Wednesday, February 2, 2011

New year, new budget (part II)

You guys, I'm so glad that you are as dorkily excited by personal finance as I am. It's nice to have company and I loved reading your thoughts on spending.

Once I knew how I wanted to spend my expendable income, I had to figure out how to stick to a budget. I've always had a generalized budget, but I've never really tracked my spending. My necessary expenses are all paid automatically. My contribution to our joint account (which pays for rent, utilities, groceries, car insurance and any fun stuff we do together), my student loan payments (which I will be paying for a very long time), my savings, our joint savings, and my retirement contributions all get pulled out immediately after I get paid, so I never have to worry about overspending and not being able to meet my obligations. But whatever was leftover was just mine to play with and I'd like to step it up a bit this year, especially with the wedding coming up. 

Soooo .... I'm giving myself an annual allowance this year. I always get frustrated with monthly budgets because my spending fluctuates a lot. I'm hoping that seeing a lump sum sitting there (and diminishing, over the course of the year) will help motivate me to keep my spending in check. The annual allowance is just for money that I spend on fun things (shopping, drinking, buying overpriced cookies, etc). As I mentioned, most of my big expenses come out of our joint account and D and I have a separate budget for that.

Also brand new this year - I created a line item for hair cuts.  I am cheap and I hate paying to get my hair cut. But I also feel significantly better with a decent cut. Dilemma. So I calculated out how much it will cost me to get my hair cut every 8 weeks (my stylist will do a free bang trim whenever I want, which is every 3 - 4 weeks), added it up, gasped a little and then put it into my budget. That money doesn't come out of my allowance, so I won't be tempted to stop going.

I created a super simple spreadsheet so I can have a brief overview of how I'm doing throughout the year. Each month I'll enter my credit card bill + miscellaneous expenses. I put almost everything on my credit card (points!) so the miscellaneous is usually cash that I've taken out for splitting bar tabs. 


You can see the spreadsheet here. Feel free to save a copy to your computer if you'd like - I'm not guaranteeing that it will be the most mind blowing financial tool invented, because I'm using it for the first time. You can make your yearly allowance anything you want. If you change the number in that cell, the others will adjust for you. As you input your monthly expenses, you'll see a running tally of how much money you have left for the year.

I'll keep you guys updated on how it works. I went back and checked my spending from last year and the allowance I've given myself is much, much lower than what I've been spending. The sensible thing would have been to up it a bit, but instead I'm soldiering on. I'll adjust if I need to, but I'm hoping I can stay in the ballpark.

Questions? Ask in the comments and I'll answer as best I can.



33 comments:

  1. looks like a good plan, rach! there is something about reviewing and being smart about setting up a financial plan that is so reassuring. we were using a spreadsheet and just this week started with mint.com-- have you heard of it? it is proving to be an amazing tool so far. you can link up all of your bank accounts, loans, etc (completely safe & secure!) and it automatically updates and categorizes your spending. its accessibility is a huge plus, and it will be great to budget & track so easily. here's to smart spending!

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  2. We've learned a lot from Dave Ramsey. He has great practical advice for paying down debt so you can use your income to help others. I highly recommend picking up one of his books or going to a seminar. It has seriously changed the lives of those I know who have put it in practice.

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  3. Nice! I've been following a pretty strict budget for the last six months and it feels so great. January was a tough month, but I'm excited to get back on track in February!! Good luck!

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  4. It looks like a great plan. I need to follow in your footsteps.

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  5. Budgeting by year is SUCH a great idea. I tried to do the month by month budget, but you're right -- some months you have to buy birthday gifts, some months you're spending a ton on bridesmaid dresses and wedding travel. I might borrow your spreadsheet and give it a whirl!

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  6. i have been searching and searching for a great way to organize our finances and have yet to find one or be creative enough to make one so i'm definitely going to try your spreadsheet! and great idea with the haircuts! thank you much!!

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  7. This is a really awesome way to approach it! I always get frustrated with keeping my monthly expenses in line because mine, too, fluctuate so much month to month. I use Mint.com right now to track monthly, but I think I'll try this yearly thing now!

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  8. Wow, what an impressive plan. I'm not sure I would be good at sticking to it.

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  9. What a great system! I should really set something like this up for myself. I've been trying to come up with a way to sneakily save money for an anniversary gift for my husband and I think a little side budget for myself is the perfect way to kind of hide my savings, without feeling like I'm stealing from the family budget.

    Also, I agree that it's nice to know that others out there get amped up about budgets and stuff.

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  10. I've really liked these last couple of posts mostly for the motivation it's given me to do something similar. My husband would be so happy it I stuck to a budget. He once said, "Provident living is my life!" I think my spending habits drag him down a bit.

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  11. i'm seriously impressed and simultaneously freaked out. i need to start something like this, but am almost positive i'll fail immediately and give up entirely. oy.

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  12. This is awesome. I really need some budget help, so I'm going to save a copy and see what works for me. Maybe if I have something in a spreadsheet, I'll actually stick to it? I'm skeptical, but I want to try.

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  13. i religiously track all my expenditures in a spreadsheet against my monthly budget and track how much my savings go up every month. i don't always stick to my budget, but just knowing how much i am going over helps with my peace of mind and knowing if i need to cut back in one area or another. because the year i stopped tracking my finances out of laziness i somehow didn't save any money, which had never happened to me before and was so uncharacertistic of my saving nature. so i'm glad to be back on track now.

