Saturday, November 13, 2010

Fiscal Fridays: misc budgeted spending

yeah, it's not Friday this time! I wound up taking Friday entirely away from a computer, so didn't get to this 'til the weekend. Still, the theme works for me.

In September I posted the complete diagram of my money flow. Today I'm going to finish talking about this chunk of it:

I've already discussed the travel and mad money accounts; that leaves the one so descriptively labeled "misc budgeted spending." This is yet another savings account (insert rave for USAA's banking interface here), and as with the rest of my accounts, I transfer money into it every time I get paid.

The real purpose of all this account-having is that I don't have to watch my daily expenditures too much, yet don't have so much money lying around that I spend it wantonly (fun though that may temporarily feel!). This account funds the catch-all spending that I do over the course of a year, but not necessarily on a weekly or monthly basis.

Here are some recent expenditures that were funded from that account:
 - oil change & tail-light replacement
 - yarn for the wedding finery
 - plants for the garden's winter crop
 - membership in a local walking/biking advocacy group
 - bicycle wheel replacement
 - new tires for my car
 - flowers for my sister's graduation
 - membership in my local public radio station

These expenses fall into different categories in my budget (transportation, hobby, charity, and gifts), can't be predicted in advance, yet always occur sooner or later. I don't have a perfect solution for allotting money for those types of expenses, but what has been working for me is this separate misc account.

So how did I figure out how much to stick in that account every paycheck? Like most things in life, it's part art, part science. I've been tracking my spending for 3 years or so; once I knew where my money was going every month, I could decide how I felt about it, and whether I wanted to change anything in particular. With a reasonably good handle on my average expense per year for all my budget categories, it was a matter of basic math to figure out how much per paycheck should go be allotted for each type of expense.

Now - I have 14 budget categories, and even though I love me some complicated banking, I wasn't about to make separate accounts for every single category! So, I lumped the irregular expenses into this account, and fund it monthly.

The balance is running unusually high right now, but I can even figure out why, thanks to my handy little notebook with my spending figures in it. I know what I plan to spend in each category per year, can add up what I've spent already, and can see where I'm over or under, and use that information to spend or save the money accordingly.

For two concrete examples: I think I'm a bit low in transportation and charity spending. I set a goal to meet for the latter, and it'll be enjoyable to figure out how to spend the last bit of money to meet that budgeted amount. As far as transportation goes - if I determine I did spend less than planned, I'll bring my car in for a tune-up before the year is over, rather than wait til' next year and risk messing up my 2011 numbers.

Finally - actually using the account works simply. I charge the expense and then transfer the money from the savings account to my credit card. Easy! 

Clear as mud? any questions?

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