is left over for the "spending" categories. I've never budgeted this way before. Its always, 'let's see what's left over after the spending is done' Bad Budgeter, BAD!

Income $2232
Fixed Expenses $418
Debt Repayment $1000
Savings $500
Planned Spending $80
Variable Expenses $234

The budget I posted yesterday doesn't separate out the Variable Expenses vs Planned Spending because the Planned Spending is worked into the Variable Expenses. Like Gail's jars, whatever is left over in a Variable Expense category in any month is added to next month's Variable Expenses. But, since I'm not doing the jar method (I'm lazy, I'll admit it!) I'm using my 2nd chequing account (its technically a savings account but there's no charge for transferring in and out from my 1st chequing account online) for my Planned Spending account so that when I need the money to add to my Variable Expenses in any category, I can. I am REALLY hoping I can make this work. Like I said, I've never budgeted this way before. Also, I'm leaving myself with very little play money $234 a month works out to $58.50 per week, but I've been living on about $40 for the last month and a bit, so I think I can do it. More frugal fun to be had this winter!

TTYL, Morgaine

1 comment:

  1. you will totally be able to do it for that much ifyou have been doing it for $40 in the past :) good luck!