Thursday, January 18, 2007

My new Budget

After a little bit of noodling and a lot of looking at past expenses, I came up with what I think is a budget reduction plan that will allow me to keep my current level of 401k saving and still allow me to no spend more than I take in.

Why do I think it is important to keep my 401k savings rate where it is....especially since it is only me, and I should be able to retire on "less" than me and my wife....

Well, I figure I want to make sure I stay out of my kids pockets when I get older. I don't want to be a drag on them financially. Cheryl and I didn't come this far so that I could screw it up now! :-)

Also, if I happen to pass on before I spend it all down, then it goes to the girls, which would be fine with me too. (trust me, it's never going to be the Bill Gates fortune....they have never had silver spoons anywhere near their mouth, and any money they get from me will never make that happen either)

Up until now I have not given out any specifics on my budget situation. I guess I'm still thinking about how far to exactly go, but I guess I will wade in a little with some expense numbers. (at least those I am going to change)

I'll start by note that our house income has recently dropped by a bit over 25%. That is a fairly sharp decrease, but we are lucky enough to not be in massive debt. This means that quite a bit of our expenses are discretionary.

It turns out I am currently about $227 per month ($2723 per year) in the hole at my current spending rate. So I wanted to come up with savings that would balance that and give me a slight savings every month.

I decided on the following:
1) Cut out Vonage and move my home number to my Cell Phone: With my kids off at college, I am the only one home and so I can use my cell phone and perhaps get Skype Out for home outbound calling. (only $15 per year vs $20 per month) That is a savings of $18.75 per month.

2) Cut out all cable except for Internet access: Again, being the only one in the house, and NEVER watching TV, I am fine with this. This will lower the bill from about $89 per month to about $40 per month for a savings of $42 per month, or $504 per year.

3) Drive for better mileage: Ok, so this seems like a stretch, but I literally drive to work at 80MPH or above...and I get about30MPG in a Civic. When I was breaking in the car, I was driving it like it was fine crystal and getting about 42MPG, so I think I can gain something by driving in between those two. I did my estimates on a 9% fuel economy increase, which I think is possible. I happen to drive about 70 miles per day, so it adds up...and to the tune of about $14.61 a month for about $175 savings per year!

4) Decrease my food costs: We spent about $100 a week, and I figure that being me along, I can cut that to $60. Not only am I eating for one alone, but I also intend to cook more simple things with more inexpensive items. Stir fries, rice, to be eaten over days and taken in for lunch. This will save about $172 per month, or a bit over $2060 per year savings.

5) Take a car off the road: I currently have 4 vehicles on the road right now. I have a 2005 Civic, a 1990 Honda Odyssey, a 1998 Jeep Cherokee and a 2005 Kymco Scooter. I am going to take the van off the road. Taking this car off the road will save $4.17 per month or $50 per year. NOTE: As an aside, I am going to sell the Van and my 1999 VW Beetle that sits off to the side waiting a driver. Those sales are not really a cash flow move, but will get rid of a couple of idle vehicles and perhaps add a couple of bucks to the checking account.

6) Taking the Van off the road will also save me insurance money. This means a savings of about $29 per month ($348 per year). I also suspect that with one less driver, the total rate may also go down a bit too...but I have not estimated this at all.
My final savings total per month is $271, which means I end up with my saving about $3256 a year.

NOTE: It was noted that I made a serious mistake typing this in so late and tired.....having made a ton of typo mistakes. (I did my budget spreadsheet in terms of a monthly budget, and really botched things going to years here) looking back over my spreadsheet, I find that I have forgotten two fairly major being church donations and the second some money I transfer to my daughters every month. This results in a spreadsheet change of about $300 per month, so I am not again about $163 per month in the I need to sharpen my pencil a bit more!

Yes, I know I didn't give you all the numbers.....and I know that my savings doesn't really come up to the level of my wife's salary, but that is the best I can do without doing a total zero based budget. I will be doing that over time as I get my own payment history documented.

So back to the calculator for me....but not right now!

I hope to keep you updated on my experiences in 'Saving'.

Oh, BTW...being the Engineer that I am, I have been thinking about how I was going to track and follow all my spending activity, and I have been considering Quicken, Microsoft Money, etc.... I think I might play with quicken, but I think the most straight forward system is a manual one that my mother in-law described to me. It has the benefit of not only being simple, but it also will leave a much better "paper trail" for anyone coming along when I pass they can better pick up the pieces.

My wife did a very good job of this with a fairly manual system she used....and the only things I have screwed up on (mostly double paying) are the two or three items she took care of online of with auto payment from checking!

My next post will probably be about an "issue" I have just had with Mastercard. (and I'll be looking for suggestions on another card....NOT Mastercard and NOT Citibank...but more on that later)

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Blogger moonfever0 said...

You need to recalculate $4. You are not saving $40 per month but $40 per WEEK!!

I have a spreadsheet with tabs for every month and multiple columns for cash, credit, and other (paypal, check, refunds). Every purchase gets entered in the first set of columns and then itemized in another set of columns for type of expense: food, gas, repairs, etc. I have separate tabs for utilities, donations and condo rental (the last 2 makes tax time a snap). There is another tab for the budget of all expenses including yearly ones like insurance and recurring monthly ones like mortgage and daycare. Finally, there is a yearly summary tab that automatically updates with the monthly totals as they come in.
Every year I start a new spreadsheet and have been keeping the for the last 14 years or so. It is my way of keeping on top of the budget. I tried Quicken, but I don't like conforming to their methods when I've gotten used to my own spreadsheet which is completely customized to my needs.

9:05 AM EST  
Blogger Bigqueue said... are so right...I botched this post up royally. I tried to update it a second ago....but when I did I noticed two expenses that missed my I need to find more cuts.

Such is with Microsoft Software, I guess I should never trust Rev 1.0 of my back of the envelope calculations.

2:41 PM EST  

Great stuff

3:04 PM EDT  

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