Monthly Budget: The Rent "Problem"

As it stands now, my monthly income is based upon two biweekly paychecks plus incidental income such as referral bonuses, gifts, side jobs, etc. I get paid on the 15th and the last day of the month. The way I currently have my budget set up, my end of the month paycheck is technically my 1st paycheck for the following month, with the 1st paycheck of that month actually counting as the second for purposes of accounting. For instance, my first paycheck for April was actually my 3/31 paycheck, with the second being my 4/15 paycheck. The reason I do this is because I've been paying for my rent ($700 - an enormous portion of my $994.19 paycheck) entirely out of that end-of-month paycheck. Since I've started this blog, established a budget, and revamped my finances in January, I've been following this method. What this does is it gives me a (relatively) huge amount of money to "play" with in my second paycheck, but it also forces me to live fairly light for the first two weeks of the month. I think there are pluses and minuses here, based upon my discipline.

But I've been thinking that evening my rent payment out over the course of the month would actually help me budget, in that it is psychologically easier for me to take, say, $200 right off my first paycheck and save it, rather than try to save $400 of my 2nd paycheck. So this month I'm planning on sticking as much as I can at the end of the month into my traditional checking account (out of which I pay my landlord with paper checks) so that I will only have to make up the difference with the 1st paycheck for June. It will probably take me a couple months to get to an even split, but I think I could probably do at least $200/$500 or something similar. I am going to try this and see how it works out.

Anyone have any similar situations in trying to work out budgeting along with income and scheduled expenses?

April Budget Report

April was the first month since I've been budgeting that I blew my budget by a significant margin. Because of this I didn't save nearly as much as I should have, despite the numbers in the Saving column. I only saved $250 of my normal income, with an additional $400 coming from my aunt expressly for my trip in June. While this certainly helps with the Travel Fund, I was hoping to put more money in there and more money in my IRA as well.

I could offer up excuses, but mainly I just chose to spend more than I should've, and dipped into money that I had earmarked as untouchable. One positive is that our electric bill was very low, so I actually ended up with a small surplus in the Rent/Utilities budget. I couldn't resist Dining Out more than I should have. Miscellaneous was a big overexpenditure, but I don't mind having spent more there because it included a $75 passport renewal fee, nearly $100 in gifts for very important people, and a $27.80 registration fee for a race at the end of June. What really killed me was the Entertainment/Luxury category. I dropped almost $200 on my first Red Sox game of the season (including pre- and post-game bar tabs). But I took my brother and it was my first game of the season. Need to get my Sox fix! Add to that more going out and casual booze spending and I ended up almost $350 over budget.

So on the one hand, not a good month. Not at all - especially contrasted with the previous three. However, I was able to contribute $200 to my IRA for 2007 before 4/15 as well as my automatic $50 savings in my TD Ameritrade account.

A bit of a wake-up call. I was conscious of some of this overspending, but I think I got lulled into a bit of security by my improving financial status since January and fell back into old habits. This month I plan on being far more disciplined, helped in part by a lack of temptations. A large part of my second paycheck will be shoved into my Travel Fund, and I should be in good shape to tackle Ireland & England next month.

March Budget Update

I'm going to continue to share my monthly budgets as I get used to the budgeting process and learn about potential pitfalls or tips that might be of interest to others. Again - if you're interested in a budget template, I'm finding that this one works pretty well for me. Feel free to shoot me an email or leave a comment. At some point I may stop once it becomes routine and/or uninteresting or useful, but for now I'll keep going. It helps me, at any rate.

This month was a mixed bag for me. I had a sizable chunk of extra income on the positive side, but I ended up going over budget significantly in several categories.

I was able to save a good portion of my money (slightly higher than my normal budgeted amount of 25.15%) but I should have saved even more. My utility budget was almost spot on, being just $13.36 over (and thank God we are on the tail end of winter here! low electric bills for the next few months until the AC needs to be turned on...). Slightly over in my Grocery budget, by $20.73, but this included a relatively pricey meal I cooked for a friend. Personal/Health was fine - over by $16.55 but that included a haircut. What killed me was Dining Out and Entertainment/Luxury.

Now, on the one hand, I had a few special occasions that warranted some extra spending. Namely - my best friend in town from England for a weekend and four birthday celebrations, including my boss, my Mom, and a good friend and her fiancé's co-birthday. I ended up spending more on these than I should have, but I don't feel altogether that bad about it. I had fun spending time with important people and I was still able to manage an overall increase in my assets for the month.

