Monday, December 21, 2009

Spending Plan for the New Year

I have most likely mentioned my obsession with budgeting already. That I look at my budget and plug in what was spent that day almost everyday. I once read a study that taking a few minutes review your spending and update balances at the end of each day would save someone making about $40,000 a year $300 a month. That is a lot of dough for very little work.
Aside from the hopes of saving an extra $300 because I account for each dollar, I enjoy it because I feel like it is something I am good at.
I have been creating what will be our budget for the new year. Nothing like taking care of this before the holiday so you can be ready on jan 1. Just one day of not planning your spending can really ruin your whole month. So I am prepared to get the year off on the right foot. If you are not a budgeter- but have been intending to- or needing to, January is the perfect time to start. For one it is easy to live on a tighter budget because you most likely will have spent tons of time in Decemeber eating out and getting gifts. That should really make it easy to cut down your spending on your grocery bill and discressionary spending. Plus it is freezing where I live- so the desire to go out is minimal. My only temptation of course in Janurary is after Christmas sales- but really I never find that good of deals anyway.
In the past after splurging and spending more than expected in Decemeber my family has gone on a "Spending Fast" where we only purchase what is absolutely nessesary. No eating out, no haircuts, no treats from the grocery store, no clothes or makeup, no stuff for the house, no eating out... I know I already said that but we alwasy rationalize going out even when we say we can't. It is amazing to see how much you can save when you cut everything down to the bare minimum. We just make do and it really doesn't effect us that much.
..... so today is the day to make a spending plan. Need someplace to start?

Here is how the budget we have been using for a couple of years breaks down by percentage of total take home pay.
Savings/ Emergency- 14%
Charity- 10%
Mortgage- 33%
Loan- 7%
Utilities- 4%
Discressionary- 4%
Insurance- 14%

I found this link to see what others recommend for percentages and household spending.
Obviously no two families are alike. For example, our medical, life, and car insurance comes to %14 of our take home pay where others may have an employer pay for some of these. We are also paying 7% of our take home pay towards students loans where others may be lucky enough to not have any, and may need to add a higher percentage to the car/gas catagory if they have a car payment where we do not. Times are tight and you may want to lower the percentage alloted to the savings/ emergency fund. It is your budget, but we seem to find emergencies to spend this amount and more each year so I might recommend this as a minimum. It is a much better plan than our previous plan- which was to hope our tax refund was big enough to cover broken down refridgerators and SUV's that need new engines unexpectedly.
Another tip to share is that if you spend more or less in a catagory one month- carry the balance and add or substract it to the next month's amount. For example. We spend about $90 a month in utilites in the summer (only 2% of the 4%) but sometimes as much as $320 in the winter when we are spending more in gas to heat our home. $320 is much more than the 4% this catagory has been alloted, but because of summer months of under spending this catagory there is a surplus to carry us through.

Need some more tips to get started. Try this link about building your first budget.
There are lots of sites on line that offer free downloads of household bugets. Just be sure that you are downloading from a reputable site. Your banks webiste is a great place to start. They often offer downloadable forms for members.

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