Monday, August 11, 2014

Surplus budgeting

You know that when I don't spend all the grocery budget in one month, that I carry forward the surplus into the next, and beyond. Well, we do that with all of our variable budget categories.

For instance, our natural gas budget. We use natural gas for heat, the stove top and water heating. We are currently budgeting $100 per month for natural gas. We don't need to heat the house in summer, so any of that budget not spent in a summer month gets banked for winter heating.

In past years, I've tried to build a surplus of about $600 by November 1st, to supplement our heating budget in winter. This year, I'm trying to build that surplus to $800. We have about $650 in surplus right now. If this winter proves to be milder for our area than anticipated, that surplus will carry forward to winter of 2015-2016.

We have also done this with the water bill. We budget a set amount per month, and save anything not spent for the more intensive water-usage months of summer. This year, we chose not to fill our pop-up swimming pool. So we have more in our water budget surplus than in previous years.

In addition to saving the surplus, we also "invest" the surplus. With the water surplus, we buy rain barrels, install drip irrigation and replace water hog toilets and shower heads. With the electricity budget surplus, we buy LED light bulbs and we are saving for a new garage fridge/freezer.

In budgeting areas like clothing, car repairs and family entertainment, we haven't really found ways to "invest" the surplus, but instead simply bank that amount for large expenditures like winter coats, major car repairs or family mini-vacations.

This sort of budgeting means that we're never "caught out" with big expenses. There's always a little wiggle room in the budgets to cover those unexpectedly cold winters, or replacing winter gear, or new brakes for the car.

Being prepared allows us to relax a bit about our finances.

16 comments:

  1. I like the way you use the "surplus" in your budget--planning ahead. Now if our county council could only get that concept.

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    1. Hi live and learn,
      If only we could get our gov'ts to be responsible in all areas. I'm afraid that most responsible people are too busy taking care of their own lives to enter political life.
      But seriously, there was a brief time in my life when I wasn't prepared. That was a mistake that I've tried very hard not to repeat.

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  2. What a great way to think! We have a combined bill: gas, electricity and water. We have to pay a certain amount each month and once a year they control the meters. We had a mild winter so I got about 500 euro's back. The company does want to lower the monthly bill ('we are not the bank") but I said I didn't want that. I am not a weather woman so I don't know what next winter will bring.
    From the 'surplus' I got back, I replenished the pantry and I am going to buy some more canning jars...

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    1. Hi Maria,
      now your way is anther great way to "invest" in your future. I'm sure your family will really appreciate having the abundance of good foods this winter!

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  3. Love this Lili! I am soooooo stealing this idea ;)
    I think I get so caught up in oh look there is extra money instead of banking it for later - so clever!

    I hope you enjoyed you fun week last week!!

    Be Blessed,
    Cathie

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    1. Hi Cathie,
      Every once in a while, we have a splurge, where I look at a large surplus, and we do something out of the ordinary for us. And I think that's okay, too. It makes life less humdrum and routine. But overall, we try to bank surplus for future needs.

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  4. This is a great idea and one I strive for but am failing miserably at. May I ask how you keep track of the various categories? Paper ledger, separate accounts, online program? I end up getting myself thoroughly confused and I am someone who likes and is good with numbers normally.

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    1. Hi Cat,
      I do it all on paper. I know there are ways to do this on computer, but I like the freedom of having a pad of paper ready to make entries, w/o needing to turn on a computer.

      I have a spiral notebook, each page in the notebook is a month's budget. Yes, it's messy and crammed with numbers and info, but it works for us. Each line has a different category of the budget, and on the left margin, I keep a running surplus or deficit. On the actual line I enter most expenditures. I use the back of the page for long tallies of expenditures, for grocery spending and one other category that runs long, and for which there wouldn't be room on the front of the page.

      I think however you keep track of expenses, so long as you keep it up to date, and actually use it, carrying surpluses and deficits from month to the next month, it will work.

      Good luck!

