I can hardly believe it, but after months of thinking about it, planning to do it, tweaking the costs of our fixed expenses, tracking our spending, and determining realistic amounts for monthly food and transportation costs, we FINALLY have our projected budget done. In rough thirds, our new budget includes one third for fixed expenses, one third for variable expenses, and one third for mortgage and debt repayment.
The hardest part of the process was trying to figure out where all our money goes, what to allow for in the budget, and what is a reasonable amount to plan on spending in variable expenses categories. In case you are also in the process of putting together a budget, and feeling as confused as I was, I thought I would share my recommended areas to include in your fixed and variable expense categories.
Fixed Expenses to Consider
Housing
In our case, our mortgage is not a fixed expense. We have a non-traditional mortgage through the Manulife Bank that functions more like a line of credit than like a mortgage with a fixed payment. Because of this, we consider our mortgage repayment in the Debt Repayment and Planned Spending portion of our budget.
However, there are other housing costs over and above our mortgage that are fixed, and need to be planned for. They include electricity and gas, water and waste, and our property taxes.
Insurance and licenses
In our budget, this includes insurance for home, auto, life and disability, as well as our driver's licenses. If anyone in your family has to maintain a license for work, put the cost for that here, too. Most of these are annual costs, but by dividing the annual cost by 12, and including it in the monthly budget, we ensure that the money will be there when we need it.
Services
In our budget, this includes our cell phones, home phone, internet service, cable tv, and Netflix costs. This is the fixed expense that stood up to the most modification. You don't want to pay for more service than you need, or you can really afford. With the exception of our cell phone contracts, all these services could be discontinued if we were willing to go without, and we saved money on most by dropping extra things, and shopping across providers for the best price.
Church and school
It is important to my husband and I to prioritize giving to our church (the money is used to pay the church's mortgage, to support needy members, and also to support various church-funded projects and pay our pastor), and also to pay membership fees in a local Christian school. In addition to these costs, my son also attends a small private preschool, two afternoons a week. These costs are all determined at a monthly rate, and are included in our fixed expenses.
Bank fees
This is a very small percentage of our monthly budget, but it all adds up. If this number does not represent a small number in your monthly expenses, it may be wise to shop around for a better rate. In the past we found that it actually costs less to pay a higher monthly fee that allows for more transactions, if you find you are exceeding your limit, and paying per extra use.
Variable Expense Categories
Food
This represents more than half of our variable spending. We
love to eat, and love to eat well. The money in our food budget doesn't
have to be spent all at the grocery store, but it goes a lot farther
there than it does at the pizza place. We are still learning how to cut
costs here without sacrificing taste, nutrition, and variety. Some
things that are helping are meal planning (which cuts down on impulse
spending and waste when unused food spoils in the fridge), making the
vast majority of our baked goods ourselves, comparing unit prices to
find the best deal, and buying pantry staples and freezer items in bulk
and on sale. I hope that some gardening and shopping for in season produce with help us to joyfully stick to our budget as the weather gets warmer.
Transportation
Mainly the cost of gas and bus tickets, this category
is our second highest variable expense. A car wash would also be
recorded here, and our routine oil changes.
Consumables and Personal Care
This is the budget for things that get used up. Shampoo and conditioner. Aluminum foil. Paper towels. We are trying to save money in this area by using these things less often, and/or using less per use. Some things in this category, like resealable plastic bags, can also be washed and reused a few times, making a purchase last longer. This is also the category that allows money for personal care services that need to be kept up, mainly hair cuts. Thankfully, none of us is maintaining an expensive dye job. ;-)
Home and Clothing
This category represents the 'stuff' we buy. Any expenditure for the house, including home improvements, decorating, gardening, and furnishings would fall into this category. Also clothing (including footwear and outerwear) for the whole family is included here. This is not a large number in our budget. We make the money stretch by shopping secondhand, swapping for needed items with other families, and doing as much as we can ourselves (e.g. starting plants from seed indoors, instead of paying for bedding plants in the spring). Freecycle and our city's free weekends held twice a year are also great for meeting our needs on less.
Entertainment and Gifts
This is the category for all things extra. Hobby spending, computer games, craft supplies, toys, booze, eating out, admission costs of any kind, you name it. If it isn't essential, this is the category. However, this is also the category with the most flexibility. IF there is money leftover in the food budget at the end of the month, beer is allowed to be counted as food. IF there is money available in Home and Clothing, maybe part of the cost of new computer part could come from that budget. Saving money in other areas of the budget means extra spending for fun stuff.
Flexibility
One last thing worth mentioning is that the income I based our budget on is what I like to think of as guaranteed income. It is the combined amount of my husband's salary, and the two government cheques we receive each month, the Child Tax Credit, and the Universal Child Care Benefit.
However, this 'guaranteed income' is not the only money that ever comes our way. My husband does get occasional commissions at his job as an insurance broker. I have a small income from some babysitting, tutoring, and potentially from casual work with my previous employer. Other occasional income includes anything we get at tax return time, or from our annual cheque from our cooperative gas station. Some income can also be generated by reselling items we no longer need at garage sales, through classified sites like Kijiji, or by selling to consignment shops around the city.
Any extra income can be added to any variable expense budget, to give it a boost, or it can be used to increase our debt repayment, which is especially important if our debt repayment goal for the previous month was not met, due to overspending in the variables, or an emergency that came up.
By keeping some flexibility in the budget, I hope that it will be easier to stick to. Life is not the same every month, and expenses vary. But one thing is constant. You never get anywhere, living on money you haven't earned yet.
