Tuesday, January 09, 2007

2006-2007 budgeting

Ok, I already spelled out for you how much I made and spent last year. But now much was I budgeting to make and spend? Let's take a look:
First of all, the earnings. This is an area where I don't budget very agressively. I basically budget for whatever my salary is at the beginning of the year, plus a little less than my last bonus, plus a few other conservative amounts to cover interest income, gifts, tax refund, and 401k employer matching:
Salary: $85,575/$79,000
Bonus: $9,464/$8,000
Tax Refund: $1,221/ $1,200
Gifts: $325/ $200
Interest: $2,278/ $900
Other Income (mostly 401k match): $5,770/ $2,460
TOTAL INFLOW: $124,002/ $91,760 (this doesn't match what I posted the other day because of some new transactions I hadn't entered on my E*Trade accounts)
It's kind of weird to me that the area I budgeted most accurately was my tax refund! But that is ok-- I don't like to count my chickens before they are hatched, so I think it is better to under-budget one's income, and then be happily surprised at the end of the year! And to look at this in terms of variance from 2005, my total inflows were higher by 14%.

Now for expenses. First of all, let's just ignore all the housing-related ones, because I didn't really budget for them in the same way I do my other expenses. I just knew they would be A LOT! As for the rest, I had a lot of categories that were over budget:
Payroll taxes: over by $3,036. That was to be expected, as I got a raise. For this coming year, I think I'll inflate my budget for taxes, instead of just basing it on a multiple of whatever is on my paystub at the beginning of the year.

  • Dining: over by $927. I do love going out to dinner, and I'm often lazy about bringing lunch from home. And I never eat breakfast at home, except on the weekends. But what really killed me this year was living in these wacky sublets for months, none of which had adequate cooking equipment. That forced me to eat out and order takeout much more frequently than usual. Given that my monthly budget is $650, and I was only about $75 a month over budget, I think I could have done much worse. But this is definitely an area I'd like to keep under better control.
  • Medical: over by $602. Part of this can be accounted for by a couple hundred dollars worth of flex spend reimbursements that will come during 2007. Other than that, my insurance got a wee bit more expensive, and I started using a prescription medication that costs me about $40 a month, which I hadn't planned on.
  • Bank Charges: over by $210. This is so annoying. Part of this is for those "emergency" wire transfers that I actually didn't end up needing for my condo closing. But I also got hit with a couple other stupid things, like a charge for doing too many transfers from savings to checking within a month, and using foreign ATMs. The only thing I really budget for in this area is my Visa annual fee. (Yes, I could probably get a card with no annual fee, but I earn frequent flyer miles on this one, and I think it's worth it.)
Those are the only categories that were significantly over budget. Here are the ones that were under:
  • Travel: under by $1,610. I didn't really take any exciting vacation trips this year. I didn't take any unexciting ones either. All I did was visit family.
  • Clothing: under by $1,564. I'm telling you, check out your local nudist camp.
  • Education: under by $576. I had thought I would take a painting class in addition to my French lessons, but didn't.
  • Telephone: under by $261. I guess I've just been a little less chatty. It's miraculous that this is under budget, though, as I was using only my cell phone for months, and kept going way over my allotted minutes, so those bills were huge.
  • Miscellaneous: under by $168. Dunno why.
The overall expenses were over budget by $25,414, but if I backed out all the condo-related stuff, it would be more like a $625 overage. So if you then backed out my extra dining and phone expenses due to the move (or rather, moves, many of them!), I'd probably have been under budget by a few hundred dollars. I'd like to say this was due to day-to-day discipline and consciousness of my spending, but really, it was more because I skipped a few major things, like a nice vacation and a class, and didn't buy some clothes that I actually do need. I keep planning to spend a couple hundred dollars on a super duper Arctic quality parka, but with weather like we've been having lately, maybe I won't have to!
And again, to look at the expenses in terms of variance from prior year, I spent about 40% more including the condo expenses, but without those, I think I would have spent about 5% less than I did last year.

For my 2007 budgeting, here's my philosophy: I'll obviously budget for my new higher housing expenses-- mortgage interest and principal, condo charges and property taxes, as well as the gas and electric bills that I now have to pay. I will also have a couple thousand dollars budgeted for buying furniture, etc. And I'll adjust my tax expenses, and increase my tax refund a bit, since I'll now be deducting mortgage interest. Otherwise, I think I'll leave the rest of my category budgets pretty much as is. I don't think the cost of anything has increased much, and I don't have any plans to change my habits much-- my day-to-day expenses may fluctuate, but in the end, they seem to be fairly predictable. And I won't budget for investments dividends and other such things that might provide unexpected little windfalls. Hopefully I'll once again underestimate my income and slightly overestimate my total expenses... but it is a whole new ballgame being a homeowner. Last year, my budget and expenses differed by only $13 for the whole year! I had had 6 years of living in my tiny studio to become a creature of relatively inexpensive habits, but now I feel like I'm adjusting to a whole other life in some ways. I'm certainly spending a lot more on housing and decorating, but that makes me so nervous about the rest of my budget, maybe I'll really cut back on those expenses? Or will I want to spend more on the other areas so I don't feel like the condo is a ball and chain that prevents me from enjoying the rest of my life?!? We'll see.


SF Money Musings said...

wow, those numbers amazing! you are so careful budgeting and at your salary level you budget! i think that's even more powerful.

do you mind if i ask why you didn't budget for the condo expenses? did you figure that you'd buy whatever was needed no matter how much it cost because you're investing in the condo long term? just wondering ...

Anonymous said...

Frankly, I'm surprised you get such a "big" tax refund. I much prefer keeping my money and paying out a little at tax time. I usually can come pretty close so I pay less than 200.

moneymonk said...

WOW ! You count every last penny.

I admire that, I always guessimate. I never have time to track everything.

Kudos to you

Madame X said...

Re. budgeting for closing costs, I looked at a few different places to buy, all of which had different scenarios of price & closing costs-- they vary a LOT between new construction condos and coops here in NYC. I weighed those factors as part of the overall decision about affordability in each case.
With the place I was buying, I did budget for closing costs in the sense that I set money aside for them. But I never updated my Quicken expense budgets to reflect that, and they ended up partly in 2005 and partly in 2006 anyway.

Anonymous said...


Maybe it's just too early, but when I add up your various inflow line items I'm about $20K short of $124K. Where is the extra coming from--blogging income? Also, assuming your salary line item is gross and not net, I don't think you can count a tax refund as inflow/income.

Madame X said...

Anon 9:15, the rest of the income was realized gains from selling some stocks and mutual funs-- I mentioned that in another post, but forgot to say so here.
I WISH I could make $20,000 from blogging!