Wednesday, February 16, 2011

Step 2 - Managing the miscellaneous


In general, I've found it difficult to keep to a set budget. Although I did up a pretty excel sheet and have allocations for each area of expense, I find that I still spend more than what I budget.

However, upon a closer look, the main breaches in the budget usually fall under a category called miscellaneous. This is where I allocate expenses which do not fall readily under the common budget categories such as Church, Entertainment, Home and Car. Examples include seasonal gifts, ang paus, birthday dinners and presents, adhoc giving, and the list goes on.

I've generally been quite good with all the main areas, especially recently, where I have tended to spend less than what I allocate on groceries, petrol, etc. But it has been the miscellaneous and unexpected expenses which have derailed all my efforts to keep to budget.

Over the last few months, there have been major, unbudgeted costs for our cars at the workshop (two for the wife's car and one for mine), an unplanned series of dental bills not covered by insurance, Christmas presents, CNY ang paus, replacing broken basketball shoes, etc.

I tried to deal with these costs by setting up an emergency fund which I read from Dave Ramsey's 7 baby steps. I set aside RM 1,000 for unexpected, but necessary expenses. But all this resulted in was for me to keep accessing this fund, and then to replenish it the following month with money that I may have put into savings. The net effect was that I still could not save.

And so, what I'm trying now is to beef up my miscellaneous funds. The emergency fund will be set aside only for serious emergencies. And because I'm working with a zero-based budget (will write about what that means in a future post), any extra funds from underutilised budgets will be placed under the miscellaneous fund each month to deal with these expenses.

Previously, any extras would be put into savings, only to be accessed again to cover back the expenses and it was rather difficult to track because it was just moving in a cycle. At least, from the new method, it will be easier to follow with each budgeted area properly covering its allocated expense...that is if the beefed up miscellaneous budget does its job.

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