Budgeting – Fine Tuning
Once you have your average-month budget complete, you should use it to help create a precise budget for every month. This not only helps you plan for variable expenses, but it also helps you plan for any variable income. With this yearly budget you can plan for expenses that only happen occasionally - like getting your carpets cleaned and buying school clothes. You can also vary the amount you budget for common expenses - like utilities and auto maintenance. On the income portion you can vary your income by month if needed. Maybe you get a lot of overtime in the fall, and only work four days a week in the summer. If you are in the construction trade you probably make less money in the winter then you do in the summer. You may get bonuses at certain times of the year or you may have a commission based income that is seasonal.
If your income and expenses are fairly steady throughout the year, you can probably get by with only doing three months worth of budgets at a time. (We don’t want to make this too hard.) The more variable your income and expenses, the more important it is a do all twelve months worth of budgets up front.
Click Here For A Paper and Pencil Yearly Budget Form
Click Here For A Microsoft Excel Yearly Budget Form
You start by putting the average month budget in the first column, then use that budget to help you estimate the remaining months. Try your best to think of all the odd things that come up during the year. Maybe you know you will need new tires on your car in a few months, and your child has a school trip in the summer.
The next step is to review the budgets to determine if you have any problem months. Are there any months where your income does not cover your expenses? If there are, how are you going to handle these months? You do not want to have to resort to charging the difference on a credit card. Comb through the budget and see if there is anything that you can trim. Can you trim something from the month before or the month after?
This next step is probably the least fun part of budgeting. It is monitoring your spending to make sure that you stay reasonable close to the budgeted amounts. We definitely don’t want to track every penny, every day, forever. Fortunately, you won’t have to do that.
First off you will need to start memorizing some of your numbers. For instance, you should know how much you budgeted for groceries and eating out each week. When you go to the grocery store keep that number in mind. The same thing with eating outing. Let’s say you budgeted $35 a week for eating out. You should have a rough idea of how you are going to spend that money – maybe two pizza’s Friday night, ice cream Sunday afternoon, and latte on Wednesday. If you stick with the same amounts each week, the numbers become second nature. You can still vary this occasionally, just make sure that if you spend $75 eating out one week, you need to either put that in your budget up front, or cut back on something else.
The second way you are going to monitor your spending is by writing a few words after each item in your checkbook. If you write a check for $40 to the gas station write “gas” next to the amount, or “gas $35, food $5”. Then when you go back at the end of the month you will know what that money was spent on. Do the same thing for any debit transactions. Then, at the end of each month, you will total up what you spent in each category. If you take cash out of your account roughly estimate how you will spend that money – gas $20, eating out $10. Another trick is if you give yourself a certain amount of spending money each week – say $30 – and don’t bother tracking every little thing you buy with it. Instead simply say “John’s spending money”. You can even make this a line item in the budget.