A new financial year ~ budgeting

In response to Rhonda's Biggest Kitchen Table Home Audit, I thought I'd share my annual routine of setting up our budget. It's a bit of a job setting it up the first time, but after that I found it runs quite smoothly.

Rhonda actually gives a great detailed explanation of how to set money aside in plastic envelopes, which is a method we used in our early years of marriage. We very much wanted to buy our own home as soon as possible, so we used this method to live on only one wage and save the other (mine).

We decided we needed to save at least 20% of the home value, no matter what the banks said we could borrow (as they're always willing to give more). It took 2 years and then we found our home, and we're still here! :)

Once we had the mortgage, some of our budgeting methods changed a little. This was because we wanted to make optimum use of the banking system, but still needed to be in control. A credit card came into our possession for the first time and that made me nervous. So - I track EVERYTHING! Yep, I'm pedantic at collecting receipts and writing up spreadsheets on my Excel program. Why use the credit card? We make the most of using the reward points to acquire free vouchers we can use toward purchases. If it weren't for around $200 or more of freebies a year, we'd still be using cash for everything.

The first thing I do at the beginning of the financial year is to grab 14 C4 envelopes. 12 of them are labelled July through to June for that financial year. I then mark one for all medical expenses (as we have chiropractic, dental, optometrist and medicines ), and finally one for our educational expenses as we can now claim them too.

All receipts go into these envelopes for the year, but before they disappear there, I update a tally sheet created on Excel.

This is a print-out version, without all of our details typed in. (Click on the image to see a full-sized view). If you're familiar with Excel, then what I've handwritten in as "Jul '09" would actually appear on the tab. So, I'd have 12 copies of this particular page:

I like using this as I can keep track of all bills and when to expect them. After having kept records like this for some years now, I have an idea of what % the rates will increase, so I take the previous year's totals, divide them per month and then allow the extra to make the $value in the first column (A).

Column (B) is then filled with the actual amount spent/due.

The due date is also recorded for future tracking where relevant.

The final column is the accrued amount. This should always be in the positive. Ie: = (A) - (B). ** You will need to add an actual accrued amount from the previous year when you begin July, as not all bills come in during June. Therefore, my Water Rates may actually look like this in the final column (July only):

Water Rates $50 $180 18/7/09 (=$150+A-B) where the $150 is the balance in accrued from last year.
For the following months, you'd enter (=(accrued amount previous month)+A-B).

On the 13th sheet for the Excel pages, I have an annual tally. This I've linked to all the other figures so it quite literally fills itself throughout the year. So, to copy the amount of the Water Rates in the July column I've entered, I would enter "=" and then click the box in the Actual column on the page "July, Water Rates" so it automatically copies it over. ** There should be a tutorial on your Excel program which explains copying between sheets for calculations.

The yellow columns are quite straightforward. There's an annual total per item, followed by the monthly allowance (ie: divided by 12) to help in calculating next year's budget.

You will note that I've written that the annual spending must be less than the annual income. I usually play with a mock-version to see how much we can save each year and put toward renovating the house (a real, but very slow project).

Most of the categorising and ideas for helping with these spreadsheets were inspired by Anita Bell. Her book called Your Mortgage ... was most inspiring, so after borrowing it several times from the library I was quite pleased to have found a copy at the local op shop. :)

Well, that's a very brief summary, but it may be helpful to some, perhaps giving more ideas ... or maybe you can share some of your ideas with me!!