“Financially Overwhelmed” Series, Week 3
Budgets are, by nature, fluid documents that will change with your life circumstances. Some weeks or months will be more expensive than other weeks or months – like December if you celebrate Christmas. Life events can also change what your incoming and outgoing expenses are going to be over time as well. It’s good to be as prepared as possible for what your year is going to bring you and starting now is as great a time as any to do just that.
Budgets as a Visual Tool
I think I’ve mentioned in a previous article that I am a visual person so I like to lay everything out in front of me. One of the best ways I’ve found to do this is with one of those free calendars you can pick up at insurance offices sometimes. Or you can print off calendar months using Microsoft Word – templates – calendar wizard. I like to lay all the months out in front of me and start filling in known events that will be happening over the year. Think broadly because the more you fill in now, the less you’ll have to scramble around later. Some things I like to include:
- Birthdays, anniversaries, other celebrations (Christmas etc.),
- Car maintenance appointments
- Car registration renewal dates
- Specific bill payments, insurance renewal dates, etc.
- Weekends away/vacations
- Weddings/births/etc. (I classify these separately from birthdays and other perennial celebrations because these are one-offs and typically are more expensive)
- Dentist appointments/doctor appointments/specialists
- Recreation – gym membership payments/exercise classes/etc.
- Kid expenses: sports/arts/lessons
- Anything else that belongs on this kind of list
If you can, take the calendar apart and lay all the months down next together so you can see your whole year. For me, thing start to come together when I see things in their entirety and I can start to put together a fairly comprehensive plan for where my money has to be and when it has to be there.
For example, I’d like to spend a $75.00 on a gift for my mom on Mother’s Day but then I won’t have enough to throw that theme party for my daughter on her birthday later that month. Okay, well if I take $20 from my spending money for two weeks, then I can do both because…. (And the planning continues)
Budgets as a System
The beauty of this system is that it forces you to prioritize your spending in a big picture way even though you’re dealing in the details. This can be a pretty big endeavour so sometimes it’s helpful to start with one month at a time. It may take a while to put everything together and at best, you’re dealing with numbers based on educated guesses (For example, I think my dentist bill will cost this…) but at least you’ll have a rough idea of what to expect.
One thing to keep in mind is that you can’t out-plan life. There will always be that unexpected car repair or that hot water tank replacement that needs to take priority in an emergency situation but it’s always good to reduce the surprises to as few as possible. Either way, you can dip into your emergency fund – which we will discuss in another article – and then redo the rest of your numbers later when your crisis is over.
At the end of this, you’ll be able to build timelines for when to start saving money for certain things long before you have to wonder where the money is going to come from. Read here for more on budgeting from Making Sense of Cents. Happy planning!
How about you Cents’ers, how do you plan for things?
Although it’s near impossible to plan for all the unexpected expenses in a budget the emergency savings is used in our house for emergencies only. When we designed the Canadian Budget Binder Spreadsheet we factored in what we call ‘projected expenses’ which are expenses we know we will have to pay for at some point in time throughout the year but it may be a one time expense. To lighten the load during these months when the expenses come up with save each month a portion of that expense and set it aside in a separate bank account all year long even after the bill is paid. When the bill comes in the money is already saved and in that account so no stress trying to come up with the case or using our emergency savings. This has worked awesome for us and it’s amazing how much we have in projected expenses to save for each month as we would have no idea how we would come up with the cash if we didn’t save but the emergency savings or a line of credit.
That’s a perfect way of doing it! tally up all these oddly timed and/or placed expenses and then average it over the year so the money is already there when you need it. Making that a monthly habit would sure solve a lot of problems before they even occur. Nicely said!