Wednesday, December 14, 2011

Frugal Retirement-2012 Budget (Round 2)

Since I hate the budget process, I began working on my 2012 budget at the beginning of December. As I mentioned then, I hate budgeting.  We do what we have to do though, so I have been continuing the process.  As I finalize things, I've made some changes, and reached some conclusions.

First, I've done some fine tuning of expenses, looking to where I could reasonably and comfortably cut those expenses.  Second, I've come to the realization that in order to continue the current lifestyle, additional income will be required.

I'm not upset by the second point. I'm feeling comfortable that my quilting business is beginning to make money, and that there are other at home options for making income that work for me. These include online options and buying and reselling online-both of which I enjoy because I like the thrill of the hunt. If my only choice were to get a "real job" (read: dress up and go to an office or store and work for someone else), I would be more that a bit unhappy. In my case I have the ability to earn income from my home (mainly) and on my own schedule. Yes, occasionally I may have to meet a deadline or spend a weekend at a craft fair (oh, the horror). Overall, my only concern is whether this income will be regular and if not how to fit that into my budget process.

Everyone does their budget differently. For me, first I listed those fairly fixed expenses.  These included the mortgage (to include taxes and insurance).  Utilities are also a regular expense, and for now I included the cell phone plan and the bundled cable bill, along with the gas bill, electric bill, city bill and home security.  In terms of fine tuning in this area, I already refinanced the house.  I'm being much stricter with myself on the heat and electricity.  While I have not eliminated the cable bill (for reasons discussed here), I have lowered it as much as possible for now. I am always willing to revisit things later.

My second budget category  are those expenses that are flexible, but often a necessary part of life, if you will.  These include things like groceries and gas for the car, monthly dog meds,my monthly medications and my monthly hair cut. I can control these to a certain extent, especially the food, but they are part of my life, as is my church donation.  Built into this expense is also a separate amount ($100 or so per month) that I call deal money.Other folks might call it "blow money" and I suppose it is. this money might be used to get an online deal or a pile of almost free loss leader items. It also might be used to buy thrift items to resell, or just to use as spending money at the local Christmas market.

The last list included every single irregular expense. Some of these are more mandatory than others, but since they are all irregular I put them one area, but two "piles" if you will. The first pile are those irregular expenses that are necessary and include car service, medical and dental co pays and basic house maintenance (heating and cooling annual checks).  The second pile includes those less necessary things such as home improvement and decorating, gift giving, larger entertainment and dining wishes, and of course travel.

My final category is savings. I need to build an emergency cash fund. I will always be able to manage on my monthly income and adjust budget items as needed. Should a major emergency arrive, cash to pull from is simply not there right now. So funding this is a separate category.  Funding for this area will come from rebates and cash deals, gifts, and of course extra earned income.  Ideally, my goal is to take some of my free school money and put that into my emergency fund account in February.  I am getting a full ride, but my living expenses are already part of my budget-hopefully this will help.

My monthly budget will cover all of the first two categories and flow into the irregular category.  This category (and savings shown above) is where my need for additional income comes in. This earned money will go to things like landscaping and appliance replacement, and unexpected emergencies. It will also pay for travel and entertainment and whatever else is needed or wanted.

I hate math, and budgeting can be a literal pain.  That said, I do feel much better when it's done. Coming soon, some of my specific expenses and where I made cuts.

Meanwhile, back to quilts and Christmas cookies.

5 comments:

  1. Kudos for doing this even though you don't like to. One thing we did was look up the estimated lifespan of everything we might have to replace that was of significant cost (appliances, roof, car, etc.). Then we put down when we had purchased the current one, the projected replacement date and cost. This was an eye opener and led to putting even more money into the replacement/maintenance category.

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  2. Sounds like a great plan! :) Any extra income I make goes for my daughters private guitar lessons usually. Anything above & beyond that may go for something fun! We still have to enjoy life! ;)

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  3. I'll do the budget at the end of January when all the 2012 expenses are known - I've been using Quicken to track expenses for 15 years. I'll want to recategorize some expenses to make them simpler - do I really need 8 "yard" subcategories? - but it should be a fairly straightforward process.

    In our first year of retirement we went kind of travel crazy, and I lay awake a few nights worrying about that. Now we put a certain amount in a special travel account every month and pay any travel bills out of it. If we don't have the money in the account, we don't take the trip. That works.

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  4. I hate math too!! We are still working on our budget for next year.... too many changes lately to take into account.

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