Monday, July 21, 2014

Handling money with a manual budget.

If you’d like an effective way to budget your income, try the arithmetic method. It keeps track of how much money you’ve spent throughout the month, and what expenses you still need to pay.

I use the arithmetic method because I’m on a fixed income and saving money to retire in Ecuador. That’s a personal top goal. Consequently other items take second place importance. I allocate minimal amounts in the secondary categories so as to save more. These amounts will be enough to cover the expense and no more.

You can use this uncomplicated budgeting system to plan for funding whatever needs or wants you have in your life.

It’s a manual system that monitors how you’re spending your money. It tells you in black and white if you’re staying within the budgeted amount for each category of expenditure. That’s why I like it. It tells me where I am. Knowing where I am means I can find wiggle room.

Unexpected expenses this month hit savings for Ecuador hard. I will be able to deposit only about 25% of its regular amount.  But I had to pay those surprise billings to stay on track and keep the house in order. Living is much like maintaining a home. It sometimes costs more than expected. The roof needs repair when it leaks. The car battery is dead. The printer ran out of ink. I know these unexpected expenses will happen; I know they slow down the rate of savings, but if I didn’t pay them I wouldn’t even be in a position to save to go to Ecuador.

In my personal budget, fourteen categories of expense are included.  I list them from top to bottom on the left hand side of a Word document. The list includes rent, food, gasoline, haircut, electricity; Mostly basic needs. One item is for miscellaneous expenditure.  One is for entertainment, which pays for Netflix. No way will I cut Netfix out to save $7.99 a month more for Ecuador. Then the amounts budgeted for the items are typed next to the items. The figures for the items when added exactly equal total monthly income. With receipt in hand after spending, I sit and find the category of expense for the receipt and subtract the charge from the amount in that category. I then see precisely how much remains at that time for that category for the remainder of the month.

I set aside $200 monthly for food, so I go to the grocery store weekly and buy no more than $50 worth of food. This month I set aside $50 for AT&T, but the bill was $46 so I moved the $4 surplus to the miscellaneous category.

Budgets reflect priorities. This week I added a new category. It will slow Ecuador savings by $120 a month but still to me it’s worth the expense. I hired someone from El Salvador to talk Spanish with me two hours a week at $15 an hour.

No comments: