Friday, February 26, 2010

Regrets: Not Planning

I didn't find out about various ways of budgeting until a few years ago. When it was too late. I used to just say, "these are the bills that happen every month, we'll pray for windfalls to cover the rest." Okay, I didn't actually say that, but my actions did.

I currently like two theories of budgeting:

Zero-Based Budgeting and FSA Budgeting

Zero-Based is the kind of budgeting that would have kept us out of debt. We used to look at our account at the end of the month and say, "Hey, all our bills are paid, we have an extra $40, let's go out to eat again."

With Z-B you figure out all your income, all your expenses, and then make the total 0 at the end of the month. EVERY dollar is earmarked for something. And if you find your electric bill was $20 under what you had budgeted, that $20 immediately gets allocated to something else.

For years we would spend the "extra" without really thinking of it. Even though we had big expenses coming up, things we needed to plan for, debt to pay off, we'd spend it. I can't tell you how many $20 Target items we've added onto our household good shopping trips because "we could afford it".

FSA Budgeting--probably not the correct technical name, but it's what I call it--means taking all your non-monthly/irregular expenses and breaking them down over 12 months.

Let's say my normal bills total $2000 a month. But then I pay my car insurance every 6 months ($600) so that I get a bigger discount, get my teeth cleaned twice a year ($80 each time) plus an exam (another $50, let's say). I also need three oil changes a year ($30 each) and new windshield wipers ($20).

Car Insurance ($1200) plus ($160) plus ($50) plus ($90) plus ($20) = 1520.

1520 over the course of 12 months is about $127.00.

So my expenses aren't really $2000 a month or $2127 a month, but the latter gives me a chance at making sure all my occasional expenses don't fall through the crack.

Some of my actual FSA categories are:

HOA Fees
Dentist Appts
Car Maintenance (oil changes, wiper blades, etc.)
Car Repairs
Car Replacement
Doctor's Visits
License Renewal
AC and Large Appliance Replacement

Now... have I been putting anything into my FSA account? No. I'm falling far, far, short of what I need. That's part of the reason I'm having to file. Not only are we living paycheck-to-paycheck, we're only paying our basic expenses and minimum payments.

If I had the same combination of Z-B and FSA budgeting that I use now, things would have been really different.

Can I consider this a very expensive financial education? I guess.

Do I wish I had done many things differently? Hell yes. I would have less clutter, less stress, and far less debt.

So my regret is not planning beyond my immediate comfort and needs.

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