10 September 2014

Spring Clean Your Finances - Week 2

Now you've been faithfully tracking your spending for a week (you have, haven't you?) you'll have a better than fair idea of how your spending is going. This week it's time to take that information and use it to update your Spending Plan.

Spending Plans, or budgets for those who like the "B" word, are not set in cement. They are meant to be fluid, to change and adapt as your circumstances change. That won't happen without regular reviews. They don't need to take long, just a few minutes every couple of months, to make sure you're on track and living to your Spending Plan.

I do a quick (10 minutes max) review of our family Spending Plan each week, usually on a Sunday afternoon when it is quiet and I can concentrate. It makes sure I know I haven't over-spent any of our budget categories and I use the time to schedule bill payments and file any paper work that needs to be kept.

But once a month Wayne and I sit down together and go over our complete Spending Plan. Now this isn't always a cheery exercise. For starters Wayne is more than happy to leave the nerdy stuff like spreadsheets and so on to me. He also trusts me implicitly to ensure that our family finances are straight, something I don't take for granted and don't ever want to take advantage of. We are a team and as a team we need to both know our financial situation. So sometimes when the footy is on or there's a particularly exciting car race or he would rather be doing anything but crunching numbers he needs a little encouragement. But we do it together because we both need to know where things stand.

Here's our Spending Plan review routine. It works for us. You can follow our steps or arrange them to suit yourself.

1. Set a day and time. We use the first Sunday of the month. I time it for just after lunch if possible, when we are already sitting at the table, well-fed, happy and relaxed (and before any exciting sport event on TV). If you have small children you might need to find half an hour after they are in bed or having an afternoon nap. Just choose a day and time when you can sit down together without interruptions.

2. Hide. Get away from distractions.  We use the laptop so we can pull up any of our accounts and the dining room table because we won't be tempted or distracted by the television.

3. Come prepared. Before each meeting I make sure our Spending Plan is up to date and have the bill folder, with bills to be paid and any other things we need to discuss within reach. I bring the receipt envelope and Wayne brings his wallet with his receipts and mini-statements so we can check them against bank statements.

4. Go through your receipts and tracking notes. Use them to bring your Spending Plan up to date for the year. Are you on track in all your categories? Have you over-spent in some? If so, will the deficit be made up by the end of the year? Have you under-spent in some categories? Will they balance by the end of the year or will they be in surplus? If they are going to be in surplus can you adjust the amount down and put the excess into another category that needs a boost?

5. Keep it simple and fun. We do this once a month and it takes no more than half an hour. We could probably get through it all in around 15 minutes but we enjoy the time together. We usually have our coffee and dessert while we are going over the Spending Plan. It makes it more fun and less work, we get through the bookwork quickly and we both know exactly where we stand financially.

It doesn't matter whether you run your Spending Plan on a spreadsheet, in a computerised budgeting program or the old fashioned way in a ledger, as long as you keep the records up-to-date so you can see at a glance just how your budget is working.

Remember, it's not set in cement. It is meant to change and adapt to suit your financial situation. Regular reviews will ensure you are always right on budget.

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