Just wanted to share some thoughts on budgeting that others might find helpful. I do not have a very strict budget per se, but I have been tracking all of my expenditures (monthly and annual) for the past few years. This has allowed me to see where my money is being spent, what areas I might want to consider cutting back, and ultimately how much I am able to save. Here is a sketch of how I currently categorize my expenses, which may serve as a general guide.
Start with your monthly net pay and subtract the following:
· Mortgage payment (or rent)
· Utilities: gas, electric, cable, cell phone, water, etc.
· Basic necessities: groceries, toiletries, household products
· Gas, travel (e.g. tolls, parking)
· Apparel, accessories
· Media (books, music, etc.)
· Home, lawn, garden
· Restaurants, purchased foods
· Pet supplies
· Entertainment, going out
· Other (everything else)
Track annual expenses separately. Annual expenses include:
· Previous year's income taxes
· Car insurance
· Car maintenance/repairs
· Homeowner's insurance
· Property taxes
· Home improvement/repairs (major)
· Vacation
· Major purchases (e.g. big TV)
For those of you interested in becoming more rigid about saving, I would recommend tracking your expenditures for a few months first. If you find you have some money left over at the end of each month (hopefully you will), initiate a monthly automatic investment plan in a high-yield savings account starting with that leftover amount. As you continue monitoring your budget, you may identify some areas in which you can reduce spending (e.g. buying lunch from FLIK less often) and thereby increase saving. Also, assuming your expenses remain fairly stable, your monthly savings (automatic investment) amount should increase over time in line with (presumed) salary increases – just because you're making more doesn't mean you have to spend more.
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