Mastering Your Budget Week 4 - Manage your budget
Download: Budget spreadsheet
This week’s assignment is the audit. You’ve setup a new checking account, identified your planned expenses, and directed your cash flow. Now it is time to monitor your system.
At first the audit is about reassurance. You are relying on external processes to control your finances, so you want confidence in your system is setup correctly. As you continue with your budget it becomes a check point. You audit to make sure your bank statements are correct, you look for leaks, and you optimize the flow.
To audit is quite simple. If you’ve organized your planned expenses all you have to do is copy them. As the bills get paid cross them off. Using excel just copy your planned expenses into a new spreadsheet and turn the bills light gray after they’ve been paid.
At first, I recommend checking up every few days marking off the bills. If you forget to change the account information on one of your bills you could get faced with a late payment. You want to make sure you’re paying those bills you’ve worked so hard to set the system up for.
Unless you have a lot more than you spend, it is helpful at first to organize your bills into paychecks. In other words, audit based on the pay period. If you get paid twice a month, say the 1st and the 15th, then these are your pay periods. If you get paid every other week, then just have Pay Period 1, Pay Period 2. If you get paid once a month, then just lump everything together.
The above advice given, the goal of this system is to move away from paycheck to paycheck living. After a short period of successfully living within your budget you will find you won’t need to base your planned expenses off of pay periods. You will have enough money to cover your bills and all that matters is money is flowing into this account.
From the feedback I’ve received, it seems a lot of people have bills that are not easily clumped into monthly payments and/or they don’t get paid on a scheduled basis. So I’ve created an alternative annual audit sheet. It allows you to lay out your expenses for the whole year. It is to be used the same as the monthly audit sheet just put your expenses in for the year.
Congradulations, you’ve made it through the 4 weeks to master your budget. Next week there will be a bonus assignment.
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February 14th, 2006 at 9:49 am
This may have been answered in a previous post’s comments, but what should you do about a planned expense that may vary? For example, a utility bill that is higher in the winter (heat more) and mid-summer (cool more) than the spring and late fall?
I just graduated from college and have not had experience paying a utility bill, so I am not sure how much it will be varying month per month.
Thanks!
February 14th, 2006 at 10:35 am
A planned expense that varies is indeed tricky. Here are two easy ways:
1. Have your utilities averaged, most utility companies will give you the same number every month based on their predictions.
2. Use the annual audit sheet for your planned expenses as well. Estimate how much you will pay in the summer and how much you will pay in the winter. Ask your family/friends/neighbors/landlord what you sould expect in a bill if you have trouble coming up with this number.
Anyone else have any advice in this area?