A Balanced Budget Doesn’t Make It Unbreakable : January 2016 Monthly Budget Review

budgetupdatepost2016BALANCE IS NEVER A STEADY VARIABLE IN FINANCE

 

I often hear that a budget is ready to go once it is balanced but a balanced budget doesn’t mean that it can’t incur hiccups along the way.

Someone asked me how we could possibly budget every single month. “Isn’t it time-consuming?” After a bit of practice it gets easier BUT is your life not worth the effort? Think about that for a second. Anything you do to better your life IS worth it.

It’s not hard to make a budget look pretty with colours and numbers but numbers are like credit, once you spend it you are stuck with it. You still have to pay it back.

What I’m trying to say is that anyone can say they have a balanced budget and still screw it up. Too many people rely on a fixed balanced budget and ignore it for the rest of the year as if it’s bulletproof.  This is a huge mistake in my opinion because when it comes time to review your budget the last thing you want to find out is that you messed up along the way and didn’t pick up the broken pieces.

Even ignoring our budget for a month is a catastrophe in our household because numbers are very important to our overall financial goals. A misconception of needing a decent income, limited debt or no debt in order to budget otherwise it’s not worthwhile is rubbish.

I never started out making 6 figures when we designed our budget and we sure as hell didn’t pay off our debt in one fast swoop. Each situation is unique so stop comparing, second-guessing and slopping a budget together just to say you have one.

If you create a budget then set it and forget it this is comparable to opening a business and not showing up for work. You have to know what is going on at all times so you can manage how the business is run in order to create profit. If a business doesn’t balance their budget properly and buys more stock than they need then they aren’t building wealth, they are sitting on it. This is comparable to sitting on consumer debt.

Many times I’ve said our family budget is run like a business because budgets won’t run on their own. Sure, you can be flexible with your budget and you should be because things change throughout the year that need to be adjusted but if you take a budget and are constantly moving around money then your so-called balanced budget isn’t working out the way it should be.

Another scenario is when a budget is not weighted properly and by that I mean you guess at how much a certain category should have in it based on a few flickers in your head. Don’t do this. Review past bills, make phone calls and always stay on top of your numbers. The best way to make sure you have a balanced budget that will work is to build it based on an earlier years budget numbers.

What happens if you didn’t budget the year before? Well, you will have estimate and review monthly for the first year but if you overstep the categories with too much or too little money you may find your balanced budget falls apart.

After your first year of budgeting it’s up to you how often you review it but I’d say monthly because that’s how important the numbers are to us. The key here is to monitor your budget and adjust it as you go along. Don’t just hope it’s working out for the best. It’s easy to put it all on paper or a spreadsheet but it’s another thing to see it all unfold in real life.

The worst thing you can do for your budget is to constantly justify expenses, debt creation and non-debt repayment because things “came up” that you hadn’t planned. If you have a balanced budget you will save for future expenses and ensure that your budget categories reflect actual expenses as closely as possible. There’s no room for slipping back into habits if you want out of the debt game. Stay strong and fight through the muck. It’s not easy, but worth it.

How can I make sure my balanced budget is working for me?

You’ll know after the first of second month of budgeting whether you budget is working for you or against you. The first thing you may notice is that you don’t have enough cash to pay your bills at the end of the month. You might also find that you have too much leftover money in a category over and over. This may not seem like a bad thing BUT if that money can go towards another budget category or even debt then this may cut years from financial debt.

Many of you may look at that extra cash as “Spare” and spend it on whatever you want because you think that no one will miss the leftovers so you might as well use them up. Silly really, but people do this. In fact you might be this person and prove it with all sorts of excuses, stop this habit. Get into the habit of becoming debt free and forget about stuff you don’t need to buy.

