My new monthly budget for 2014

Your budget is your most important guide on your personal finance journey. It tells you where you’re headed and how long it’ll take to get there. Like any tour guide, your budget must be honest and realistic to be useful.

I needed to re-calculate my monthly budget for the remainder of the year now that I’ve sold my second house. Here’s the result.

The new monthly budget vs. the old one

Category Old New (Jun-2014)
Utilities: Electricity 175 125
Utilities: Water 65 40
Utilities: Gas 100 90
Utilities: Phone 155 136
Utilities: Internet & TV 95 115
House: HOA 61
House: Repair 40 40
House: Insurance 95 186
House: Mortgage 2,175 1,525
House: Security 55 55
Groceries 426 520
Auto: Gas 10 10
Auto: Insurance 207 205
Auto: License 15 20
Auto: Repair 25 20
Tax Withholding 30 61
Miscellaneous 25 17
Medical 25 25
Sub-Total 3,779 3,190
Discretionary 931 755
Cash 30 30
Total 4,740 3,975

Creating a budget

I split my budget into mandatory and discretionary categories. Mandatory items (or ‘needs’) are essentials such as food, electricity, mortgage etc. Discretionary items (or ‘wants’) are expenses that I could live without such as putting money aside for my next trip to the UK.

I haven’t listed the discretionary categories in the table, but they are: Books, Music, Games, Movies, Clothing, Yearly Credit Card, Travel, Home Improvements, Computing, Dining Out, Fitness, Gifts, Online and Spare.

All of these categories are a personal choice obviously; one person’s wants are another person’s needs and vice-versa. The important thing is that the budget contains all expenses you are likely to encounter in a year. I’ve been tracking my spending for several years now so I have a pretty good idea of how to categorize my expenses.

I recommend keeping the category amounts fixed as much as you can. So if you pay your auto registration fee once a year, then divide that fee by 12 and put that amount aside each month. Any money in a category not spent in one month should roll over to the next month. There are various programs and sites for this (Mint, Quicken etc) that I’ve listed on my Resources page. Although I use Excel since it’s more flexible and I’ve set it up so I can apply my budget across several credit cards and my bank account.

And I also keep a reserve of a couple of months budget in your bank account; this acts as a mini-emergency fund to buffer against unexpected expenses. Think of each line item in the budget as a glass of water; you top it up with water each month but you’re also drinking from it too. The bigger the glass, the less chance you have of emptying it in a month when you drink.

Once you’ve created a budget then you can:
1) Check the total budget against your income to see if you’re waving or drowning [1].
2) Continually review each line to see how you can reduce expenses in that category.

My budget – highlights

Cash

I hardly bother with cash now so I generally save $30 a month just in case and I spend it when I go to the hairdressers or when I’m travelling aboard. Otherwise every expense is by credit card, direct debit or online bank bill payment (in that order). It’s easier to track that way and I get points from the credit card use. All credit card bills are paid in full monthly – I don’t subscribe to the view that credit cards are evil; they’re merely tools and for me they’re a good thing because of various benefits such as 1 year extra warranty on purchases and roadside assistance that I’ve already used twice this year [2].

Electricity

This has been reduced since I only have one house now. I do have an electric car which adds about $20 a month to the bill.

Water

I’ve not been in my new house long enough to know the cost of running sprinklers in the summer. The water bill for the previous six months have ben $80 total, so I have some reserve built up as I’ve saved $40 a month. This amount is reduced from before because I only have one utility bill now.

Gas

Still haven’t a lot of time with the gas usage in the house but we survived winter so I reduced this amount a little.

Phone

I changed mobile phone plans and saved some money yet added mobile hotspot support which has come in useful several times already. I’m re-thinking how I view phones vs internet vs TV – eventually I think I just want a “communications” category and go entirely wireless and drop cable tv / modem. But it’s too expensive to do that right now I think.

TV

The TV bill went up as a new subscriber ‘special’ expired.

Homeowners Association

I’m now HOA free on account of selling the house!

House Insurance

I changed from paying insurance via escrow to paying it myself on my credit card (for extra points). And I cancelled the insurance on my sold house. So I’m actually paying less insurance now even though the monthly amount increased.

Mortgage

This has improved as I only have one mortgage payment now.

Groceries

Ms. DivLife is in charge of spending this category.

Auto:Gas

Hybrid electric cars are awesome! I’ve driven 3,000 miles in 6 months and spent only $30 on gas. And that was only because the cold winter caused the engine to switch on to keep the batteries warm. I shouldn’t have to buy more gas until September or so, although I allocate $10 a month just in case.

Tax Withholding

I save some money to pay the tax advisor come April. And in case I owe any taxes. I increased this amount due to the higher dividends although I’ve also reduced by W-4 exemptions so I’m hoping not to owe any taxes next year.

Discretionary

I reduced my overall discretionary spending from $931 to $755. Most of this was because I had a lot of money that wasn’t being used, so I’ve cut it.

My next steps are to figure out ways to reduce the above amounts!

How do you create or track your budget? How much is in your budget? Leave a reply.


Wealth consists not in having great possessions, but in having few wants.

~ Epictetus (Greek philosopher associated with the Stoics, AD 55-c.135)

[1] Reference to Not Waving But Drowning by Stevie Smith – one of the few poems I remember from school.
[2] My car got stuck in snow and needed to be winched. Which was even more embarrassing as it happened in my driveway.

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