Friday, May 7, 2010

Advanced budgeting

My first post was on budgeting, but how far have you really gone to get a handle on your budget since then? It's not enough to decide how much to spend on rent, food, entertainment, and miscellany, though those are a good start. There's a few major targets that I've identified for better budgeting.

1.) Taxes
We pay property taxes twice a year, and as an independent contractor, I have to pay estimated federal income taxes four times a year. These are six potentially budget-busting expenditures and I don't want to have to dip into my savings to pay them.

Fortunately, I discovered on Mint.com that they have a budget feature that lets me budget an expense that is paid once. I've added a budget called "Property Tax" put in the total amount due in November, and now Mint is setting aside a bit each month.

2.) Emergency Funds
This is synonymous with your savings. I'm reminded of Allison's first post at We the Savers. When her husband was laid of, her scant emergency savings was wiped out pretty quickly. She's having to take on more jobs just to make ends meet (and put her husband through college!). I empathize, as I put Tammy through Stanford while our company was implementing austerity measures.

If I hadn't started augmenting our savings really aggressively many years ago, we'd still be dipping into our savings right now. And when I got laid off (November 8th, 2008) that buffer was all the more important, especially because I abhor using my CC as an instant loan machine (as should you). Tammy took six months off from work to be with the baby, and is only working 4/5th time right now. Hence the urgent need to spend less when I only get sporadic contract work right now.

While we had to dip into our savings during her maternity leave, we've returned to to 2008 levels. We're not growing like we did before (Tree, why did thee need a trim?!), but savings are rising, thanks to our own austerity measures like eating in most of the time and only buying what we absolutely need, used if possible. (While you may not need a hydrometer, a webcam, and gardening sheers, we have immediate uses for all :-)

Few of my current readership are starting out their careers, but for both you, start puting money into savings now. The kind of savings is almost irrelevant, but a savings account at a local credit union with some non-zero interest would do you well. Invest local, accrue interest local. Build up your savings, aka your emergency funds? Why?

3) Unanticipated family expenditures
Tammy and I were not among the fortunate seventy-five percent of the coupled population who conceive easily in the first year. It took us almost four years to have a child, and one of those was spent paying for expensive medical interventions. We were both employed when we needed to pay out (not covered by insurance, not that insurance covers anything anymore), but it was still a budget buster. The operative word here is "unanticipated", which is why emergency savings can be life savers.

4) Vacations
I hate saying it, because I'm not much of a long-term planner, but plan out your vacations, add them to your Mint budget as a long-term expentiture, and try to stay in budget while on vacation. This is a post in itself, but I wanted to get you thinking about it. It's important to live our lives, not just trudge and toil. Vacations are an important part of what fuels our sense of liveliness and purpose.

5) What are you paying for that you don't need?
Cable TV comes to mind. An extreme data plan on your phone. The wine club. I'm not saying to pinch pennies (Later, I promise I'll give you all the tricks). I'm suggesting that you pay for only the things that you need and are using.

6) Plan out your meals
If you have time, sit down Sunday night and make a menu for the week. Reference your existing staples. Then make a grocery list of what you don't have. When Viola and I go shopping on Monday, we buy what's on the list, and I don't have t to think on the fly about family meals. While it's always nice to occasionally be spontaneous, as a tired stay-at-home dad, not having to worry about meal planning while changing diapers or corralling a kid is a big relief.

If you have any budgeting techniques, please share them!

Next up, a topic that has constantly come up here, the banks. I'll be talking about the myriad ways they aren't your friend.

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