 

Balanced Budgeting gone wrong

 

Example:

  • Net Income $1500
  • Housing $800.00  Spent: $800
  • Food : $600 Spent : $200 Unused: $400
  • Clothes $50 Spent: $40 Unused $10
  • Insurance: $100 Spent: $100
  • Debt repayment $50 (minimum payment) Spent: $50

Once in a while you may find you spend less in a category and that’s fine BUT if you are consistently doing this then you don’t have a balanced budget. If you are taking that leftover money and blowing all or even a portion of it you are doing your budget no favours.

If you were consistently spending $200 a month on groceries and budgeted $600 then you have money sitting around doing nothing unless you move it to pay off debt or invest in retirement savings or other ventures. Don’t let financial opportunities pass you by especially when the answers are obvious.

Take the time to monitor your budget every month and to be flexible with moving numbers around until you feel that you have nailed it. A few of my fans who are saving money in their grocery budget by playing the grocery game challenge for example are just learning how to budget for food. By practicing smart shopping they are left with extra cash which goes towards debt. Baby steps gets you there every time and this is why I’m proud to motivate them along the way.

If you are this person and this happens month over month drop your grocery budget allowance and use the money to your advantage. You won’t miss the money in your grocery category if you aren’t spending it in the first place. Not everyone will do this but not everyone wants to become debt free either.

Forget about that “I’ll be in debt until I die” mentality.

Sometimes those who budget have no debt to worry about so carrying over money that doesn’t get spent means they can either save more money for the future or buy more. Again, if this is consistent have a look at your budget and lower your budget categories to reflect your estimated monthly usage amount. Even if you go over by $20 that’s not going to hurt you as much as having an extra $100 or more kicking around every month when that money could be working for you in the best way possible.

A savings account is a big deal and always has been so if you don’t have savings or even emergency savings find ways to chop your categories and spill a bit of that extra money into your savings every month.

Remember a balanced budget is only as good as the person running it. If you are stressed out every month because you don’t have enough to pay the bills but are screaming out loud that you have a budget, then it’s not working. You are doing something wrong and typically this has to do with inflated budgeting which created a balanced budget that doesn’t work. When you estimate too high or too low or budget based on what you think you will earn then your budget can become a giant flop.

Your best attack to combat the balanced budget:

  • Review the amounts in your budget categories and ask yourself if they are realistic
  • Estimate as close as possible based on previous months budgets or other financial documents.
  • Be flexible with your budget and review it monthly
  • Swap around money that isn’t being spent so it’s being put to good use. Consider category revision.
  • Start saving money as fast as you can even if you drop a few extra dollars in here and there

Don’t blow any extra money not spent each month without first asking yourself, “Am I debt free?” or “Am I saving for a down-payment on a house?” and if the answers are no and yes then you better revisit your budget categories to balance them out properly.

If your answer is yes and no then you should clearly see where you can save more money for a rainy day rather than spending it because you think you don’t need it. We all need money, some months more, other months less so hold money close to your personal vault and only release it when the time is right or when you’ve saved enough to do so without compromising your debt and future.

If your answer is no and no then you still have consumer debt you need to get rid of so make sure you are piling down as much as you can handle. I’m not talking about fast-tracking the mortgage because some of you may not want to pay your mortgage off like we did. You’d rather invest the money so the choice is up to you. But, if you have credit card debt looming over your shoulders it’s probably best to hold off on those “wants” and put that money towards no more debt.

Do you have what you consider a happy balanced budget? What changes have you made along the way and do you spend “extra cash” not used in a budget category every month?

 

Where our money went in January

 

January 2016 Month Income and Expenses

Where did your money go in January?

Our money didn’t go far this month because we still have a rather large portion of it. We actually kept 60% of our earnings as savings. That’s what I meant by it didn’t go far, it’s still here.

Working 2 jobs is great for the income which in turn works wonders for the budget. We have a larger income every month and less spending because I just don’t have the time to go and spend a fortune.

The downside of having 2 jobs is that it really does wear on you after a while. The family life doesn’t thrive on it either. I can only say that it’s for a reason other than short-term cash injection.

