New Year's Resolution Step 2: A New Budget

Friday, December 31, 2010

Okay, so technically I am skipping a step and jumping onto one of my tasks before prioritizing my entire list, but because I was feeling pretty motivated after my brain dump the other day, I decide to actually start working on a big one. This is one of those things that constantly creeps up on the priority list in my head and seems to pop up in my head more often then most others. Although it's not complete (not by far), and its one that will probably take a few steps and will always be a work in progress, if felt good to start things moving in the right direction. I'm talking about starting a budget.

Wes and I are by no means rich, and we certainly have our financial struggles just like a lot of people but I think we are headed for a pretty big lifestyle change when Jackson comes along. Right now, we are pretty conscious about how we spend money, but if there is something within reason that we want, we tend to be pretty impulsive and just go buy it. For example, if I want a new pair of shoes, I tend to just go out and buy them (and more often than not, I come home with two new pairs), or if Emma needs some new jammies, I will go out, get her a few jammies, and inevitably come home with other outfits, new hair bows and a new pair of shoes for her. With gigantic daycare payment #2 starting soon (which will actually make our daycare payment total more than our mortgage payment), our impulsive buying habits are about to change. And with my New Year's Resolution, I'm trying to get ahead of the game and start planning and living that lifestyle now, so when the double daycare payments start in May, it's hopefully not as much of a shock and we can somewhat "practice" for a few months first.

So...step number one was to create a monthly budget estimating and tracking sheet (you will get a good idea of how much I love spreedsheets here). Ha! I'm a nerd.

I started out with a simple spreadsheet that I downloaded off of Bank of America's website here and updated a few things. First, I made a new "Estimate" and "Actual" column for each month of 2011. For me, it's important to note which months have those extra pay days in them so we can be aware of when we can potentially put a little extra money away. So this way, I can update those months that have 4 weeks vs. 5 weeks. I then went through and included our income and expenses for each month in the "Estimate" category.

Again, because I am an engineer, I love data, so I used as many 'actuals' as I could, meaning I found out how much we paid for Gas & Electric for each month in 2010, and used that as an estimate for each month in 2011. I did the same thing for each of our monthly expenses and tried to put in the 'worst case scenario' for things like grocery shopping. For example, there are weeks we spend $120 at the store and weeks we spend $200 at the store. So to be conservative, I included an estimate for $200 each week to hopefully account for some of the additional cost that Jackson will end up throwing at us.

Now that I have all of our monthly estimates done, my next step is to record our "actuals" for the month of January. This will help us identify more specifically where we are spending our money and where we need to cut back on.

Above is a picture of my super sweet spreadsheet that I am so proud of! Before my mom freaks out (and I know you will mom), I took out a lot of our expenses, made everything generic and made up numbers for everything. So none of the numbers shown below are our actual numbers (always have to have the mom disclaimer going haha). Even if some creepy Internet person blows up the picture, none of the information is accurate. The bottom line of the spreadsheet will show us if we expect to be positive or negative that month, and as we track our actuals each month we can make adjustments accordingly.

PS: If anyone is interested in trying out the spreadsheet as well, or modifying it to fit your family, I'd be happy to send you the example spreadsheet in MS Excel for you to try!

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