A Women's Financial Series
We are now working on our third month talking about a financial budget. We started in October preparing for our holiday spending. In November we defined Fixed and Discretionary expenses. We also defined some important items you needed to know like what is Gross Income versus Net Income, and the financial industry's recommendation for your monthly expenses. You have enough tools now in your grasp to make a sound budget for yourself. Remember, if you need a budget packet, please let us know and we'll get one sent to you.
Now, let's talk about those expenses that if you are not prepared for, will raise havoc on your budget. Let me use myself as an example. Some expenses that happen to me in some months, but not others are as follows:
- Auto Insurance: June and December
- Auto Registration: November
- Pest Control Service: Feb, Apr, Jun, Aug, Oct and Dec.
- Property taxes: March
- Homeowner's Insurance: March
- Estimated Taxes (for the self-employed and some retirees): Apr, Jul, Oct, Jan for the prior year.
And those are to name a few.
Some of the expenses aren't too bad, like the pest control service, but the other expenses can run into hundreds of dollars. If you didn't have a category in your budget for "savings" or "extras", then you could be in trouble when these expenses come around.
Here is a system I use that may help you.
Take one of those calendars you get in the mail this time of year from charities and use it as a planning tool for your budget. Start with January and enter all those "extra" expenses that show up in that month for you. Do the same thing for all 12 months of the year. Now, instead of stressing about these extra expenses, you can see them in plain sight, month by month. At the end of each month, in one of those blank squares at the bottom of the calendar, put in the value you came up with for your extra expenses in that month! Total all 12 months. Now you have at least an approximate total of what these expenses will cost you monthly, and for the year. These amounts may not be exact due to increases with the expense, but they will provide you with an estimate of what may be due.
We're almost done. You now need to divide that 12-month total by 12 to give you what you'll need to put away monthly. Understand, these infrequent expenses need to be managed and you need to be ready for them when they are due.
Lastly, make an entry on your budget sheet called "Reserve for other bills" or "Special Savings". The amount you need monthly for these extra expenses needs to go into this account, away from your regular savings, so you don't accidentally spend it on something else. This money has already been allocated to an expense in your budget, it is not "free" money. If you don't plan for these expenses your budget is only partially correct, and you could run into trouble as the months continue for the year.
I believe this is what happens with our government. They plan a budget for routine expenses, then some terrible weather event happens in one of our States, and because the government has to help, it throws the planned budget into a tailspin. Our personal budgets are on a much smaller scale, but the concept is the same. If we don't plan for everything we are responsible for we will end up running short on funds when we need them to meet our commitments.
Remember, I am here to help whenever the occasion arises. Let's start 2018 in control of our financial budget. It is something we can actually control as we "plan" for all our expenses with the income we have to work with.
- Next month's article will be on respecting money and how Inflation affects our Purchasing Power.