Household Tips Budget

Budget

There are several reasons for keeping a budget.

Tax records
You can't reduce expenses if you don't know what you're spending.
Feeling like you know where your money is going.

You should have several folders for your budget:

One folder for annual budgets. In this folder you'll have a summary sheet for each year you track your budget.
One for each month of the year, labeled "Jan 2005 budget" through "Dec 2005 budget"
One for future years labeled "future budget" - in here you'll put expected income and expenses for future years as you come across them, for example, a child going to college, an upgrade to the house, a new car, etc. - if they're in the current year, put them in the correct month's folder.
And one folder for "Unrecorded Records"

In the monthly budget files, you'll have a front page with a summary of expenses and income, as well as receipts and records of monetary transactions. Each receipt / record should be identified as to it's category - the categories are which row you store the information in on your budget - like utilities, groceries, etc., and they should have a date on them. Some receipts you'll want to store in your permanent records, or safe deposit box, or other files, in which case you'll write on a piece of paper the key information - date, amount, category of expense/income, and where the document is filed. For example, "3/18/05, 512.00, dishwasher, unexpected expenses, in appliance file". The receipt / record / note is put into the "Unrecorded Records" file until it's transferred to the summary.

On a regular basis, maybe once a week (write it on your calendar/list), you'll go through the receipts and records and transfer them to the budget summary for the month. As you transfer a record to the summary, mark the record to show it's done. For example "Recorded 3/18/05".

The monthly budget summary should be a spread sheet with have rows for amounts such as this:

Category
Salary
Investment Income
Misc Income
Mortgage / Rent
Utilities
Insurance
Property Taxes
Groceries
Clothing
Miscellaneous

You might also want to track some things in more detail because you're spending what you think is too much money in these areas. For example, groceries might be seperated into groceries and lunches. Clothing might be seperated into clothing by person, etc.

This can be a computerized spread sheet, but if it is you need to print it and put it in the folder each time you update it. I've been a computer professional for over 25 years, and mine is tracked on a piece of paper - I use Excell to generate the paper and then the numbers are written on the page.

You can complete this everytime you add a receipt or record to the file, or on a regular basis. I think it's easire to do once a week.

A procedure that works

Weekly

Once a week - the same day each week works best - go through the "Unrecorded" folder. For each document, record the amount in a box on the associated row on that months summary sheet, mark the document so you know it's recorded on the summary sheet - one way would be to write "Recorded 3/18/05" on the paper.

Monthly

When the end of the month passes be sure to put the information on the right month's summary sheet - if you do this on the same day each week, you'll have some receipts for two different months once in a while.

Reconcile the amounts with your bank statement. To do this you add up the amounts you've recorded on your monthly actuals and you add up the amounts in your bank statement. They should match. If not, you're either over-recording something or missing something.

Total the amounts for each row and record this information on the annual summary sheet for this year - in the folder labeled "annual budgets". This sheet looks something like this:

Actuals 2005	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Salary
Investment Income
Misc Income
Total Income
Mortgage / Rent
Utilities
Insurance
Property Taxes
Groceries
Clothing
Miscellaneous
Total Expenses
Net Income

Total the income rows for the month, record the amount in the total income row. Total the expenses rows for the month and record the amount in the total expenses row. Subtract the total expenses from the total income and record the amount in the net income row.

Compare the actuals to the budget to see how you're doing. If you're not close to the budget, figure out where you went wrong and take steps to correct it this next month. Understand there will always be unexpected expenses, you can record notes of these on your actuals page, and refer to them when you make next years budget. If you haven't created a budget yet, you can use this months information to create one, as described below.

Go through the next few months folders looking for expected expenses and income, preparing for these upcoming events.

Annually

At the end of the year, create two new forms. One is the actuals record for the next year, and the other is the budget for the next year. Compare this years actuals with the budget you prepared last year. Any discrepancies should be accounted fore, make a note on the actuals and / and or budget pages to indicate the issue. The budget for the next year look just like the actuals, but is labeled budget, and the numbers in the boxes are put in at the end of the prior year. Use the same numbers as your actuals from the prior year, with only minor adjustments based on expected raises, increased or decreased expenses and the records in your "Future budget" file. Don't over-estimate your reduction of expenses.

The purpose of creating a budget and tracking actuals is to enable you to see where your money is going. From this information you can see how you can adjust your spending habits.

It's not always easy to make spending habit changes, you can't change your mortgage easily, or utilities, but you can see, through this method, how much you're spending on things that you might consider frivolous. You might finally see how much money you're spending on lunches, or interest on a car, for example.

More finance tips

Permanent files What to store in your permanent file.
Safe Deposit Box What to store in, and how to get, a safe deposit box.
Filing Checklist How to develop a filing system, either to start a new one or improve your existing one.
Other Files What to else to keep in files.
Budget Keeping a budget.
Medical Records What to keep, and what to do with medical records.
Home Inventory Creating and maintaining a home inventory file.
Car Purchases The most efficient use of your money when purchasing a car.
Phone Book An organized personal phone book file system.
Keeping Records Where to keep records.
A home office Setting up a home office.
Home Office Running a business from home.
Banking Banking, savings, checking, and other bank accounts.
Balance the checkbook How to balance a checkbook.
Interest What interest can do for you or to you.
Bad checks How much a bounced check really costs.
Tax refund What to do about tax refunds, how to calculate what to have taken out for taxes during the year.
Pay off debt How to get out of and stay out of debt.
Cutting Expenses Ideas for reducing expenses as much as possible.
Investing Making wise investments.
Credit Cards Making wise use of credit cards.
Debit Cards How to use debit cards.
Finances and records Getting started with your finances and records.