Wednesday, December 27, 2006

Expenses That Come Back Like Bad Pennies

One of my major goals for this year was to take all of the information that I had gathered and get my budgetting spreadsheet updated with all of my personal information. The way that I keep myself in check with money is by using a budget. And the way I stick to the budget is by using a simple excel spreadsheet that I created that has my own personal layout that suits me. It also serves to make sure I get my bills paid on time and keep my accounts balanced.

New improvements for the 2007 spreadsheet include bill categorization. During 2006, I had all of the bills itemized which is fine and I will continue to do, but I found that I was really interested in keeping the money in categories -- but probably not the ones you are thinking of -- categories of expenses. For me, there are just three categories: recurring, debt, savings.

Recurring expenses or (inescapable expenses) as I like to call them refer to expenses that happen every month and generally cannot be avoided. The sum of these expenses is the money represents a large, large portion of the money that I will need each month to retire.

Debt represents those payments that go toward reducing overall debt and will eventually be paid off.

Savings represents savings for either short term items like a vacation in 6 months or long term items like retirement. Right now, recurring expenses are about 33% of the household net expenses. I'd like it to be closer to 20%. The plan to make this happen is to reduce the debt load and save more and to try to hold these expenses down despite raises and bonuses in the next year or two. If it can be done, this will mean much more for savings and retirement and a chance to retire a bit earlier.

In the next couple of posts I will talk about how I've integrated retirement planning into the spreadsheet and done some forecasting for 2007.

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