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  14. the annual allowance is a fantastic idea. i too have the automatic bills taken out first and pay with my (one) credit card for the points. but i'm not sure it would have occurred to me to take out the misc spending from a lump allowance. genius!

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  15. I love using Excel for my budget. I calculate everything down to the penny and in every category from money spent on iTunes to Starbucks and how much I spend on purses. Good luck this year.

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  16. @ ashley maureen - I keep wavering over Mint! I really want to try it, but I can't quite get up the courage to hand over all my passwords. D does track our joint spending with Quicken, so we have an idea of where our joint money goes.

    @ people who are worried about failing- It's totally possible that I'll fail miserably! I'm serious when I say this is a big reduction from what I (thoughtlessly) spent last year. And I'm not a crazy spender. I'll let you know how I do throughout the year - that's actually more likely to make me stick to it.

    @ Julia - I wish I had that kind of drive. I at least read over my credit card receipts and check my year end summary, but I hate having to do purchase by purchase tracking so I've never stuck with it. Hence, my wimpy tally plan.

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  17. I'm proud of you for adding the haircuts line item ;)

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  18. this is awesome. i love hearing new ideas about tracking finances. it's so important to make smart decisions, but easy to become overwhelmed sometimes.

    just a general question: what card companies have you - or your readers - found to be good? we're looking at opening a joint card now that we're married and have been comparing point plans and perks, but everywhere we turn we hear different pieces of advice. (if this is too personal a question, i completely understand!)

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  19. i've always said if i would add up the money i waste, i could do something really fun instead of wasting. this seems to be a good way to keep better track.

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  20. I have really enjoyed reading about your budgeting. Haha, I guess that is the CPA side of me shining through! The way you think about, spend, and budget your money is very similar to what my husband and I do. Thanks for sharing! :)

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  21. No questions, just wanted to leave a comment and say you're awesome for doing this and inspiring me to no end.

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  22. My husband and I don't really have a budget but goals. We have an amount in savings we don't go under (this would only be used for emergencies). We have a goal of how much we want to put in savings each month. We also use our credit card for everything to get reward points and pay off the balance each pay week. We also make a plan for any big purchases for the year (vacation, furniture, home improvement).

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  23. Oh this is such a great tool! Nice idea and thanks for sharing!!
    xxx
    alwaysxbeing.blogspot.com

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  24. I'm always so impressed by your organizational and spreadsheet skills. Thank you for these posts! I've saved it so I can begin implementing it for myself. Thanks Rachel!

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  25. I know you sell your lovelies online but I was wondering what your 9to5 job was?

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  26. @ Amy - I really wish I could help you with cc recommendations. For my personal spending, I use a Chase Amazon card and I love it. It's great if you already tend to shop on Amazon, because you get extra points there. And it's easy to redeem your points, so I love that. For joint use, we're currently shopping around for a better card. Our Citi card is okay, but we'd like easier to access rewards. Interest rates aren't something we take into account because we don't carry balances, so we're just looking for the best rewards options.

    @ anon - I'm a scientist by day! I was in biotech research formerly, now I've transitioned to academia.

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  27. Very impressive. I've tried to find a cheaper, decent hairdresser, and it hasn't worked out, but I've tried to just leave it any extra week inbetween cuts so it works out less expensive over the year.

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  28. This spreadsheet is a great idea, I will give it a whirl. I am dorkishy excited about this subject and have been enjoying everyone's comments and suggestions.

    To add my experience, I direct deposit 10% of each paycheck directly into my savings which I learned from The Millionaire Mind. It took a bit for me to consistently allow that 10% to be deposited instead of using it to pay bills.

    When I first started fixing my finances I literally could only afford like $10 per paycheck to go into savings. Thanks everyone for sharing your tips!

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  29. this is really inspiring. thanks to this peachy economy we've suffered terribly due to unemployment and discovered we stink at personal finance but just never knew it because we always had enough to cover ourselves and anything that went on the cc in the past! it has been so difficult but we have learned to live on nothing this past year and are working on our own system as we try and get back on our feet. talking about money always makes me sad lately so your frank and confident approach is nice to hear! we've heard about mint.com too but are still nervous...maybe a spreadsheet system is in our future :)

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  30. I'm really loving your blog. It's funny I ended up taking over the finances this year since I"m not staying at home. What kills me is now that I'm budgeting for us, we save WAY more now without my income then we did when I was working. Kind of makes me sick lol

    -Sarah
    http://agirlintransit.blogspot.com/

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  31. Since I'm *now staying at home

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  32. hi rachel, i just found your blog today and love it! i tried to do the same thing at the beginning of the year but have been failing terribly. budgets and i do not mix well. hope you're been successful with yours! have you heard of dave ramsey? he has some great advice on how to budget as well!!

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  33. Your words are completely describing me... I've always had a generalized budget, but I've never really tracked my spending. And it's definitely not a good habit for an adult independent woman, don't you think so? Currently I'm trying to do my best in budget planning, these apps help me a lot: http://www.agsinger.com/best-family-budget-app-reviews-comparison/. Have you tried any of them? Personally for me PocketGuard is the best one. Maybe you can advise me something else?

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