Category Archive: Budget

Forgotten Budget Categories – Home Maintenance

When making a monthly budget, it is easy to forget certain budget categories.

One of the most often overlooked and underfunded categories is Home Maintenance.

It’s easy to understand.  None of us want to think about stuff breaking – especially in our home – so we tend to ignore this vital category.

Over the years, we have employed two different techniques for including Home Maintenance in our monthly budget.

1.  We simply lumped it into our baby Emergency Fund.  That’s kinda what the baby emergency fund is for, in a way, so that’s what we did.  When something broke, we stopped our accelerated debt reduction, fixed the broken item, and then continued with debt reduction.  This worked well for us, but wasn’t the perfect solution.

2240344525_bf3036b5992.  We created a separate Home Maintenance category in the Savings portion of our budget.  This worked very well for us – but it was a bit tricky, figuring out exactly how much to budget, each month, for an expense that may or may not be incurred.  At this point, we have enough data, from several years of budgeting, to have a pretty decent idea of what our monthly Home Maintenance costs might be.

Budgeting is, ever, an inexact art.  Over time, we have worked hard to minimize the surprise costs associated with household finances.  By taking the time to plan ahead – we have avoided the emergency-borrow-emergency-borrow cycle.

Side note – For those interested, here is a partial list of the Home Maintenance expenses we have had to deal with over the past 3+ years of home ownership:

We replaced two broken windows.

We repaired two pieces of siding.

We replaced the garbage disposal in the sink.

We repaired and reconfigured the outlet for our dryer line.

We replaced the blower mower on our HVAC unit.

As you can see, none of these are killer expenses, but all of them required a bit of money, and if unplanned for, could have been real headaches.

Image credit – austincameraguy

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Monthly Money Plan

As part of my ongoing efforts to Simplify. Everything. – I have reworked our monthly money plan.

Our monthly money plan details our strategies for managing our household finances.  The money plan is very similar to a budget – but it also incorporates the use of a calendar and a filing system.

I like for things to be organized.  Our monthly money plan keeps us on track, moving towards our main goal, and in control of our finances.

Our Income Sources -

My wife and I both deposit our monthly paychecks on the first day of each month.  This is our regular income.

I also receive money for various part-time work.  This is our irregular income.

Our Budget -

We use a very basic zero-based budget to manage our regular income.

Irregular income is used to create a secondary budget – for things like vacation planning, reducing our mortgage principal, and longer-term savings goals.

Our Big Goal -

Currently, we are working to pay off our home mortgage in less than ten years.

Our Monthly Money Plan -

Step 1 – Paychecks are deposited at our local bank on the first day of each month.

Step 2 – Cash for monthly expenses is placed into our envelope system.

Groceries for us and gasoline for our automobiles are purchased each Monday – using the cash from the envelope system.

Step 3 – Bills are paid.  It’s very simple to locate and pay these bills.  They are either bookmarked in my web browser for easy access – or in our bills to pay file folder.  We pay our bills online via our primary checking account.

Step 4 – Paperwork associated with bills is filed.

Step 5 – Deposits, withdrawn from our primary checking, to our online savings account, are scheduled.

Step 6 – Deposits, withdrawn from our primary checking,  to our Roth IRAs, are scheduled.

Step 7 – Extra, principal-only payment is made to our mortgage provider.  Click to see our debt reduction progress!

Step 8 – Irregular income is deposited, as received, into our online savings account.

Step 9 – Budget needs for the upcoming month are discussed and budget is updated.

Step 10 – Mid-month and again at the end of the month, I check to see that all payments have been received and deposits have been credited.

Step 11 – Charitable donations are made.

Step 12 – We balance our check book.  This takes about two minutes – because our bills have all been paid and we use cash and debit for 95% of our off-line purchases.

Once a Quarter -

I check on our retirement accounts and make any adjustments that I feel are necessary.

Once a Year -

I review all insurance policies, to insure correct coverage and good rates.

That’s it. That’s our monthly money plan.  We make deposits, use cash, pay our bills, work hard to earn a little extra now and then, build our savings, and reduce our debt.  It’s very simple and very basic – and it works for us.

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Hit The Brakes – Get Real About Your Debt

This article is step 2 of the Hit The Brakes – Get Real series.  I encourage you to read step 1 – Get Real About Your Expenses.

In this series, we’ll examine ways to stop adding to current debt balances, create a basic budget, and begin the process of moving forward with a solid debt reduction plan.

Now that you have a list of next month’s expenses – it’s time to get real about your debt.

You’ll need access to your latest account balances.  You may need to log in to your online accounts and / or gather up recent statements.  I use Mint to track my various accounts and to manage our household budget.  It’s a cool tool – something you might find handy as we move forward.

