With the new year approaching, it’s time to take survey of your financial goals for the next year. If you haven’t been on a budget, or have fallen off the wagon, now is the perfect time for a fresh start! Let’s get started. 🙂
If you take a look at your average budgeting form, there is a line for EVERYTHING.
And on my very first budgeting form, I filled in everything. Car repairs (which was unnecessary at the time since my father was still covering anything over $100), Contacts and Insurance (split up monthly, but only paid twice a year), clothing (also only bought twice a year), and so on. At the end of the form, I was negative a couple hundred dollars.
Basically, I couldn’t afford to have a sinking fund for everything, so I have adopted a more simple approach. When contacts are due, I budget for it that month and only that month. We need to do a new budget every month anyway, so contacts month, I rearrange my budget to fit it in. Clothes and insurance, same thing. Car repairs, same freaking thing, if I can – otherwise, this is what the savings account is for.
And this works out well for me. After all it’s called personal finance. Does this mean I end up with an bloated “blow money” budget some months – you betcha! And it makes it take much easier to cut back the months I have to in order to pay for car tags and other such things. If I had a sinking fund for everything, I would have no spending money. And as a spender, I MUST have spending money.
Does this mean that car tires might become an emergency? Yep, it does. Because that is an emergency to me. I don’t drive a whole lot, so repairs don’t come around too often. Car repairs are an emergency to me. Have I ever had to dip into my emergency fund for such things? No. This is because I have a second savings account that is both an emergency sinking fund and car fund. A new car is not a priority, so I will go to that money first.
If I cut my budget back and still can’t entirely cash flow something, I’ll take it from that savings. So, it’ll need to be something bigger than basic car repairs to get me to actually tap into the emergency fun. I haven’t had to use the extra savings account for that yet, but that is partially why it’s there, so I can enjoy my shopping sprees. 🙂
In my actual budget, unless I know for sure I’m buying clothes one month, after my bills and such, I have about two or three categories that I budget for – blow money, entertainment, and gifts/pets/hobbies/home stuff. Those are all separated categories, but if I have more than two, it’s usually one of those. It makes things really, really simple.
On Learnvest.com, they say you can even go as far as to have two checking accounts – one for stationary things like bills and one for flexible spending like entertainment and such. I think they go a little overboard with the accounts – some of their CFPs say they have two checking accounts and three or four savings accounts and their emergency fund at an entirely different bank. It’s kind of ridiculous and sounds complicated, but whatever works.
I can’t lump ALL of my non bills in one category, otherwise I might spend too much money on eating out or spend some of my grocery money on bedding for the hamster. But you never want to have too many categories, you’ll drive yourself crazy. The same goes for having too many accounts. You will both drive yourself crazy and limit who you can bank with as many banking institutions these days have minimum balance requirements on their accounts.
Budgeting doesn’t have to complicated. Make it work for you! If you need a sinking fund for gifts and optometrists visits, have one, please. But you definitely don’t need a category for every single little thing.
Happy Budgeting. 🙂