 

Pick a budget that is right for you

 

I’m currently offering 2 versions of our budget and the reason behind it is simple. Firstly, read the CBB blog disclaimer because what you do with it is your own business so if you mess it up you need to sort that out.

I have not closed off any cells so you can make all the changes you like to the budget to reflect your lifestyle which is what you asked me for in your emails. (See I do listen and read your comments and emails)

Although I would love to help every single fan with their budget I am unable to do so but I am always willing to answer any emails you send me so don’t be shy.

This was after all meant to be our personal budget and although I would love to customize it for every fan that wants to use it but, I’m afraid I cannot.

I’m not selling this budget or hope to make any money from it so enjoy this free budget and I hope that it works for you as much as it does for us.

 

Sneak peek at our free budget spreadsheet

 

cbb budget screen shot compressed

You can download the free budget spreadsheets here.

  • Budget 1– You can use the pre-existing categories or you can use your own if you wish and you have the option to use projected expenses or not. Please read all notes left around the budget for tips.
  • Budget 2– Everything is pre-set so you have to use the pre-defined categories but this budget will generate year-end budget figures where the other one won’t but you must use the categories already in this budget. If you change anything you will mess up the formulas and year-end figures.
  • Please read all notes left around the budget for tips.

Test the budget for a month and see how it goes.

 

Our family budget plan

 

How we budget our monthly expenses?

I often have fans ask me how to budget money on a low-income or they simply a high debt load and want to kill it like my friend Tony who got rid of over $100,000 worth of debt by using a budget.

CBB fans want to know what we do in order to save so much money and the reply I give is simple>> It’s not about the money it’s about the process involved.

We are both money managers of our finances and with our relationship compatibility we have been able to get to where we are in 2016, debt free.

It doesn’t matter if you are using a cash only budget or you use your debit and credit cards, if your budget doesn’t balance you have budget issues you should check it pronto.

Learning how to be your own money manager is important because no one else will care about your money more than YOU!.

We don’t always save as much money as we would like every month but most importantly we are not going into debt but only because we are budgeting our money. In fact we are currently debt-free including the mortgage which means all we pay for is our monthly bills and expenses.

One of the most important things we did for our personal finances was that we never let the budget deter us from reaching our goals.

Sure we’ve had crap months but we’ve made up for it or we learned from our mistakes just like we should. Budget failure only occurs when you give up on your budget which should not happen as long as you truly want to reach your goals.

We didn’t always earn the income we do today but made do with what we were earning so we didn’t go into debt. That my friends is called “living below your means”. The only science to becoming rich!

Sometimes fans email and ask me if living on a budget in Canada is any different from living and budgeting in other countries. To be honest I’m going to say, probably not.

If I still lived in the UK I could use this exact budget spreadsheet to meet all of my needs however the budget needs to be reviewed monthly.

Below are links to the budgeting series which I wrote while designing our excel budget spreadsheet which will give you an idea just how we designed our budget.

I’m not a financial planner/advisor so I can’t tell you how you should budget but I can show you how we budget. I’m just a regular guy just like everyone else; some might call me a budget or numbers nerd.

 

Learn how to budget with Mr.CBB

 

Our Budgeting Series

Do you want to learn to budget like we do?

We explain everything we do and more in this mini-series below all about budgeting.

Please take the time to read through our budgeting series plus read Budgeting in the New Year. I hope the information will help stop you from making common budgeting mistakes that I hear of often and that you take something away from the information and apply it to your financial situation.

If you have any questions about what we do with our budget money tracker feel free to email me.

