Tuesday, October 28, 2008

A Surprising (But Essential) Budgeting Tool

(This article was included in this week's Carnival of Personal Finance!)

As I realize that I have not done a terrific job of budgeting over the past couple of months, it has become clear to me that I have neglected to use an essential budgeting tool - a calendar.

Use A Calendar!

Up until now, I have thought about each months expenses in an almost abstract way. Wouldn't it be better to actually look at the commitments we have scheduled and go from there?

I think the reason that I haven't done this in the past is because I want to decide in advance how much I will spend on a category - and then force myself to stay within that limit, rather than plan everything I want to do and use the cost of those plans as my budget figure.

I think that true success is probably found somewhere in the middle.

My November Plans

Let's look at my November plans and budget as an example.

Normally, I budget $20 each for my husband and myself for spending money each week. On top of that, I budget $120 for the month for dining out.

Now, I will take a look at the commitments I have already scheduled for November.

11/1 - We have plans to go out to a concert with friends. We are leaving at 5:45pm and will return probably around midnight. I will need to pay a babysitter for about 6 hours at a rate of approximately $10/hour, for a total of $60. The event is byob and food. We have some left over beer and wine from our Halloween party last weekend, so no extra cost for drinks. I will need to bring some food, but that can come out of our regular grocery budget. We will need to pay for the concert tickets which will be $20 each, for a total of $40. So, the total amount I will need to budget for this event will be: $100.

11/8 - I have plans to go on a one day bus trip to New York City with a few girlfriends. The cost of the bus is $45. We leave very early in the morning and will get home very late in the evening, so I will need to purchase breakfast, lunch, and dinner (yes, I can bring coffee from home and a muffin and some snacks), but I should plan maybe $5 for breakfast, $25 for lunch, and $35 for dinner. (These are high figures, but it is NYC so I would rather over estimate than under estimate.) And we will of course be doing some shopping in the city. I don't plan on buying anything for myself, but I will be on the lookout for Christmas gifts. This won't require any extra money as I will just use the money from the Christmas budget. So, the total amount I will need to budget for this event will be: $110.

11/16 - My book club is planning a trip to the Mayflower and dinner out. I'm not sure how much the tickets for the Mayflower will be, I'll guess $20. And I'll plan $30 for dinner (a high estimate, but sometimes in a group the bill will just be divided equally, so just to be safe). Total: $50.

11/22 & 23 - My daughter is in a play that I will be bringing my family to see. I think the tickets are $10 each. I will probably go to both shows. I guess we'll need to budget $50 for the tickets. There is a cast party that we will probably need to contribute money to. Maybe $20? They will be collecting money for a gift for the organizer, probably another $20 (maybe less). So, another $40. Making the total amount I will need to budget for this event: $90.

11/27 - I will be hosting Thanksgiving for my extended family. I have already budgeted an extra $50 in our "party" category to cover the extra food (in addition to our regular grocery budget). This will hopefully be enough. My extended family will be in town for several days and I'm sure we'll all go out for dinner together at some point, so I should budget another $50 for this event.


So, for the events that I have already committed myself to for the month of November, the total amount needed will be: $400. (Wow!) This is a lot more than the $120 dining out money plus the $80 blow money ($20 each week for me), that I had previously planned for.

So, simply by using my calendar, I have realized that I need to either increase my budget by $200, or change some of my plans for the month.

I'm very excited about the realization of how helpful a calendar can be when planning a budget. Hope it helps you too!

(Note: I am amazed at how many plans I have scheduled for November. Seems like a lot more than usual. This is going to be a challenge given my plan for a 21 day spending freeze in conjunction with the Forget The Joneses Project!)