2012 Budget Planning

The new year is officially in gear! I've been doing a good job of sticking to the plan, and I just heard the official numbers for our vacation house mortgage, which means I can move forward with my plans to adjust our 2012 budget. In addition, I'll need to adjust the budget in September based on the boys switching schools/grades and a few other things.

I'm working to tighten the budget so we can stick to it, and use irregular income (stock option vests, bonuses, stock awards, etc) for our planned goals for the year: boys college accounts, paying down our mortgages, and saving $5,000 or so to have an architect come up with extensive remodel plan for our house.

Here are the upcoming changes for 2012:

• We just refinanced our vacation home from a 30 year to a 15 year mortgage. This fits with our longer term plan of paying that house off within the next five or so years, but it means a bigger monthly payment. Estimated payment increase of $615/month.
• In September, my oldest son will be going to first grade, which means we will no longer be reimbursing the state $330/month for full day Kindergarten. We will still be paying $395/month in after care, as school gets out at 2:30, and I work until 4. Estimated savings = $330/month.
• In September, my younger son will be off to Kindergarten. *tear* Although we have to pay the $330/month + the cost of after care ($395/month), it's still a bit of a savings over preschool. Estimated savings = $250/month
• I have an opportunity at work to invest 15% of my net monthly salary in our company stock options. We get an immediate 15% discount & can exercise quarterly, so I'm bumping up my stock investment from 10-15%. The money will be coming back (with the 15% return) quarterly, but it impacts my monthly cash flow & I need to budget for it. Reduction in cash flow = $400/month. (This is estimated, as I don't have a firm number for my net pay in 2012.)

As you can see, I need to come up with some budget cuts. Especially between now & September. In September, things will ease up based on my childcare savings.

Categories I'm looking at for cuts:

• Liquor. We spend too much on this category. We frequently bring mixed drinks to parties, & this is typically $40+. We'll be drinking wine only on weekends/special events, which will also help to cut back. Savings = $50/month
• Clothing/shoes for me and the kids. I have a line item budget of $1000 for the year. I'm hoping to trim this down even more, but if we stick to the plan, savings = $20/month.
• Gifts. We've cut back in the category substantially, but could still afford to trim a bit. For example, I'll be using my Toys R Us Reward (accumulated over the holidays & from various shower gifts I purchased) to buy both kids their birthday gifts. Savings = $25/month.
• Personal. This is used to cover hair cuts, the occasional pedicure for me, etc. M bought be a large gift card for Christmas, so I should be able to use that for my pedicures. Savings = $25/month.
• House. We really don't need anything for the house at the moment, so I'm cutting this category back a bit. Savings = $25/month.
• Dining out. M & I primarily use this money for the once/month date night, as well as a once/month lunch date. However, we have a few gift cards we can use over the next couple of months, so trimming this back a bit. Savings = $50/month.
• Gas. Based on my tracking, we're spending less than expected on gas, & I can cut this back. Savings = $50/month.

Based on these cuts (totaling $245/month), I can close the gap on our increased mortgage payments. But, I will likely need to dip into savings for the other $370/month until September, where things will pretty much be offset. I think my plan will be to keep one of my first quarterly company stock purchases & save it to offset the next six months. The numbers should just about even out. This plan really, really requires us to stick to our budget!!

Are you adjusting your budget for 2012? What's changing & how are you making cuts to fit the budget? And, a tracking question for you. For those of you who do no spend days, do you count paying bills as "spending"? If your power bill comes in, do you just wait to pay it until you've had another "spend" day (e.g. went to the grocery store)? It seems artificial to shuffle the bill paying. Or, are you considering a no spend day when you don't spend on variable expenses: gas, food, dining out, entertainment, etc?

Your Grocery Bill Is Getting Higher

Did anyone happen to see this article about how the price of groceries is going up? I don't think this is terribly shocking information to anyone who regularly tracks their grocery spending, but I did find some of the specifics and forecasts interesting.

For example, food is projected to rise 4-5% this year, and another 2-3% next year. . .
Can I just say YIKES to a potential 8% rise in food costs over the next year? Holy smokes - that's a huge dent in any budget. And, it looks like beef (up 10% from last September) & produce have been impacted the most: "Fresh fruits and vegetables costs 7.6 percent more in September than a year earlier, while processed produce prices were up by 4 percent over that same period."

How will you adjust your grocery budget for 2012? Will you cut things out? Bake more snacks/breads at home? Cut down on produce or meat consumption?

I've been working on our 2012 budget, so this question is at the top of my mind. We don't buy too many snacks (Pirates Booty, Zbars for the kids before sports practices, the occasional bag of trail mix from Trader Joes, etc), but I will likely consider baking our own bread (learning how to successfully bake bread is going to be on my 2012 goal list after an utter failure in 2011 :-)). I've also started to cut out Crystal Light, both because I know it's artificial & not good for you, and because it's expensive. We've cut way down on our waste this year, so I need to keep that going & look for other creative ways to shave 10% percent off our bill in order to keep the dollar figure about the same as prices rise. . .

October Financial Wrap Up

First off, I'm nervous posting this. I realize we're in a different financial situation than many other personal finance bloggers (we make more/and spend more) & I am a little anxious posting our budget and income. My goals in posting are to keep myself on track, share how we allocate our money, and get feedback from all of you savvy folks.

Okay, with that said, here goes. :-)

You'll note that our expenses were higher than our income this month. While not typical, we do have months where we go over. We have standard income (the same every month) that I use for our regular expenses. We also have non-standard income that we use for things like: travel, the boys college funds, savings, and months where we're over our budget. The non-standard income generally comes in the form of bonuses (I get this 1x/year in September, M is eligible for a bonus 4x/year + stock awards from our employers.) We save this non-standard income for various specific line-items (college funds, travel, house repairs) & the also keep a more general savings slush fund for unexpected expenses.

