Wednesday, December 12, 2012

Household Budget: Step 1 Learn Your Spending Habits

There is some leg work to be done before you can develop a good budget. It may seem like a lot of work, but it will be well worth it. If you take the time at the start of the year then the monthly work is minimal. Here is what you can do to get ready for your 2013 budget. Regardless of where you are at in your financial planning or if you continue on my process this first step will help you.

Evaluate the past years spending habits. How much did you spend each month? What categories do you spend in? Look back at your checkbook, bank statements and bills to gather this information. If you don’t have good records make an educated estimate. Remember be honest about your spending. Log everything you spend throughout the year. Trying to make spending match income even if it didn’t, doesn’t help you plan for the next year. Until I logged everything, I couldn’t understand how we spent so much each month.  It’s amazing how quickly the little things add up.

Below is a sample of how I log our spending. Group spending into categories and how often it is paid (for irregular intervals just say per occurrence). I use 10 main categories with sub-categories in each. The main 10 is what I use in my checkbook spreadsheet. You can make your own categories to fit your family spending or just adjust mine. You don’t have to do any monthly averaging right now. Step one is just gathering information.  

Note: The values below are fictional so don’t use them for any of your estimates.  


Main Category          Sub-Category         Amount/Frequency
Charitable Gifts          Church                        $50/week
Others                      $25/month

Retirement                 Extra Mortgage           $50/month
Other Investments      $50/month

Savings                        Regular Savings          $25/wk
Emergency Fund         $25/wk (if you are establishing one, we’ll talk more about this later)

Housing                       Mortgage                     $1200/month
                                    Improvements             $100/occurrence

Utilities/Bills               Electricity                    $100/mon
Water                          $40/month
Propane/Gas                $500/every 6 months
Phone                          $40/month
Cell Phone                   $90/month
Trash                           $200/year
Internet                       $60/month
Newspaper                  $100/yr
Cable                           $50/month

Groceries                     Food(Groceries)          $800/month
(I include almost everything I buy in Wal-Mart in here.)
School Lunch              $100

Transportation             Gas                              $75/wk
Maint. & Repairs         $50/occurrence
Car Insurance              $200/6months
Plates & Taxes            $300/year
Car Loan                     $300/month

Medical/Health           Doctor                         $50/occurrence
Dentist                        $50/occurrence
Orthodontist               $100/month
Life Insurance             $200/month

Miscellaneous Needs Property Taxes            $100/year
School Reg & Fees     $500/occurrence

Miscellaneous Extras Christmas                    $2000/occurrence
Other Gifts                  $30/occurrence (Birthday etc...)
Kids Activities            $70/occurrence (Sports, lessons, Camps)
Travel                          $200/occurrence
Clothes                        $100/occurrence
Personal Care              $50/month
Misc                            $20/wk

I think this will keep you busy for awhile. Hopefully by the time you are done I will figure out how to upload my worksheets!  If you beat me feel free to email me at and I can send them to you that way. Also don’t hesitate to email if you have any questions. I hate to ruin any momentum.

So get your old checkbook ledger, bills and bank statements, and tackle one month a day, and in January you’ll be ready to go.  Good Luck!

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