  1. How We Designed Our Budget Step 1 Gathering All the information
  2. How We Designed Our Budget Step 2Budget Categories
  3. How We Designed Our Budget Step 3– Tracking Receipts
  4. How We Designed Our Budget Step 4- Note-taking
  5. How We Designed Our Budget Step 5– 5S Organization
  6. How We Designed Our Budget Step 6– Who Does What and When?
  7. How We Designed Our Budget Step 7– Balancing Our Budget
  8. How We Designed Our Budget Step 8– Knowing our Coupon Savings
  9. How We Designed Our Budget Step 9– Reading Our Bills
  10. How We Designed Our Budget Step 10 Projected Expenses

 

Budget percentages January 2016

 

16 Household Percentages

Our savings of  60.44% includes savings and investments and emergency savings for this month.

The monthly totals comes to 100% which shows that we spent our income this month and used the rest as emergency savings.

The other categories were well within the defined percentage limits. Our projected expenses this month is at  18.32%.

 

Budget percentages month by month

 

January 2016 Month by Month

 

Breaking down expenses

 

This is simply a breakdown of our expenses which has helped us to understand where all of our money goes. Since May 2014 we have been mortgage free so much of our money will be directed at savings, investments and renovations.

I appreciate that you enjoy this budget update each month but I do hope you view this as an educational tool rather than comparing your own financial numbers as our situations are all unique.

Although I encourage your comments and love to hear what you have to say about our budget categories and expenses please don’t tell us to donate our money to charities because we have too much or are fortunate. We are hardly out of the clear with finances for the rest of our lives and have worked and sacrificed to get where we are. We do plan to enjoy the money we’ve saved now since we haven’t over the years with our son.

What we do with our “extra cash” is our business and although we do donate to a charity we won’t be putting it on display for the world to see as it defeats the purpose in my eyes. It is part of the budget as you see it. I hope that clears that up for those of you who had concerns about our extra money.

Almost 8 years ago I started working in Canada making a bit over minimum wage and have since moved up the ladder. I’m now working very hard to secure my dream job with one foot in the door. We aren’t all lucky but if you do the best you can at least you can look back and say you gave it a shot.

Sometimes we wish we had more money to budget with but understand that we only have what we earn and if we want more, we need to earn more. Spending less than we earn and budgeting our money has been the easiest way for us to pay down debt and save money.

  1. Chequing– This is the bank account where all of our debt gets paid from.
  2. Emergency Savings Account– This is a high-interest savings account.
  3. Regular Savings Account– This is a savings account that holds our projected expenses.
  4. Monthly Budgeted Total: $5,093.64
  5. Monthly Net Income Total$10,468.03
  6. (Check out our Ultimate Grocery Guide to see where our grocery money goes)
  7. Projected Expenses: These are expenses we know we will pay for throughout the year = $1,917.68
  8. Total Expenses Actually Paid Out$3,840.27
  9. Total Expenses Actually Paid Out: Calculated is $10,468.03 (total net monthly income) – $1,917.68 (projected expenses) – $4,710.08 (emergency savings) = $3,840.27
  10. Actual Cash Savings going into Emergency Savings: Calculated is $10,468.03 (total monthly net income) – $3,840.27 (actual expenses paid out for the month) – $1,917.68 (projected expenses) = $4,710.08

 

Saving for stuff you haven’t yet paid for…but need to!

 

What are Projected Expenses? – We project expenses throughout the year so we have the money saved. PE= A projected expense is money automatically saved each month so it is ready when the bill comes in or when you need it as in the example below.

We review our projected expenses at the beginning of the year to set up our yearly budget and adjust as we go along if a new projected expense arises and needs to be added to the budget. Sometimes we remove a projected expense as well so it’s very important to keep an eye on your expenses.

This has happened on many occasions but it’s bound to happen as we can’t predict everything we have to pay for over the course of the year. The important part for us is that we are saving for these expenses and we no longer have to stress about taking money from our savings to pay for them. To learn more about projected expenses read Step 10 in my budgeting series.

When we spend the money in a projected expense category we move that money to our chequing account in order to pay for that incoming expense. So this means the numbers go up and down in the projected expenses account based on what we need to pay for that we saved for in the account over time.

