Thursday, April 15, 2010

Dissect Your Budget - Part 12 - Miscellaneous, Savings, and Wrap-up

Tip #249 - Dissect Your Budget - Part 12 - Miscellaneous, Savings, & Wrap-up. I"m going to wrap up this series today by talking about miscellaneous items and savings. Remember that you need to write up a budget that works for you. If you want to cover eating peanuts at a baseball game under entertainment, consider that cost when deciding on the budget amount for entertainment. If you want to consider it under the food item, then do so. Or it may happen so infrequently that you cover it under miscellaneous. If you are in schoool, you would have a line-item for tuition and books - broken out separately or combined, it doesn't matter. As long as everything is covered.

The miscellaneous category is often a catch-all for things you don't think about - like postage stamps or library fines. Bus as you use your budget more and more, the miscellaneous category should get smaller and smaller as you see a trend in items you spend. Parking meters costs can get wrapped into the transportation/auto line item. Postage stamps can get wrapped into entertainment or gifts if they are a regular occurance. Any non-regular, "surprise" expense can go in miscellaneous.

Lastly, let's talk about savings. To me, savings is one of the most important categories to have on your budget. Most people don't think to budget for savings. And because of that, people have very little saved. But if you budget $400 to spend on food and $200 for entertainment, why not have a budget for savings. Then each month you take that amount and put it away somewhere - into a savings account, money market fund, mutual fund or wherever you see fit. This savings category should cover your 401(k) savings, too as well as any IRA, education savings or other big ticket item savings you are doing.

And really my whole point of doing this dissect your budget series was to increase the amount of money that goes into your savings (or toward debt if you have any). So go through your budget with a fine-tooth comb. See where you can reduce your expenses and put more in your pocket.

In Real Life (IRL). My budget looks like this for 2010. Please note that thw two biggest categories in terms of amount after our mortgage is our IRA or retirement savings and our college education savings for our children.

Mortgage $2,300
Phone $45
Cable $45
Computer $45
Electricity $125
Water $25
Gas $200
Cell phones $35
Gasoline $240
Travel $200
Car Insurance $125
Food $400
Preschool $300
Activities $50
Religious School $50
Summer Camp $150
Entertainment $80
Vacation $200
Clothes $100
Gifts $150
Auto/Maintenance $100
Condo Loan $415
IRA $834
Education IRA $500
Misc/Giving $133

To me, making sure that all of your expenses have a place on your budget is one of the most important rules of budgeting. That's why having a miscellaneous category is important to catch all those expenses you don't expect or forgot about. And secondly, having a budget allows you to set an amount that you are putting away for savings for retirement, for a home, for college, or for the future in some other way. Without having a line item for savings, you won't save! So dissect your budget, try to cut down on non-necessities or think of creative ways to make them cost less so you can increase the amount that goes towards savings. For other ideas on how to save money, check out Frugal Fridays.


Your Frugal Friend, Niki said...

Hi there! Niki here, dropping in from over at Free 2 Be Frugal. I really enjoyed your Frugal Friday post...I need to get cracking on a new budget.

Stop by and see me sometime.


Anonymous said...

Hey, Michelle! I just found your blog thru Frugal Fridays @ Life As Mom. You've got some great information here. I'll enjoying looking around. Have a great weekend!

Johnlyn ~ said...

I saw your blog earlier this weeke, but didn't get a chance to comment.

I love this series! You did an awesome job.