DAY 93 - SPENDING & SAVING PLAN – BUILDING A BUDGET
I hope you’re following along as we countdown the final 100 days of 2022 - you can join us anytime. Learn more here about the program HERE.
There are so many reasons to periodically re-evaluate your monthly spending. It shouldn’t be done only when there is a life event like, losing a job, expanding your family, or medical issues. It should be something you do at least twice a year. If now is the time to cut back on spending, there are a few easy steps you can take to create some new behaviors that just might help. It starts with building a budget.
Grab your notebook!
If you have a budget, review it to make sure it is current and accurately captures everything. If you don’t have one, you need to put one together. It doesn’t have to be fancy; it just has to be all-inclusive. You can find any number of budget templates online, free of charge. Here are some reminders of what to make sure you include:
Installment obligations. Start with installment expenses like housing (including property taxes if there’s a mortgage), rent, HOA dues, automobile expenses (including loans & insurance), student loans, etc. If your rent or mortgage payment will increase within the next twelve months, budget for the higher amount now so you can build up a reserve for when that increases. Add in any additional installment loans you have that you will need to continue to pay on for more than six months. If they are paid off in less than six months, you can include them but note that that expense will be ending.
Insurance. There are so many insurances we pay on a regular basis. Include everything like homeowner’s or renter’s insurance, automobile/motorcycle insurance, insurance on electronic devices like a Smart Phone, iPad, computers, life insurance, medical insurance, etc.
Marital/Childcare expenses. This should include alimony, child support, or separation payments. You should also add in any support payments you’re providing to a family member such as a parent or a college-aged child’s monthly support/or allowance. Add in childcare or babysitting expenses. Don’t forget monthly tuition or expenses for after-school sports or activities such as football, track, piano, ballet, etc.
Auto-debit/auto-charges. Next, add in expenses that are auto-debit from your bank account or auto-charged to a credit card. These would be charges like subscription TV or movie apps, and cell phone(s). Those are easy to overlook since you don’t have to write a check for them each month.
Utilities are next and in addition to water, gas, waste/sewer, don’t forget cable and internet expenses.
Employment-related expenses such as uniforms/clothes, dry cleaning, parking, gas for commuting, subway/train, tools, etc.
Food & household expenses. Include anticipated spending on dining in and eating out for each day. Make sure you include those morning lattes. Also, add in cleaning supplies or a house cleaner if you have one.
Entertainment/Lifestyle. This should include everything you do outside of working hours: movies, gym, hobbies, books, concerts, dating, birthday and holiday gifts, etc.
Personal care & clothing. This will include everything from shampoo and body wash to makeup or shaving expenses like those monthly shave clubs. For clothing, consider what you spend, on average per year, and then divide that by twelve so your budget for that monthly. Don’t forget haircuts, including color and highlights, manicures/pedicures, and other personal care items.
Savings. For savings, do not include contributions that are already deducted from your paycheck. The same holds true for 401K contributions. Those are already accounted for. This line item should only be
Credit cards. Include all credit card payments that you are currently making and note the balances.
Vacation and holidays. While these are two things that typically bring people a great deal of joy, they can also really impact finances. Determine how much you typically spend on vacations and the holidays including holiday travel, decorations, gifts, etc. Again, take that annual amount and divide it by twelve to come up with a budget number.
Other. Any items not accounted for in the list above, include it now.
While making a budget is fairly simple, many people do not live by a budget or track their income or spending. A survey conducted by The Penny Hoarder in June 2015 reported that 56% of those surveyed didn’t know how much money they spent last month. While there is a myriad of reasons why some people opt not to budget, I would think having a little more knowledge of how you are handling your money is beneficial.
Let us know in the comments if you already have a current budget in place or is it time to reevaluate?
