Hello Readers! The countdown is on and it’s crunch time for most of us. I know that the last thing you want to think about right now is your budget, especially since Sunday is the last big holiday of the season. But this is a crucial part of the New Year, and this should be a high priority for you today.
Now, I know a lot of you may be lost about what to include in your yearly budget or where to start, but this is something that can be easily figured out. This doesn’t have to be a huge time taker nor does it have to be too extensive. It should take an hour or so, but it should be no longer than three hours maximum. However, failure to do this can result in some frustrating times or getting stuck in a hard place really fast. You can actually prevent emergencies or major heartache by planning now. So, grab some paper, a pen or pencil, and a calculator and let’s figure out what to plan for on our Master Budget List.
This should be a no-brainer for you. This is one of the most important expenses in your budget, especially since you need a home to survive. And, for the most part, these expenses are pretty much known: rent/mortgage, electric, gas, water, etc. These are your monthly bills and most of them are the same amount each month. Your utility bills may fluctuate each month, but you can easily figure out the average amount spent each month. Simply access your account online, go to your account history, and add up the totals of each monthly bill for the last year. You should have twelve amounts. Once added up, divide by twelve and you have your average amount. Now, not every month will be the same, and not every year will have the same amount. However, you can calculate how much you should allocate, plus or minus a few dollars, each month. Having this step done now will save you steps each month. Instead of having to guess what your household expenses will be you can just refer to your Master Budget List.
This expense may be a little difficult to figure out since you may not be aware of how to add this up. This expense includes any office supplies, groceries, eating out, and household supplies. A good way to calculate this is that each family member should cost you from $50-$100 per week, depending on how much they eat or what they need. For example, our small family of three tends to but about $150 to $200 in groceries per week, and we spent more when our son Sean was on formula. My sister’s family of four spends $250 per week on average. So, if your family tends to eat more then account for that. Then, just figure that your amount times 4.5 (or 4 1/2) will provide you with a good monthly average.
This expense should include your maintenance costs, fuel, tires, and such expenses as these. You shouldn’t include your insurance, which we will get into soon. Instead, you need to think about how much you spend each week on fuel and what it costs you to maintain your vehicle. It is difficult to figure this expense out since gas prices constantly fluctuate, but you can guess on how much you spend per week. Then, just as before, multiply by 4 1/2 (4.5) and you get your fuel amount. Now, you will also need to budget in your maintenance costs (such as oil changes and filter replacements) and any additional needs like tires, etc. For maintenance, just remember that most vehicles should be serviced once every 4-6 months. So, calculate how much you should account for each month by taking your last service statement, multiply it by 2 (for every six months) or 3 (for every four months), and then divide that amount by 12. Round up to the nearest dollar or five dollar increment. For us, this amount is $20 per month to cover both of our vehicles. Also, account for any other maintenance needs you may need at this time. So, if you know you will need new tires in October, then account for it until then and write all of this on your Master Budget List.
You know exactly how much you spend on your insurance premiums. Even if you only pay once per year or every six months, like we do, for your car and homeowner’s insurance, you should still account for it every month. Again, take your total amount owed and calculate by six (if you pay twice per year) or by twelve (if you pay once per year). And write down how much you should account for each month.
Yes, you just dealt with shopping and buying gifts. And you are probably so sick of thinking about buying gifts that you don’t want to think of it right now. But, honestly, this is a great time to think about buying gifts. Think about how much you spent for the holidays for each person. Figure out how much you want to spend next year, and calculate how much you need to allot each month for your holiday spending. You can also include other holidays, such as birthdays and Mother’s/Father’s Day gifts at this time. For example, my husband Ryan and I have a standing order right now to budget $40 per person for the holidays and the same amount for their birthdays. We have one dozen people to buy for outside of the three of us. At $40 per person per each big day (Christmas and their birthdays), we budget for $960 total for the year, or $80 per month in our gifts account, plus another $20 each month for our own household. By budgeting for this now and preparing for it each month, we have less stress during the holidays because we already have that money set aside for the holidays. If it’s easier, then pull the money out each payday or once each month on a set day and keep it in a safe place at home. Then, when it’s time to buy a gift, you can easily access the money without having to wonder if you have enough.
So, your emergency visits may not be known right now, but you can figure out how much it’s going to cost for all other medical expenses like wellness visits, dental visits, eye care, and medicine. Even if you only go to the doctor’s office twice per year and the dentist twice, you still should account for those visits each month to avoid any hiccups or “tight” months. Again, emergencies happen and it can still leave you strapped for cash. But your regular visits should be treated differently because they are known.
Savings/Emergency Funds/IRAs/College Funds
This is also a known and it needs to be accounted for each month. Even if you only contribute to these funds once a year, you should budget for it each month so that you can ensure that the money is safe in your funds and that your future is protected from as much financial crises as possible. Just remember: save for a rainy day!
For some of you, this may be a known monthly expense. This is the car payment, the student loan payment, the credit card bills, and whatever other debt you may have. Even your medical debt should be accounted for here. For example, our household has just one debt payment each month: my student loans. This debt payment is known each month, so it’s easy to budget for it. If your debt is based on a variable, such as a credit card payment, then try this method to budget each payment. Figure out how much you would need to pay each month to ensure that it’s paid off at the end of the year by dividing the current amount owed by twelve. Aim for that amount each month. But if you can’t afford to pay that much each month, then figure out how much you can afford and aim for that each month.
These expenses are clothing, outings, trips, vacations, and whatnot. These expenses aren’t always mandatory or necessary, but they should be accounted for each month. If you plan on taking a vacation, then calculate how much it will cost and divide that amount by the number of months between January and the months until the trip. Then, account for that. And, calculate how much you will need to save each month to pay for clothing for everyone in your family. Even if you think you won’t buy anything, bear in mind that kids outgrow clothes fast and you will always wind up buying something you need (even if you do a capsule wardrobe).
After figuring out what you will need to budget for each month, write it all down on a Master Budget List and keep it with your budget notebook or journal. Your monthly budget may alter as time goes on, but this Master List is a great reference guide for you as you map out your monthly budget. So, take some time today to set up a Master Budget List and make your 2017 a lot easier to handle.
Until next time,