Monday, November 2, 2009

The Automatic Budget

I haven't been writing about my budget a lot lately and I realized it's because I don't think about it as much as I once did. It took me over a year, but finally my budget is almost completely automatic! It is absolutely fabulous.

Let's take a look at some of my monthly expenses and how I am taking care of them each month:

Mortgages - I have two properties, each with two loans. All of these payments are taken care of every month with online billing.

Life and Auto Insurance - Since my home insurance is paid out of escrow, these are the only insurance costs I have. Both have odd billing dates - the auto is semiannually and the life is quarterly. Basically what I did was add up the cost of both over the course of the year and then divide by 12. Each month that amount is set aside in a special online savings account I have just for Insurance. When a bill comes in, I just transfer over the money from the account and pay it online.

Utilities are a bit different...

Gas at the house, and both electric and gas at the cabin, are on budget plan billing so each month I owe the same amount. I have online billing just pay those three bills automatically. Electric at the house is one of the few checks I actually cut each month (though, of course, I do it through online billing.) I did it this way because this was one area where I was really working hard to decrease costs. I think I have pretty much gotten it as low as it is going to go, so I am considering doing the budget plan for this one too. It is so nice to have a set number each month - then I can just schedule to pay it and it goes.

Cell phone - My cell phone bill is one of those ever changing bills. I have no idea why. Fortunately, it is almost always within $5 or so of what I plan on, but it is off enough that I cut this bill separately. Trash and water I treat just like insurance - I estimate the amount I will spend for a full year, divide by 12, then have a little bit put aside each month.

In fact, that is how I handle all the rest of my bills. I have a car registration fund, car maintenance, Christmas, and emergency funds - all which take out a little each month. I hate getting surprised by bills, so this way I am ready when the time comes.

For the two things I spend the money on the most - Groceries and Home Improvement, I have gone to the envelope system. I take $125 for groceries and $100 for home improvement out in cash and keep them in separate places in my wallet. Since doing it this way, I almost never go over, and usually I actually have money left over. The only other two things in my budget that are slightly unpredictable are Entertainment/ Dining out and Buying gas for my car. Since I started focusing on trying to only dine out with other people and making it a social occasion, I have really cut down my bill. I still miss dining alone, but having the extra money in my pocket is worth it. As for auto fuel, I always come in under budget - maybe because my budget is set too high. I still expect gas prices to rise.

Essentially, the way my life is structured now, I know that unless I am dining out - any time I use my debit card I am outside of my budget. This knowledge has scaled down my spending a lot. When I do use the card, I know why I am doing it and how much I have to spend. Same thing with cash that doesn't come out of the grocery or home improvement funds. Doing all this may sound like a lot of work, but it means that I don't think about it during the month. I just stay on track and everything else takes care of itself.

Photo by: massdistraction
via flickr

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