July 15, 2009

Budget

Last night my husband and I had our "Annual Budget Review". We sit down once a year, at the beginning of January, and set new budget limits for the year and review how we did the previous year. Sometimes we have some nice surprises and other times we are shocked at how much we went over budget (last year we were way over on dining out!). Strange as it may sound we actually look forward to our yearly review. It is also fun to look back at all our budgets from years past.

We use Quicken to keep track of all our accounts. We don't balance the checkbook on paper at all anymore. Since it is all on the computer we print off a "report". We can look up anything we need since it is all right on the computer. We try very hard to categorize where all our money goes. We did pretty good...this year we only had $9 in miscellaneous for all of 2007!

We used to be "average" savers. We would save up some but something would always come along to eat up the savings and if it got too high then we would spend thinking we had enough. Thankfully, we had minimal debt...a car payment, an occasional credit card we didn't pay off right away, and, of course, the mortgage.

But we had a major break through in our finances a few years ago. We sat down and added up all the non-monthly bills. You know the ones that come and you think "why didn't I save up for this....I knew it was coming". We took that total and divided it by 52 weeks and started putting that into our savings account by direct deposit (so we didn't have to think about it) when J got paid each week. We also figured out what we should have left each week after paying ALL the bills and added that to the direct deposit amount as well to kind of force of to save. We thought we'd see if we could live without that money but knew it was there just in case. It was kind of our habit to spend it if it was there.

Our non-monthly bills list is as follows (I'm sure everyone's would be a little different):

Water bill (ours come quarterly)
Medical bills (not covered by insurance)
Vet bill (annual exam and meds)
Dog grooming (quarterly)
Car insurance (twice a year)
Life insurance (quarterly)
Gifts (birthday, Christmas)
Safe Deposit Box (once a year)
Car registration (once a year)
Car repair (just in case)
Property taxes (once a year...we do not escrow ours and earn the interest in the mean time!!)
Tax preparation fees (once a year)
Subscriptions (newspaper)
Membership dues
IRA contributions
Home repair
Clothing
Charity (not tithing that is weekly)
Church activities (kids, trips, etc)

Basically the only things we budget for on a monthly (sometimes
weekly) basis are:
Mortgage
Telephone/Cell phone
Electric/Gas
Gas for the vehicles
Groceries
Household (paper goods, shampoo, etc)
Dining out (we really need to cut back on this one!)
Internet
Medical/Dental (comes out of paycheck weekly)
Tithe

A little over one third of the paycheck goes right to savings, some to be spent later when we need it, and some to be saved. So now when those non-monthly bills come we transfer the money from savings to checking and pay them. No problem. Plus with the "forced" savings our account really started to grow! So much so that we looked into other places to keep it so it would earn more interest for us. We finally decided on a money market deposit account (MMDA) which has the great interest rates of a money market but is also insured like a regular savings account. Now we keep our savings there (we use Capital One's MMDA) and love to see the interest! Way better than our bank and no minimum balance either!

Using this method we no longer carry a balance EVER on a credit card. Our vehicles are paid for so no more car payments. Right now we are trying extra hard to save for a down payment on the new house. Once we have the new house we would like to work towards paying off the mortgage early. We have done all of the above over the last few years as our family has been growing (and most years we have had high medical bills as well since we have a high deductible plan and preemies!). We often wonder how much we could have saved by now if we had only started sooner!

I just thought I would share...this is what works for us. As far as saving money goes, I think the most important thing is do SOMETHING. It doesn't have to be this method or any other in particular...find what works for you and your family!

Until I write mine (ha!)...here are some financial books I found helpful if you are interested...check the library:
  • The Complete Tightwad Gazette by Amy Dacyczyn
  • The Two-Income Trap and All Your Worth by Elizabeth Warren
  • America's Cheapest Family by the Economides
  • The Total Money Makeover by Dave Ramsey
  • The 9 Steps to Financial Freedom by Suze Orman
  • Raising Kids with Just a Little Cash by Lisa Reid
  • Miserly Moms: Living on One Income in a Two Income Economy by Jonni McCoy
  • Your Money or Your Life by Joe Dominguez and Vicki Robin

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