The only thing you need to do is track your projected expenses each month manually as I can’t customize that for you in the excel budget spreadsheet as I don’t know what you will use for projected expenses.

For now we will have to manually track which means month after month we add up what we save in each projected expense category and minus what we spend so we know how much we have and what is left in each category. I have updated our personal excel budget spreadsheet for 2016.

We pay money into the projected expenses account continually throughout the year even when bills come due as its revolving so as one bill gets paid the money continues to come in from the other categories all year-long. This ensures that money is always available. It may not always be enough but having something ready is better than having nothing at all and having to use credit.

So the $1766.35 gets paid into the projected expense account every month no matter what. It seems to be easier to track our money this way but you can do what works best for you.

Sample Projected Expense

If our clothing category was a projected expense we would have a budget of $50 per month for the two of us. If we spend $30 on clothes for the month that means we need to pull $30 from the projected expenses account to pay for this expense or we move only $20 to projected expenses for the month and leave the $30 in your chequing account.

It’s up to you how you do it as I mentioned above. My plan is to create a projected expenses spreadsheet to track the expenses all year-long otherwise you need to do it manually which we currently do in order to make sure we don’t overspend what we haven’t saved or will save over the course of the year.

It’s a fairly easy process and becomes a lifestyle change for your finances but the most important part is that the money is available and saved, which means potentially less stress.

This means we should have $600.00 per year for clothing to spend. We have to track that expense as we spend it manually but hopefully for our 2015 budget I can incorporate that into our spreadsheet so it tallies the numbers up as we go along. That way we will be able to know exactly what we’ve spent as an ongoing total.

(Note: I am working on this but slowly as I wasn’t anticipating all the extra hours with my second job)

 

Our actual family budget

 

Time for the juicy category numbers and to see how we made out with our monthly budget. Below you will see two tables, one is our monthly budget and the other is our actual budget for the month of January 2016. This budget represents 2 adults and a toddler plus our investments.

If it is highlighted in blue that means it is a projected expense. You will also see our budget does not include the emergency savings as this is factored in at the end.

 

Budget for January 2016

 

January 2016 Monthly Budgeted Amounts

 

Actual budget expenses for January 2016

 

January 2016 Actual Monthly Budget

 

February 2016 Goals

 

I cut down the goals section for 2016 to keep it simple. I was spending too much time focusing on social media numbers which I can’t really control.

  • Find a used dresser for our sons clothes on the main level of the house-
  • Call around to lawyers to talk about getting a Will written up-
  • Finish sanding and stain our sons kitchen table and chairs
  • Start revamping old blog posts (2 a month)-
  • Finish the master bathroom shower-
  • Pick out new tiles for bathroom and accessories (mirror, towel bar holder etc.)-
  • Buy a new blind for the garage-
  • Finish the walls in the baby room-
  • Write down what we want in our new kitchen-
  • Start looking at pricing for a new insulated garage door-
  • Buy a pressure washer-
  • Sort through our sons clothes and sell some-
  • Research Kitchen designers in our area-
  • Start researching vacation spots for 2016-

 

Budget updates month by month

 

In case you missed our budget updates and want to do a quick search I’ve compiled them all on one handy page: monthly budgets. For the 2016 Year I will also keep track of each month below and update the monthly budgets page.

I will start the list off with our end of year budget update from 2015 just in case you missed it.

That’s all for this month check back at the beginning of March 2016 to see how we made out with our February 2016 budget.

Happy Budgeting CBB’ers!

Are You New To Canadian Budget Binder?

