Jan 25, 2010

The First of 3 Little Budget Secrets (Carole)


I think setting up a family budget (and sticking to it, of course) has to be one of the hardest things a couple ever does.  However, the alternative is complete chaos and ulcers.  So, much better to take the time and set up a budget.  But there are some Little Budget Secrets that make this process so much easeir.  I’m going to share one of them with you today.

Every budget should obviously begin with the basic expenses you have every month

Budgeted item
Expected Amount
Actual Amount
Mortgage/rent


Nevada Power


Southwest Gas


Sprint


Gasoline











The budget killers though are those OCCASIONAL bills.  You know what I mean – car registration, property tax, insurance premiums, hair cut and color J, birthdays, Christmas.  The list can be pretty long.

I remember when we had been married only a few years and Janssen was a baby.  I was suddenly home full-time with her and put in charge of the family finances.  I must admit I didn’t know hardly anything about money and was basically learning on the job.  I would sit down twice a month while she napped and pay the bills.  I had a nice sheet that listed all our usual bills, and also had some empty lines down at the bottom for anything “unexpected.”  I came to hate those empty lines – because they were always filled in!  Every dang month!  Couldn’t we have just ONE month without some unexpected bill or two that used up all our extra money??

I mentioned this to David finally and he recommended I read a series of slim books he had about family finances.  I had never had the slightest interest in these books before, but suddenly I was motivated!

I found the secret -- these bills were not UNEXPECTED at all.  They were just OCCASIONAL.  So, I needed to plan for them.

We set up a special savings account attached to our checking account.  We looked over our past year of bills to see what “unexpected” bills kept showing up.  We listed them all out and divided each bill by 12.  I then began putting 1/12 of that bill’s total in the savings account each month.  I made up a little chart where I could keep a cumulative total of what money I had saved aside for each bill as the months progressed.   All the bank saw in that savings account was one lump of money – but to me it had a dozen little categories filling up with ulcer-free money. 

Occasional Bills
January
Febuary
March
April
Car Insurance
105
210
315
420
Car Registration
40
80
120
160
Christmas
70
140
210
280
Property Tax
125
250
375
400

What a relief the next time the car insurance was due to have the entire amount already waiting to pay the bill.  I simply transferred the money into our checking account and wrote out a check.  No "unexpected" budget busters ever again!



From then on our budget became realistic and predictable.  This is the goal!  Take a look at your own yearly bills and see what you can do give your finances some consistency.  Then throw out the Tums.

6 comments:

Packrat said...

Carole, excellent advice. One just needs the will power to not spend that money on frivolous things. :)

Chelsea said...

That's a pretty good idea! I'll have to look into that too!

Miriam said...

We've done this for years, it does work.

Sara said...

I suggest you use ING Direct for your savings account(s). You can have however many accounts you want and you can put your birthday money in your "birthday account" and your Christmas money in your "Christmas account", etc. That way it shows you exactly how much money is in your special savings accounts and you don't have to write it all down. And you really can have the account's nickname be labeled as "birthday". It's a great way to keep organized.

Nathan Pralle said...

My wife and I were just talking about this the other day. It seems every year the end of the year is hell for us, because car registrations are due, birthdays and Christmas all hit. We then take 3 months just to recover from the anomaly in the budget, so I proposed something like this the other night, and she thought it was a fabulous idea.

Glad it works for others, too! :)

C. David Gravett said...

So I've been using this method for a few years for my regular expenses (car registration, insurance, etc.) because I read this post. But now I just reread it, and realized that I never included Christmas in my short-term savings! What a good idea!