Budgeting questions

[iowabergmanns]

1. With your budget, do you work off of your gross income or net income? We have a lot of pre-tax deductions where they typically are the same each pay period, so it makes sense to work off of net pay and that's our 'spendable income'

2. How do you guys fit expenses that come once a year or semi-annually like AAA fees, auto license, auto insurance, Christmas gifts, veterinarian visits. Do you simply take the annual/semi-annual amount and divide by 12? Any other tips would be appreciated.

[Seeker]

1. With your budget, do you work off of your gross income or net income? We have a lot of pre-tax deductions where they typically are the same each pay period, so it makes sense to work off of net pay and that's our 'spendable income'

2. How do you guys fit expenses that come once a year or semi-annually like AAA fees, auto license, auto insurance, Christmas gifts, veterinarian visits. Do you simply take the annual/semi-annual amount and divide by 12? Any other tips would be appreciated.

1) net amount received.

2) Divide by number of months. Like water & electricity bill comes every other month, so I divide by two to figure out the monthly.

For gifts and other things, it just sorta comes out of "mad" money (money allocated to spouse & me to spend as desired, no questions asked). Emergencies come out of the EF, but then gets repaid. etc.

[skydivingchic]

1. I work off my net income.

2. For periodic fixed bills, I simply divide by 12 and put that much aside each month. For periodic variable bills, I used past bills to estimate as best I could what I would spend each year and divided that amount by 12. Mvelopes has been an enormous help to me for these types of bills since I can easily and quickly see exactly how much money I have set aside for vet bills, gifts, car repair, etc. Anything over and above what is in the envelope would come out of my emergency fund, but so far I seem to have done a good job estimating these expenses and that hasn't been an issue.

Other ideas:
- If you get paid biweekly, try to work your budget out on two paychecks per month. That way twice a year you get an "extra" paycheck that you can use for larger purchases or to boost your savings.
- For things like my power bill, I looked back to see the most it has ever been. Each month I put that amount aside for the power bill. Most months it is below that amount, sometimes significantly. Whatever is left in that envelope gets swept into my savings account.

[jIM_Ohio]

1. With your budget, do you work off of your gross income or net income? We have a lot of pre-tax deductions where they typically are the same each pay period, so it makes sense to work off of net pay and that's our 'spendable income'

2. How do you guys fit expenses that come once a year or semi-annually like AAA fees, auto license, auto insurance, Christmas gifts, veterinarian visits. Do you simply take the annual/semi-annual amount and divide by 12? Any other tips would be appreciated.

1) depends. I work my savings rate off of gross income and all expenses off of net income.

ex) save 10% of gross
ex) spend less than I take home

2) We use IRA contributions in budget- for example I send $625/month to IRA. I hit 5k max in 8 months. So the last 4 months of the year have $2500 accumulate in bank account. This covers gifts, homeowners association (due in Jan- once a year) and cash.

For things like insurance, my wife gets paid 26X ayear. The two months she gets paid 3X cover the insurance bill. We just have to bank the money if the insurance bill is dues 2 months later.

Dividing by 12 works if you are disciplined enough to keep money in savings or in account until Bill is due.

This is why it is also a good idea to have around 3 months expenses available. Makes worrying about these little details a moot point if you have the cash flow coming in.

[maat55]

You go off your take home pay. If your take home pay is different every month, you do a prioritized budget. Starting with food,lights etc. Its best to set aside in your plan a working capital so to speak of about 1000 or more if you need. This allows you to pay bills as they come.

[MonkeyMama]

1. With your budget, do you work off of your gross income or net income? We have a lot of pre-tax deductions where they typically are the same each pay period, so it makes sense to work off of net pay and that's our 'spendable income'

2. How do you guys fit expenses that come once a year or semi-annually like AAA fees, auto license, auto insurance, Christmas gifts, veterinarian visits. Do you simply take the annual/semi-annual amount and divide by 12? Any other tips would be appreciated.

#1 - yes, we go off net income.

#2 - For once a year or less often things, we add them up and divide by 12. It's not a bad idea to add another $100/month or so to this pile just to cover other unexpected things (or in case you forgot something). Then at the end of the year, if we have a surplus, we transfer it over to our long-term savings.

I find it really simple to transfer the dollar amount to our savings every paycheck (along with retirement funding and other savings). Then you just don't miss it.

Last year was my first year budgeting really strictly, and it seems like a lot of unexpected things come up. Generally little. I started pulling them out of my short-term savings because I had a little excess. But this year I started adding another $100/month and it has been so much easier. I am no longer thrown off when a $30 bill I didn't expect comes along.

We also changed our utilities to balanced billing. At first I didn't really see the point, but I have to say it makes the budget so much easier. We get billed a flat rate every month which means pretty much everything in our budget is the same amount every month, except our credit card. Makes it so much easier to plan for on a monthly basis.

I didn't really care about this stuff before because we always had plenty of cash, BUT now we are using our money much more efficiently. Much more is getting funneled into savings and earning higher returns, etc. We are being more vigilant about transferring our checking balance to our savings at the end of every month, etc.

[Broken Arrow]

1. Mostly net. There are certain exceptions, such as my 401k, that is based on the gross.

2. Yes, I divide the amount needed by my pay periods.

[KellyB]

1. I too go off of net pay, as it is what I have to spend.

2. I use an Excel spreadsheet to track these kinds of annual/quarterly expenses so I know when they will be coming up. I have my saving account subdivided (on paper) into 3 months emergency fund, vacation, Christmas, Annual Condo fee, water, trash, car repair, medical, household, insurance premium, etc. I keep whatever annual or quarterly amount is needed in there, and transfer it over to checking when it's time to pay. To save it up originally, I also figured out the amount on an annual basis and just made it a savings goal to put aside however much money was needed in each category. I have an automatic transfer from my checking to my savings of $500 per paycheck, so once the money is in savings I just divvy it up according to whatever savings goal is short or coming up the soonest. It took me about a year but now I have it so that all my accounts are funded and just the big ones (vacation and CHristmas) are getting the monthly money. After they fill up I will be able to turn my attention to getting rid of my HELOC!

[SnoopyCool]

1. With your budget, do you work off of your gross income or net income? We have a lot of pre-tax deductions where they typically are the same each pay period, so it makes sense to work off of net pay and that's our 'spendable income'

2. How do you guys fit expenses that come once a year or semi-annually like AAA fees, auto license, auto insurance, Christmas gifts, veterinarian visits. Do you simply take the annual/semi-annual amount and divide by 12? Any other tips would be appreciated.

1. Net income

2. I just work things into where they fall (if auto license is due in Jan, I put it in the Jan budget). We try to spend less than we need so we can do it this way - so the $ is in the bank when we need it for those periodic things.

[vsjhoc]

I use the gross amount. Taxes, health insurance, 401(k), etc. are line item expenses just like groceries, utilities, etc.

[tabbycat31]

I budget by paycheck (biweekly). Every paycheck is a different budget. However I budget from my take home (things like health insurance come out pretax).