Mr. CBB
Mr. CBB was born and raised in the United Kingdom who then moved to Canada where he is a permanent resident. He recently became a father to a very busy toddler who allows him to be a kid at heart. He bought his first house at the age of 21 after University and his second at the age of 24. Both Mr.CBB and his wife are Debt and Mortgage Free and they did it all in under 5 years using a Budget. Canadian Budget Binder is a place where he shares their financial experiences with his readers and hopes to learn about theirs. Welcome to CBB!
Mr. CBB
Mr. CBB

Comments

  1. One thing somebody can do if they have never created a budget before is to do a spend analysis for 6 months worth of data. Which is writing down every time they spent/moved money between bank accounts and debit/credit cards. From those numbers, they have a realistic look at where they’ve spent their money over the past 6 months. After that, they can create their budget and determine if cuts needs to be made in certain areas or if a 2nd or 3rd job needs to be obtained to keep that lifestyle.

    I have a 2nd job for 3/4 of the year and that money has been used for extras that I’ve wanted to do or pay down debt or just save it. This money gives me options over and above my regular paycheck. My happy balanced budget is one that enables me to save a little money, pay all my debt/bills as required (if not a little extra) and my family is clothed and fed. Sometimes, I do spend the extras, either on debt or a meal out because I don’t want to cook. I’m currently satisfied if everything that needs to be paid is and I have money left at the end of my pay period.

  2. We don’t run a tight budget in our house, BUT, I will say that we have a ballpark one….Our income is fixed….no outstanding debt, no mortgage….we may not have much but what we have is paid for. we make sure that we purchase something every month to put into the house or yard…..be it a bag of concrete, a sheet of paneling or some used windows, etc for fixing up the house…..we manage to get through the month with very little extra income partly due to the fact that in our house, we have 3 people who all have serious medical issues and some of the medications are not covered through a drug program……It works….we are fed, clothed and have a roof over our head…..

    • The good part is that you are mortgage and debt free. If you were not how would your current fixed income coupled with the medical issues change your overall budget?

  3. Things can be tight for people & often people don’t want to or can’t get another job on top of their current one for a variety of reasons. This is when I think “budgeting” can become that “2nd job” that a person can do on their own time. The money they save can be considered money “earned”–and it’s tax-free because it’s after-tax income. If more people chose to look at budgeting this way, yeah, it’s not “fun” for most people but it’s a way to have more money & it’s something you can do on your own time & your own terms that works.

  4. Veronica Boog says:

    I thought I’d pop in and say hello. Mr CBB sent me & I have to say that I love the Grocery Game Challenge. Since I started playing the game, I have figured out that I do 3 kinds of grocery shopping each month & I divide my funds accordingly. I have a Grocery Budget for items we will consume that week, a Stockpile Budget for items I want to have on hand and they are on sale for a good price and lastly my US Reserve for my grocery shopping across the line. I also find the GGC keeps me on the straight and narrow with my spending because I know exactly how much I have left to spend in a given month…it certainly helps me resist any unexpected sales I spot. Owning up to the whole blog and myself that I went over my budget is a terrific motivator for me not to. LOL Come join the fun…we have a great time sharing and helping each other make the very most of what we can afford to spend. 🙂

  5. I was just curious what kind of expenses fall into the Miscellaneous category?

    • Anything that doesn’t have a category. It’s near impossible to break down a budget to include everything so this is what we use it for. An example was our son’s baptism which came out of the blue. It wasn’t an emergency BUT it cost us about $500.

  6. Anne Russell says:

    A balanced budget is a tool I use to moderate and monitor my spend. I agree with Leona, it’s my second job. I can predict and adjust based on patterns that are concrete. One thing I know, when it seems I have too much money I’ve missed something. Budget brag this week, 1 kg sliced ham for $1 at No Frills (dated Feb 18) and that I noticed that I could get 10 lb russet potatoes for $1.10 less than white or yellow. The ham was.amazing from Sofina foods in Markham

    • I might write a post about budgeting being a second job. Great deals you got this week!! IF you have a brag send me a photo of the brag and tell me what it is to be entered into a contest to win a PC gift card. If your entry is chosen to be featured on the blog you get a second entry in the contest. 🙂 You can email me canadianbudgetbinder @yahoo. ca 🙂

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