Week 12 – Set a Budget: Annual Savings $1020
Now that you have been tracking your spending habits for several weeks, it’s time to look at what you’re spending. Setting a budget is an important step in managing your finances. It’s a window into your checkbook that allows you to clearly see where your money goes and allows you to take action if you see expenses getting out of control. I would recommend breaking it up into four categories; 1) Constants, 2) Necessities, 3) Luxuries and 4) Unknowns.
Constants: There are certain expenses that stay the same month after month, such as childcare/school, car payments, loan payments and rent/ mortgage expenses. Unfortunately, we don’t have much control over these fixed expenses from one month to the next. Set the budget for these known items first – the budget is the known expense.
Necessities: Next, look at the other necessities we need every month that are variable (change from month to month), such as gas, groceries and utilities. Hopefully, you have been able to make use of some of the tools I offered in the earlier weeks to reduce these monthly expenses. No matter how you make an effort to reduce your expenses, it’s important to set goals and track your progress towards these goals. For example, if you typically spend $400 a month on groceries and plan to do better with coupons and generics, with a goal to shave $15 off your weekly bill, set your monthly budget to $340.
Luxuries: The Luxury category lists items that are not required to live, but expenses your household typically indulges like eating out, babysitting, entertainment, gifts and clothes. This category is typically the one in which you should take the most challenges in terms of spending. It’s up to you and your personal decisions, but set manageable goals to which you think are realistic.
Unknowns: The unknowns in life are what cause financial strain on families and households everyday. Unfortunately, many of us do not have appropriate savings and are unsure what constitutes the need to dip into this savings. For this, I would recommend establishing a “rainy day” fund. Set up a separate savings account for unexpected expenses such as car repairs, household repairs or medical expenses. Set this as an expense item and pay it like a bill every month by transferring money into the account. If you don’t feel like you have extra money, take another look at your budget and find areas where you can make reductions.
Set a goal for each item in the category. Once you have set your goals, add them up and compare them to your monthly income. If the goals are above your monthly income, you know it’s time to go back and take cuts. In the end, you should have a budget with goals set for each expense that are realistic and achievable.
Track this on a weekly basis to ensure you are staying within your established monthly goal/budget. At the end of each month review each item and determine if additional cuts or budget adjustments are necessary. Stay cognizant of what you are spending, especially when you go over the goal and make a conscious effort to do better the next month. It’s not easy, but with work and self-control you will see your finances come under control which will lift a strain off you and your family.
An example of an adjustment we made mid-month was related to gas. My husband drove to Atlanta to visit his brother for an annual trip. To make up for the extra gas spent that week, we carpooled to work the following week. This helped us stay within our monthly budget for gas and reduced our overall spending for the month.
The annual savings was calculated by comparing our total household expenditures from the previous year to this year. I broke it into the major categories and put together our first household "Annual Report". I was proud to share this information with my husband and it encouraged me to institute a continuous improvement philosophy - so I can't wait to prepare our "Annual Report next year!
Click here for a sample budget spreadsheet
All data found on this website is Copyrighted by MOMTHATSAVES. Unauthorized reproduction is prohibited.
Now that you have been tracking your spending habits for several weeks, it’s time to look at what you’re spending. Setting a budget is an important step in managing your finances. It’s a window into your checkbook that allows you to clearly see where your money goes and allows you to take action if you see expenses getting out of control. I would recommend breaking it up into four categories; 1) Constants, 2) Necessities, 3) Luxuries and 4) Unknowns.
Constants: There are certain expenses that stay the same month after month, such as childcare/school, car payments, loan payments and rent/ mortgage expenses. Unfortunately, we don’t have much control over these fixed expenses from one month to the next. Set the budget for these known items first – the budget is the known expense.
Necessities: Next, look at the other necessities we need every month that are variable (change from month to month), such as gas, groceries and utilities. Hopefully, you have been able to make use of some of the tools I offered in the earlier weeks to reduce these monthly expenses. No matter how you make an effort to reduce your expenses, it’s important to set goals and track your progress towards these goals. For example, if you typically spend $400 a month on groceries and plan to do better with coupons and generics, with a goal to shave $15 off your weekly bill, set your monthly budget to $340.
Luxuries: The Luxury category lists items that are not required to live, but expenses your household typically indulges like eating out, babysitting, entertainment, gifts and clothes. This category is typically the one in which you should take the most challenges in terms of spending. It’s up to you and your personal decisions, but set manageable goals to which you think are realistic.
Unknowns: The unknowns in life are what cause financial strain on families and households everyday. Unfortunately, many of us do not have appropriate savings and are unsure what constitutes the need to dip into this savings. For this, I would recommend establishing a “rainy day” fund. Set up a separate savings account for unexpected expenses such as car repairs, household repairs or medical expenses. Set this as an expense item and pay it like a bill every month by transferring money into the account. If you don’t feel like you have extra money, take another look at your budget and find areas where you can make reductions.
Set a goal for each item in the category. Once you have set your goals, add them up and compare them to your monthly income. If the goals are above your monthly income, you know it’s time to go back and take cuts. In the end, you should have a budget with goals set for each expense that are realistic and achievable.
Track this on a weekly basis to ensure you are staying within your established monthly goal/budget. At the end of each month review each item and determine if additional cuts or budget adjustments are necessary. Stay cognizant of what you are spending, especially when you go over the goal and make a conscious effort to do better the next month. It’s not easy, but with work and self-control you will see your finances come under control which will lift a strain off you and your family.
An example of an adjustment we made mid-month was related to gas. My husband drove to Atlanta to visit his brother for an annual trip. To make up for the extra gas spent that week, we carpooled to work the following week. This helped us stay within our monthly budget for gas and reduced our overall spending for the month.
The annual savings was calculated by comparing our total household expenditures from the previous year to this year. I broke it into the major categories and put together our first household "Annual Report". I was proud to share this information with my husband and it encouraged me to institute a continuous improvement philosophy - so I can't wait to prepare our "Annual Report next year!
Click here for a sample budget spreadsheet
All data found on this website is Copyrighted by MOMTHATSAVES. Unauthorized reproduction is prohibited.