budget suggestions

[buster7823]

So my wife and I have been on a written budget for about a year now and for the most part it has helped a great deal. We created a spreadsheet that tracks our monthly expenses. We broke it down into what we call "fixed expenses" i.e. mortgage, auto loan, health ins, and so on, basically every expense that does not change from month to month. in other columns we list "varialble expenses: i.e. utilities, groceries and so on. From there we take the total "fixed expenses" + total "variable expenses" and subtract that from our net income. For example (using round numbers)
Fixed...$1000 + Variable...$1000 = $2000
net income...$3000 - $2000 (total expenses)= $1000 which we call are "extra" column
So say that scenario was for the month of September, we roll the "extra" amount over to October so we know exactly what we have to spend that month. I know most say to average your utilities, groceries, gas and other variable stuff out over a 12 month period but I just thought this way we know exactly what we have to spend/save. I hope this made some sense and isn't to long. Comments/advice is appreciated.

[creditcardfree]

Interesting. I think I've seen a system that works this way. At what point do you pull money from the "extra" money for savings or debt payoff. It sounds like you are always rolling it over to a furture month to spend.

[am_vanquish]

Seems like a decent method to me. Just curious how this system handles expenses that aren't re-occuring. What about car maintenance/medical bills/etc? Seems like this system would have you blowing the budget one month due to an unexpected expense, then carrying that forward to the next month. Then the new month would have a budget higher than it truly should, leaving room for you to spend too much on going out for food/entertainment because your "variable" total has extra room.

[buster7823]

Once we get to a predetermined amount in the "extra" we roll that into savings, we also have accounts for just in case emergencies i.e. car/ house maint. No debt except for house and a car loan, we also put extra towards those once every quarter to get those paid down quicker.

[buildmybudget]

It sounds like you have a great plan in motion. My only concern is that you're trying hard to maximize your savings and pay down your debts, but doing it on a quarterly or "set amount" basis does not use make the best use of your cash. Have you tried establishing a floor in your spreadsheet for your checking account each pay period or month, and transferring the "extra" you will have after you have paid your fixed & variable expenses?

[kanjoh]

I agree with build my budget - the more often you pay it off, the more interest you will save. Holding on to excess cash instead of paying down debt is rarely the most efficient solution (unless of course you need the cash for something down the road). But if you're going to use it to pay off debt, you might as well do it sooner rather than later

[buildmybudget]

Buster, feel free to contact me if you'd like any help with your spreadsheet. It would be pretty simple to show you how you can make your money work a little bit harder for you.

Best!

[Vytautas]

I think you've got an effective budgeting method. It's very similar to some budgeting methods companies use to determine their finances. Buildingmybudget says to not just hold onto the money if it's not necessary and I agree. What you might want to consider is creating a further section below "extra" and rather than rolling it over, add additional expenses such as savings, retirement and debt reduction. This way you can keep your fixed and variable expenses separate from the "extras" but aren't forcing yourself to unnecessarily conform to the spreadsheet.

[buster7823]

Great suggestions from everyone. I thought I had most everything figured out but I have learned some different ways of thinking here. I had not heard of this budget method before and thought this was the best way for us to handle our money. Thanks to everyone for their ideas.

[wincrasher]

I would challenge your notion that some budget categories are allowed to be variable.

Groceries, Gas and utilities can be fixed. The trick is to actively work to bring down costs to fit the budget parameters.

[buster7823]

Yes we have parameters set up to not go over a certain amount but since we don't spend the exact same amount every week that is why I put it in my variable column. Any extra does not stay in the grocery column it goes to our extra column that can be saved or put towards any debt. Correct me if Im wrong but are you talking more about the envelope system.