So still a positive month for savings and retirement. I didn't save as much as I could have, but it was enjoyable, productive, and fulfilling in a lot of ways. I also learned an important lesson about snowflaking.

A Monthly Budget Is Essential

I cannot emphasize enough how important establishing a monthly budget is when one is building one's financial framework. Simply by tracking every penny of income and expenditure you become aware of how much you are spending - and on what - every day. This has been revelatory for me. Seeing the numbers makes me conscious of every purchase and expense, and that alone has modified my overspending habits. I am now living well below my means, yet ironically I feel as if I have received a big raise because I am now saving a big percentage of my income with no decrease in my quality of life (indeed on the whole it's been a very positive experience emotionally and I've never felt better about my current situation and the future). You can click on the image below to check out my February budget (if anyone's interested I can email you the Excel file. It's a simple spreadsheet but works well for me so far).



Green boxes represent either income or money saved. Red boxes are expenditures, blue is the amount budgeted, and then the balance appears in the yellow row below. In January I created a budget but I failed to track every purchase. I had an ATM Withdrawals column, thinking that as long as I kept track of money going out I would be fine, but I never knew exactly how much cash I was spending, or on what (and I'm sure a good deal of it was discretionary spending with zero utility). A friend recommended that I make sure to keep track of every purchase, which I did in February. At times this can be a pain, but for the most part my purchases were electronic, which makes it easy to track. For cash purchases I'd usually have a receipt, although to save paper sometimes I'll just text myself the amount to enter later. It takes a modicum of effort for great return. It's essential to know exactly how you spend. I imagine that once I've established good habits that this will become less important, but that won't be for some time.

The comment feature in Excel is nice because I know exactly what each expense and irregular income was. I had a fair bit of income in addition to my bimonthly paycheck - a couple expense checks from work that I had due and some minor referral and new account bonuses over at ING and Revolution Money Exchange. Now aside from simply tracking all ingoing and outgoing money, the purpose of the budget is to help me allocate reasonable funds to each part of my financial life. This is the tricky part, and for February I sort of winged it based on some January numbers. These numbers will likely change as I discover what works and seems reasonable for a month. One thing that I did change for March is to break down the categories more specifically. For instance, Groceries and Dining Out take the place of one Food category - I think this makes more sense. Miscellaneous was far too broad for me (casual beer/wine purchases, toothpaste, and cab fare seem too qualitatively different to be placed in the same category) so I broke it up into Personal/Health, Entertainment/Luxury (i.e. booze), and Miscellaneous.

You'll also see the two yellow boxes at the bottom which contain some valuable info. The first is a percentage breakdown of what I have budgeted for a standard month in which my income is just two paychecks. I can see what percentage of my budget I have allocated to each category. I have a solid 15.10% of my income going directly to savings/retirement, for instance. This is a great start for automatic wealth-building. Anything beyond that is great - and I more than doubled that in February. The next grid shows the % breakdown of my actual income for the month. This one is a bit screwy (I somehow spent more than I had) because I had some money in my checking account from January's surplus that I didn't account for as income. I think I will do this moving forward to make sure the numbers are accurate. A few more key points:

• Slightly over budget in Rent/Utilities because I hadn't taken my $30/mo. cell phone expense into account and we had a ridiculous electric bill. Hopefully this will be the peak, and our Comcast bill will also be slightly reduced moving forward.
• I was $143.49 under budget for Food. I think I overbudgeted here, but I also only bought lunch once during the month. Definitely a big money-saver. I also didn't eat dinner out much, or at expensive places.
• Went over budget in Misc. by $139.58. This included $67.29 worth of business expenses for which I was reimbursed and $57.29 worth of Obama campaign contributions and a T-shirt purchase that I hadn't anticipated. Pretty much right on target other than those big expenses.
• The big plus here is in the Saving/Retirement column - $366.60 over the $300 I had budgeted! This is mainly due to the January end-of-month surplus and additional income, but also because I was able to maintain some discipline in my spending for the month.
• I can already see some areas where I can save more, especially with casual alcohol purchases. Although I know that the odd six-pack or bottle of wine purchases felt fewer than previous months, nevertheless those $7.99 and $9.29 purchases add up. I hope to save more through sobriety in the coming months.

On the whole I feel like I've made great progress and I look forward to my new budget for March to help me optimize my spending/saving balance.