Working on budget

[macandal]

I am working on my budget. This is not the first time I do this, but this time I want some input so I can nail it down as much as I can.

One of the stumbling points that I'm encountering is how to allocate money for things you don't know how much they're going to cost or things that you don't know you're going to need. This came up when I was allocating for clothes, sure we all need them, but how do I put a price to them? What if my pants tear apart and suddenly I find myself needing to buy more?

I'd love to hear what you guys have to say about putting together a budget in general.

Thanks.

[Eagle]

I am working on my budget. This is not the first time I do this, but this time I want some input so I can nail it down as much as I can.

One of the stumbling points that I'm encountering is how to allocate money for things you don't know how much they're going to cost or things that you don't know you're going to need. This came up when I was allocating for clothes, sure we all need them, but how do I put a price to them? What if my pants tear apart and suddenly I find myself needing to buy more?

I'd love to hear what you guys have to say about putting together a budget in general.

Thanks.

I really enjoy budgetting. You probably just need to find a system that works for you. I think also seperating needs from wants could also be important.

What works for us? I have two basic categories: Fixed (or Re-occuring) Expenses and Variable (or Fluctuating) Expenses. Here's some of the items on our budget.


*Fixed (Re-occuring) Expenses
Rent/Mortgage
Utilities - Electric
Utilities - Water/Gas
Insurance - Health
Insurance - Car
Insurance - House/Rental
Insurance - Life
Medical - Dentist
Medical - Doctor
Savings
Giving


*Variable (Fluctuating) Expenses
Food - Groceries
Food - Eating Out
Transportation - Gas
Transportation - Maintenance
Fun/Entertainment
Education (surprisingly not applicable to us right now)
Debt Reduction (surprisingly applicable to us right now)
Household items
His Allowance
Her Allowance
Miscellaneous

For more see this post... Best Budget Categories.

[macandal]

*Variable (Fluctuating) Expenses
Food - Groceries
Food - Eating Out
Transportation - Gas
Transportation - Maintenance
Fun/Entertainment
Education (surprisingly not applicable to us right now)
Debt Reduction (surprisingly applicable to us right now)
Household items
His Allowance
Her Allowance
Miscellaneous

Thanks Eagle. But how do you allocate money to these items? The ones you don't know how much they will be?

[disneysteve]

Thanks Eagle. But how do you allocate money to these items? The ones you don't know how much they will be?

A budget is a dynamic document. It will change regularly, especially when you first start doing one on a monthly basis. At first, you need to come up with some reasonable estimates based on past experience. Then you can fine tune it over time.

You mentioned clothing. I'm sure you have some concept of how often you need to replace clothes and about how much you typically spend. You may not shop for clothes every month so you just need to average it out to a monthly figure. If you spend about $500/year, then your monthly clothing budget should be about $45. The same goes for things like car repairs. What do you spend in a typical year?

[snafu]

If you've budgeted in the past they're your best base for the future. One starting point is to break down income with 10% Savings called 'paying yourself first.' Allocate 50% to Needs [rent/mortgage, utilities, transportation, food, SL], 30% Wants [clothes, cable, internet, cell, entertainment, non essentials]. We're trying to keep the volume of stuff constant so our house rule is 'anything new in, requires something similar out.' If I want new slacks, old slacks get donated if in good condition or trashed. When we downsized to a condo we added 'how much is enough' and have limits on different categories of clothes so that drawers aren't stuffed and closets have no more than 12 hangers per foot of rod.

It helps to keep a list of when items you use regularly go on sale. This holiday weekend has terrific sales if you need those items. I use an on-line coupon for Jiffy oil change when due and follow the manual to take care of my car to keep it running without problem. Limiting convenience food as much as possible and cooking at home is both healthier and cost efficient.
It's really hard to give figures because every region has huge variations.

If debt is a major problem, we can offer suggestions with details like sum and interest rate.

[Eagle]

Thanks Eagle. But how do you allocate money to these items? The ones you don't know how much they will be?

A good measurement as DisneySteve said is past experience. The way we came up with our budget was tracking expenses and reveiwing what we'd spend for a few months. The easiest way to do this is on www.mint.com

Originally I kept every receipt of what we spent for 2-3 months. It was a bit exhausting. We pay our bills and incure expenses 95%-99% via credit/debit card. So Mint makes it easy now to track our expenses. Also helps save trees.

You just need to pick a starting point. Allocate all that comes in (what you make or your income) to match what you budget (your expenses). List your fixed bills first (rent, utilities, etc.) then allocate the rest of your income to the other budget categories. So perhaps a good start would be $50 a month towards clothing and then see what you actually need or do purchase in June for example.

Make sense?

First questions first though.

1. How much is your monthly income?

2. How much are your monthly expenses?

3. Do you have any savings or investments?

4. Do you have any debt?

[macandal]

I like the "wing it first, adjust later" approach that many have suggested. I'll do this.

Thanks.

[carmela1]

I had a hard time budgeting because I am not used to doing it at home (my mom does it). I had great time reading and learning at the same time. Thanks for the posts!