Monday, December 19, 2016

Working Out Our 2017 Budget

Debbie in KS asked me a few weeks ago if I'd  share how I go about determining our annual budget.  Really it is not that difficult to do.

I start by determining what we might expect for income.  Typically I'd use the last check stub and work with the net income amount on that but this coming year, I know that John will be working fewer holidays and that our income likely will drop.  I was conservative in my figures this year.  The annual budget sheet is just a roadmap anyway.  I'll take it month by month until the first quarter passes and then I'll have a better idea of exactly what our income is likely to be for the year.

So I start with our net income.  That is the first figure.  I look at the GROSS income figure and determine about what we will be paying in tithes.  That is always our first check each pay period and I make sure to plan for it.  God is much better at providing  for us on our income when we tithe than when we try to manage it all.

We have only a few fixed monthly expenses.  I list those on my sheet as well, right under tithes.  I then went through our 2016 check register and added up every check we wrote for electricity and divided that by 12.  I do this for propane, groceries, prescriptions, etc.  Anything we typically spend money on each month is totted up and then divided by 12.  Each of these are listed on my sheet of paper.

I then do the same for all the annual fees and payments and divide each of those by 12.  Then I list them on my paper, one by one.



We set aside a small monthly amount for home and AC and car maintenances.  I list these on my paper.

Now it's time to subtract each of these items from our income amount.  I tend to run a zero balance budget, since I have already accounted for all of our usual expenses.  Unexpected ones can't be accounted for anyway and we do have savings we make each month which comes from the pay check before we receive it. 

If I need to adjust figures, I generally start by looking at gasoline, groceries, and monthly amounts as the first sources of adjustment.  And if I had needed to make further adjustments I'd look at reducing the fixed areas of our income.  Fortunately this year, despite lowering our expected income amount we have had a small area of unexpected savings due to reduction in my health insurance costs for the coming year which was just what our budget required. 

That is how I work with our initial budget sheet for the year.   In coming months as I work with quarterly budgets I'll look at what our income proved to be in the previous quarter and what of our expenses may have changed and then I'll make any necessary adjustments.

I have also planned this year to do my best to pay our home and auto insurance and some of our annual fees in full.  I'm happy to say that I have currently the full amount needed to renew auto insurance next month.  I will take any extra over and above that to feed sub accounts where we keep the annual fee amounts.  This will free up a little extra cash for us and allow us to direct it to savings.  I am very hopeful that this will work well.  Paying the insurances in full will save us about $300 a year, so the savings in doing this is substantial, nearly enough to cover most all of our annual fees!

I hope this all makes perfect sense to you all and is a help in determining how to create your own annual and quarterly budgets. 

3 comments:

Lana said...

I have to wait until we get the first 2017 check on 1/15 to see where we stand. Taxes and insurance premium changes will require me to tweek the budget here and there but for the most part it will not change. Then along about May the annual pay raise will change the check again and if I had to take money away in January I often just put it back and then up the savings amount. I am amping up the car savings and reducing the home improvement budget now that we have renovated, reroofed, refloored, unwallpapered, etc. We still have a big painting project to do inside but I hope we can do that ourselves. It involves our two story stairwell though and it scares me silly to have hubby up on a ladder propped on the stairs. I asked our SIL who has painted professionally to do the top part as our Christmas gift this year so we will see. Our vehicles are 12 and 16 years old and I need to be ready in case one goes down and is not worth fixing. Thankfully our property taxes stayed the same even though our property was reassessed. I really enjoy managing the budget and seeing what I can do with our money. Hubby hates it and is happy to hand it over to me. :)

Juhli said...

Your post motivated me to tweak our draft 2017 budget in the categories that we can control. Like Lana I will have to wait for the first pay stub to know exact numbers for some things and putting our house up for sale in February and buying a different one will affect many categories. Still there are areas we have a good idea on and it is important to revisit those periodically.

Debby in Kansas said...

Thanks for posting this. I'm always looking for new ways to do things in the hope of making it work better.

$300 is amazing savings for paying in full. Our service charge is $1 per month, and that's for 5 different insurance policies.