I have created a couple of   worksheets – one for listing debts, the other for listing expenses.  I used worksheets very similar to these when I was creating my own debt reduction plan.  Remember, keep all documents related to personal finance in a secure place.  (These are Word files.)

Summary of Current Debt and Summary of Current Expenses Worksheets

Make a list of current creditors, account balances, minimum payments, interest rates, and payment due dates.

Quick side note – I am not a financial professional.  I’m just a dude who hates debt and wants the world to be debt free.  My approach, by design, is simple.  There are thousands of other sites, many written by friends of mine, with tons of detailed financial information.  I write for folks like me – people who want to get out of debt, save some money, and be in a position to bless others.  Now, on with the article!

You have your list of creditors and account balances – and now you are at a point where you can begin to do something about your debt – as a whole.

Add up all of those account balances.  That’s how much money you oweif you could pay off all of your debts, today.

Obviously, the goal is to reduce – and one day eliminate – all of our debt.  To do this, we must first stop adding to those balances.

We must HIT THE BRAKES.

When I decided to get out of debt, I did three things to avoid adding to my account balances -

1.  I stopped using my credit card.  I simply placed my card in the back of my wallet – and stopped using it.

2.  I stopped all auto-payments from my credit card.  I know, I know.  This is old fashioned.  For me, however, this was necessary.  I had several payments, including my cellphone bill and satellite t.v. bill auto-paid via my credit card.  Each month, a couple hundred dollars was automatically tacked-on to my already high balance.  By stopping these auto-payments, I stopped adding to my balance – AND I took another look at my bills.  Win-win.

3.  I committed myself, fully, to the process.  I didn’t leave any room for self-compromise (that a term?).  Instead, I jumped in – determined and ready to make big changes.

So – after step 1 and step 2 – We have a list of next month’s expenses.  We also know where we stand, in terms of creditors, account balances, and how much we owe.  We are committed to the process – and ready to stop adding to those account balances.  We are almost ready to create our debt reduction plan.  See you guys soon with step 3!

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Hit The Brakes – Get Real About Your Expenses

Being in debt stinks.  For real.

I know.  For years I lived with credit card and automobile debt, worried and frustrated.  So, one day, I decided to do something about my debt.

I hit the brakes.

I stopped – took a look at where I was – and decided to go in a whole new direction.

No Credit Needed was born and my life changed – forever.

I think it’s time for a new series here – one I’m calling Hit the Brakes – Get Real.  In it, I’ll explore the steps necessary for analyzing one’s current financial situation and then go over some ways to move forward.  I’ll follow this series with another series – Hit the Gas – Get Moving.  It should be fun.

Today, let’s talk a bit about expenses.  Why?  Because, in the next article, I’m going to write about creating a budget, and it’s impossible to create a budget without first having a list of expenses.  So here we go.

Create a list of next month’s expenses:

List fixed monthly expenses – This list should be relatively easy to compile.  Generally, theses expenses would include items like rent, mortgage payments, monthly subscription costs, monthly fees, satellite or cable bills, etc.  Include all fixed payments to creditors.

List variable monthly expenses – This list may be a bit more difficult to compile.  Generally, these expenses would include items like groceries, fuel, electricity, etc.  Include any variable payments to creditors.  Remember such budget-busters as eating out and entertainment.

List any annual, semi-annual, not-simply-month-by-month expenses due next month – This list is extremely important.  These expenses could include insurance premiums, taxes, etc.  When creating a budget, it’s these types of expenses that can really trip us up.  In a perfect world, we want to budget, each month, for annual bills, dividing the bill by 12, placing that amount in savings, and so-forth.  However, we have to deal with reality – and if we haven’t been saving for that annual bill along-and-along, well, we have to budget for the whole thing next month.

Now let’s work through our list, finding expenses that we can reduce.  I haven’t mentioned income.  I want us to focus on reducing expenses – simply because it’s smart to reduce expenses.  At this point, it would be awesome, for those who are married, to go through this list with our spouse.  Oh the fun we’ll have!

Again, I haven’t mentioned income – or savings – because I really want us to focus on reducing expenses.  There are literally, thousands of articles and tips on saving money, so I won’t try to do that here.  Instead, I’ll simply encourage you to actually DO some of those things listed in some of those articles.

Debt is insidious.  Getting into it is so easy – and getting out can be so hard.  It takes real decision making, and after years of making poor financial decisions, making smart decisions can be difficult.  So, start by stopping.  Make a list of expenses and then get to reducing.

Rewrite your list of next month’s expenses.  This list will become to center-piece of you budget.

 

 

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