Budget Planning Process

This time of year I always start thinking about next year's family budget. Life is constantly changing, so to keep the exact same budget from year to year is impossible. Maybe new bills popped up during the year (like medical or auto repair)...maybe some of your current bills increased (credit card payments or utilities)...maybe you've added additional members to your family or the children you already have are getting bigger and have bigger appetites! Life's always changing...

For us, we've had a few changes that have affected our current budget in place and I want to make sure that for 2012, I have a budget that'll accept those changes and see where I can make cutbacks and plan ahead.

I've found that the best way to set a budget is to total the year's worth of each bill we have and divide it by 12 to find the average monthly cost. For bills that sometimes vary, sometimes you may be under budget and sometimes over budget. But if you keep that excess set aside for the months that you might be over...it won't matter because you'll essentially break even.

I break down our monthly budget into categories: fixed expenses and variable expenses. I know I can't do anything to change the fixed expenses, so if I can easily see what the variables are...I can see which categories I might be able to adjust if I need to. Examples of fixed expenses would be your mortgage, insurances, car payments, personal loan payments, etc. Examples of variable expenses would be groceries, medical bills, electricity (if you're not on set budget billing), gas/fuel, eating out, etc. If you don't already know, figure out your monthly NET income after taxes...add up your monthly expenses...subtract...are you in the black or in the red every month? Might be time to adjust how you spend your money...

I'd recommend every family set a monthly budget to follow.....if nothing else, just going through the past year's worth of expenses can sometimes be a real eye opener as to where your paycheck goes. It may surprise you!! Many of us live in denial as to how much we actually spend!

People who don't think they eat out that often, go back through your check register or credit card statements and add up every time you ate out at a restaurant, fast food, or got take-out pizza...it adds up quick!