Monday, November 5, 2012

Budgeting - Fixed Expenses

In my first post on budgeting I talked about why we (finally) decided we needed to come up with a budget. In this post I would like to share the first step we took in coming up with our budget: finding our fixed expenses.
Once Will and I realized we needed a budget we sat down and listed out all of our fixed expenses. We included all expenses that we could expect on a regular schedule whether it was monthly, bi-annually, annually, etc. Here is the list we came up with:

Faith Direct (a monthly donation to our parish)
Cardinal's Appeal (a monthly donation to our diocese)
Student Loans
Disability Insurance
Bar Dues
Will Cell Phone
Betsy Cell Phone (we're on different plans at the moment)
CFCA (we sponsor a young man in India through this agency)
Car Insurance

*These items are variable, but tend to be pretty similar or average out over time, so we simply listed the average cost per month for these two line items.

With this list in hand we were able to figure out our monthly expenditure for our fixed expenses.

We pay our car insurance bi-annually (it's cheaper that way if you can plan ahead!). So this expense doesn't come out of our bank account every month, but we were able to come up with how much money we need to set aside each month in order to have the money in our account when the bill comes every 6 months.

Our fixed expenses (theoretically) don't change on a month-to-month basis, so we were able to figure out how much money we had left to allot to our variable expenses.

For most people their fixed expenses represent the largest portion of their budget, so if you're spending beyond your means (aka - spending more money each month than you're taking in) cutting back on some of your fixed expenses is the best place to start.

Will and I have already discussed which items on this list we will cut when our budget becomes tighter (assuming we have more children). For us those include: cable and cutting down on our monthly contributions to savings or eliminating these contributions altogether (if that becomes necessary). We've also discussed possibly cutting back on our cell phones and getting a pay-as-you-go plan instead because we hardly ever use our cell phones anyway (we both already have the most basic plans available). But, we haven't done enough research on different phone plans to know if we would really save much money.

If you're not sure where to start with creating a budget for your family start by making a list of ALL of your fixed expenses. There are lots of software programs you can buy to help you track your spending, but we chose to just set up our own spreadsheet in Excel. Using Excel is fairly simple and, best of all, it's free!

Up next: Budgeting - Variable Expenses

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