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    2. Thanks for answering. I do my budget in a small spiral notebook as well. Just have trouble with keeping up with my various categories. Especially if I purchase for more than one at one store. For example: cat litter comes from my pet budget but is sometimes bought at the commissary due to price. Maybe I just break things down into too many categories? We have so many animals to feed (5 cats, 2 dogs, a hamster, 3 pet rats, a rabbit, and a flock of chickens) that I started a separate pet/animal budget. :P

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    3. Cat, I do separate out non-food items from other household items. When we had a pet, the pet food and supplies simply came out of that non-human food household. I like having human food in it's own distinct category. It is a pain to have to figure out things like the tax on cleaning/hygiene supplies and deduct that from a regular supermarket receipt, but in the end , it's worth the effort to me. I think I currently have about 20 different categories. I spend about 2 hours at the end of the month tallying everything up, and making the next month's budget page.

      You do have quite the menagerie!

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  5. You are so wise! We operate our finances in a similar manner but you are more diligent than we are. I love it that you use your surplus to invest in energy-saving devices.

    We take very frugal vacations--we will be camping again this week--I think it's important to take time away with your family but not every vacation needs to be a major expense. We want to do at least one "big" trip (hopefully a few more) to places like Yellowstone. If we did a Disney trip every year, we wouldn't be able to do a vacation like that, but by targeting our expenses, hopefully we can have more elaborate trips in our future! (sorry about the segue--clearly, vacationing is on my mind right now!)

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    1. Hi Kris,
      You're very right on what makes for good family time. It doesn't have to be a Disney or European vacation. Just the time away, dedicated to the family, is what matters. And when a family does one of those "big" vacations, there are so many ways to do them for less.

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  6. In our area we have the option to do "level billing" for our gas and electricity. The utility companies average the yearly cost and we pay the same thing every month. This means we pay more for our natural gas bill in the summers but don't pay higher in the winter in the event of a colder than normal month. If we use more or less than the average the utility company either hands us an additional bill at the end of the year or reimburses us for the over payments. It works for us and definitely makes planning and budgeting easier.

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    1. Hi Linda,
      we have a level billing program for electricity and natural gas, here, too.

      We opted not to do that, mostly for one reason. I know us. If we have to actually look at the bill, and write out a check (even just an e-check online), we are more inclined to make efforts to turn down the thermostat when going out, or try lower settings for nights, etc. It just makes us more likely to use less energy than if we opted for a level billing program.

      But I think for a lot of folks, level billing is the best method for keeping their budget on an even keel. In some circumstances, being able to pay for heat in winter could be a challenge.

      I'm glad that it works for you!

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  7. My utilities company offers a similar system to the one that Linda described - they call it averaged billing. So my total monthly bill (gas & electric) comes to around $100/month year round. I chose to start my averaging in the fall so it basically meant that the first year I did it my fall & winter bills were much lower than usual - and, of course, the payment remained the same throughout the year.

    When your anniversary comes around there is an adjustment month where you either get charged more or less depending on how your usage has been throughout the year. Then they adjust the monthly amount for the upcoming year to match your average usage for the previous year. On your monthly bill you can see your actual usage compared to the previous year as well as the actual account balance, so you know if you're building up a big balance that you'll have to pay or if you're gonna have a credit coming.

    It's sorta like letting the utilities company do the budgeting for you! It works great for me because I always know what to expect on the bill, and it gives me incentive to work toward lowering my usage to get a big credit in the fall!

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    1. Hi Cat,
      In addition to the reason I outlined in my reply to Linda, I also think that I'm too much of a control freak to use an averaged billing program. I don't like anyone to hold my purse!

      I like being the one who controls our finances. If something extreme comes up, we have access to that surplus. And we earn interest on it, albeit a small interest amount, but it's something. I don't like someone else earning interest on my money!

      But I'm really glad that this type of program works for you, and many others!

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I'm so glad that you stopped by today. Please comment, and let me know what you're thinking.