Tracking our expenses has been extremely helpful! This is our first month of tracking everything (before I only tracked "variable" expenses) & we're going to be making a lot of adjustments going forward as a result.

Income: $14,088. (Typical monthly income from our employers. M also won $700 at a casino that we used to offset some of our anniversary trip. That $700 isn't included in our income number).

Total Spent - $16,859.24

Where did all of that money go? I've listed out all of our expenses, grouped by budget item & also where we're over. As noted, we had some extra money leftover from September (that's when I receive my bonus & stock awards) that I used to: make extra payments on our vacation house, & fund the boys college accounts). We typically have charitable contributions taken out of our paychecks automatically, but I made several extra donations this month, which is why it has no budget allocation.

Fall 2011 Budget	Budget	Actual	Over/Under
Groceries	600	756.42	-156.42
Dining Out	200	458.63	-258.63
Boys Lessons	200	465.5	-265.5
Gas	500	404.71	95.29
Vacation Utilities	200	244.87	-44.87
Primary Utilities	700	803.7	-103.7
Boys Clothes	50	167.21	-117.21
Adult Clothes	50	-281.35	331.35
Gifts	100	790.35	-690.35
Travel	0	1149.37	-1149.37
Child Care	1675	1715	-40
Personal	100	543.57	-443.57
Health	20	18.43	1.57
House	100	360.99	-260.99
Car	50	17.7	32.3
Boys (Misc)	50	26.38	23.62
Liquor	100	168.85	-68.85
Primary Mortg	4850	4800	50
Boys College	0	978	-978
Insurance	200	199.5	0.5
Cleaning	346	320	26
Charity	0	245	-245
Christmas	333	194.54	138.46
Vacation Mortg	1950	2311.87	-361.87
	12374	16859.24	-4485.24

Highlights:

• I was able to pay an extra $361 towards our vacation mortgage, & have now paid off 7.25% of the overall loan. Yeah!
• I put close to $1000 in college accounts for the kids ($978, to be exact.) :-)
• We were under on gas for the first time in A LONG time.
• I returned a few clothing items that I bought in September. It's kind of a highlight, but I overspent that budget item in September, so not sure that it's a net budget win. :-)

Lowlights:

• We're over on groceries. Again. This month included a bunch of random grocery purchases: the treats that I made for a Halloween party we're more than $25! It was my own foolish mistake that made this happen. I was also in charge of soccer snacks for two separate games, made meals for several families that are struggling, and brought a few meals to family get togethers.
• It's our first time to separate alcohol from grocery spending, and the goal is to understand where the money is really going. We typically stock up on wine when Costco carries it, as they don't carry it regularly.
• Boys lessons - this wildly varies month to month depending on when we have to sign them up for a new session. We are thinking of cutting this back a bit, as it feels crazy high!
• Gifts. Wow. I will be getting reimbursed for $300 of one gift, but we had a ton of events to buy for in October. We'll see how this category stacks up month after month & whether our budget needs to be adjusted and/or our spending needs to be trimmed.
• Travel. I'll be getting reimbursed about $250 in this category, as I booked a room that my sister & I are sharing. The rest was our anniversary trip. We had a great time, but it was extremely pricey for one night, & we likely won't be doing something like that again. We'll either do a 3 day weekend & spend a bit more but go somewhere, or just do a fancy dinner at home.
• Personal. I had several appointments fall in the month of October, and the rest is actually my personal training expense from September - the billing cycle if funky. (I've canceled my training going forward).
• House. We're over on the house because we had to have our oven repaired. It was leaking gas!

So, that's where we netted out for October. I'd love your input - is the way I'm tracking income confusing? Do you want to see our irregular income included? Anything else that I can add so this makes sense? Questions? How did your October go?

The Budget

I've been tracking our budget for a while, and over the past few months have gotten much more disciplined about tracking exactly where our money is going. At the end of each month, I'd like to post a summary of where we're spending our money.

Our currently monthly budget looks like this:

• Primary mortgage - $4850
• Vacation home - $2500
• Child care (we have one child in Kindergarten, and we have to reimburse the school for part of this, as he attends full day + after care, and a second child in preschool) - $1675
• Utilities - $800
• Groceries - $600
• Gas - $500
• Misc/clothes - $400
• Cleaning Lady - $346 ($80/week, but the number of cleanings in a month varies, so this is the average)
• Kids (lessons, etc) - $300
• Insurance - $200
• Eating out - $150
• Gifts - $100
• House - $100
• Personal (hair cuts, the occasional pedicure for me, etc) - $100
• Yard service - $60
• Dry cleaning - $50 (my husband has to wear suits to work regularly).

As you can see, we pay quite a bit in mortgage payments, and the majority of our other expenses are relatively low. We are good with "forced budgeting" (i.e. if we had smaller mortgage payments, we would no doubt be spending all of our extra money on frivolous things). My goal is to pay down both mortgages substantially over the next few years as we pay less in child care (my older son "S" will be in first grade next year, saving us $400/month, and my older son "N" will cost $150 less next year). This will also go down the following year as "S" starts first grade. After I pay off the vacation property, I'd like to finish funding our kids college accounts as well as make substantial progress paying down our primary mortgage.

ETA: I should probably add that this is where I think our money is going monthly, & where our spending should be at. But, I'm tracking & will be regularly reporting progress against this budget. :-)