Saturday, May 9, 2009

Revamping Last Year's Budget

On Friday I updated my "getting nine hundred" monthly goal tracker on the sidebar there with half of the extra income I get each month from changing my paycheck withholding. Part of this extra income comes from the changes I made on my tax withholding in March and part comes from changing my Flex Spending Account deductions. These changes add up to quite a bit more in the old paycheck. I get paid bimonthly, so I get half of it in the beginning of the month and half at the end.

The month of May will be the last time I will be recording this income.

When I created my budget last June, I took my then current income and subtracted all the known expenses, which brought me to the realization that in order to fight going into foreclosure, I needed to get an extra nine hundred dollars a month. Because the extra income received from changing my withholding was over and above what I had been earning, it made sense to add it to my "achieved" goal. However, as I am going to be starting June with a fresh new budget, I will no longer be including this income as "extra." Instead, I am just going to treat it like regular paycheck income. The same thing goes with some major savings I was able to make in changing my insurance. Again these were changes I made after my June 2008 budget was created, but for 2009 I will just record the lowered expense.

I'm still hammering out the details so I don't know exactly how everything will play out yet, but already I have found a few other changes I am going to make...

There are at least two items on the budget I am going to treat completely differently: one is Gifts and the other is Car Maintenance. Both of these items appeared on the budget, however, if I didn't spend anything on them, the money just stayed in my regular checking account. Here's the problem with that - my gift budget is $30 a month*. Some months go by and I don't have any occasions to spend it, which is no problem, but then comes along a month with two birthdays, a wedding and a bar mitzvah! Not good. I end up overspending, whereas if I had put the $30 aside on those "dry" months, I would be fine.

The same thing happens in my car maintenance fund. I budget an amount for it each month, but really am only using it to get oil changes. However, my car is 5 years old and I plan on driving it until it becomes a lawn ornament, so I need to keep up the maintenance. Instead of just letting unused money sit in my checking account to be spent on other things, I am going to start putting money allocated to car maintenance and purchasing a new car in a separate account. (Hey, I might have a Honda but it won't last forever.)

By creating two separate accounts and actually transferring the money into them directly each month, I am hoping to even out my spending and be better prepared for these expenses. I also know that these accounts are sort of back up emergency accounts. If something bad should happen, I can always pull all the money from my Gift fund and give friends handmade cards and hugs instead. I know they would understand. On a lesser degree the same thing is true for my car maintenance/new car fund. If I got into a tight spot, I could "borrow" from that account.

As for my old goal of getting nine hundred each month, I don't know haw that is going to play out yet; I am still crunching the numbers. From what I can see so far, it no longer looks like I have to have $900 every month to get by. Over the last year by raising my income and lowering expenses, I have evened my budget up some. That isn't to say I am not still on the hot seat - I have a lot of ambitious goals for the next couple of years
from fixing up the house to sell, to going back to school, and all of them require money. I still have an emergency fund I would like better more padding in as well!

Next on my budget review list - utility spending!

* Thirty dollars may seem low for a gift budget, but it is what I have decided I am comfortable spending. In the old days when I didn't have such a large financial burden, I was more inclined to spend more and someday I will again. For now, this is a good amount for me.

Photo by: jek in the box


Divorced Lifestyle said...

"Lawn Ornament" - that's great! I plan on the same thing.

laura @ no more spending said...

...can't wait to see your new budget, spreadsheet and budget geek that I am :)

Over the Cubicle Wall said...

I revamp my budget so much, I consider it a hobby at times.

I like your blog, and good luck with finding the $900 a month extra. My monthly budget is $900 total right now, so that number in your blog description caught my eye.

Dawn said...

Divorced - I have read so many things about how holding onto your properly maintained older car is good for the pocketbook. Besides, I love my little car. I'm making the last payment in a week and half!

Laura - Ha! I don't know if I will post the whole thing, but I'll definitely write about the changes and updates I make.

Over - Oh, I wish my budget was $900 total! Someday...

Thanks for the compliment, by the way!