For the past 7 years, I have been using a budget. When I started my first job, I thought it would be a great idea to know where my money came from and where it was going. Getting your first pay check is very exciting and it opens the door to a million possibilities. But if you want to reach any of your dreams, you need to budget it first.
I have been looking around, trying different budget formats starting from the simple piece of paper to the high maintenance Microsoft Money (where I have to enter each expense one by one). The problem with a budget is that you want one that is precise enough so it works but if it requires too much time to handle, you will leave it aside after a while. This is exactly what happened to my relationship with Microsoft Money. The budgeting software is amazing, it shows trends, graphs and it alerts you when you are about to overspend in a specific category. However, sitting in front of my computer each day or weekly to enter all my transactions was quite a pain. While the piece of paper in my notebook was not good enough, budgeting software required too much time.
This is why I managed to create something in between. I made myself a quick excel spreadsheet (I’m working on it to make it nicer so I can share it with you guys). Instead of having 2 columns (income and expenses), I have 4 columns separated into 2 categories:
Basic and regular income vs Basic and regular expenses
Irregular income vs irregular expenses
Let’s take a look at each category and how it works.
Basic and regular income
In this category, I try to put everything monthly. While I’m being paid bi-weekly, most of my expenses are monthly (utility bills). The goal of this part of the budget is to balance it out at the end of each month (to make sure I don’t depend on irregular income).
So basic and regular income will obviously include my pay check but will also include my sideline income (we draw a fixed amount of dividends per month) and government subsidies (parents in Quebec receive a few hundred bucks per month for each childs).
Basic and regular expenses
This is where I put everything I need to pay for during any month of the year. This includes a long list such as:
– dining out
– mortgage payments
– fixed line of credit payments
– insurance (car, home, life)
This part of my budget needs to balanced on a monthly basis. In an ideal world, I’d like to generate a positive cash flow of about $100 per month at least (this will help to cope for irregular expenses).
Irregular income sources
Depending on your lifestyle, this may include different types of income. In my situation, I have a few irregular income sources:
– Bonus (my year-end bonus is quite significant)
– Tax return (which is non negligible each year)
– Employer’s stock (I cash them out once or twice a year)
These types of income are not only irregular but can only be estimated. Therefore, I am very careful with the numbers I key in.
This is the most fatal part of my budget; it includes car repairs and maintenance, vacations, gifts, tuition fees and others. While my irregular income should compensate for these kinds of expenses, I always make sure that I can build a safety net with my regular cash flow.
This way of managing my budget helped me reach my goals while not taking too much time monitoring my transactions. Each month, I make sure I pay my credit card in full and respect all my financial engagements. Therefore, I know that my monthly budget balances out 😉
How about you, how do you manage your budget?