Balancing the Books

I've spent a few hours balancing my books for January 2010 and it's an interesting picture. The figures below in bold are the recommended allowances for each category of expenditures by the authors of America's Housekeeping Book (1945). In the case of shelter, clothes, operating expenses, and food, I'm spending less than the recommended allowance. This isn't exactly a surprise --- as I've mentioned before, these allowances were based on a single income providing for (on average) a family of six. I should be spending less than the allowances. When it comes to advancement, my spending is right in line with the recommended allowance. So I have to wonder if - based on the above - there are some "leaks" I might plug in my spending on advancement. My savings is above the recommended percentage of income, and that's appropriate. If I'm able to spend less in other categories (as a one-member household), then I should be saving more of my income than the 1940s family was able to save.

Shelter (if heat must be supplied) - 20% of income
Estimate: $479.25
Actual Expenditure for January 2010: $478.01 (14% of income)

Clothes - 15% of income
Estimate: $140.00
Actual Expenditure for January 2010: $247.20 (7% of income)

Operating expenses - 10-15% of income
Estimate: $186.67
Actual Expenditure for January 2010: $120.86 (4% of income)

Food - 20-35% of income
Estimate: $286.25
Actual Expenditure for January 2010: $417.06 (12% of income)

Advancement - 15-20% of income
Estimate: $594.43
Actual Expenditure for January 2010: $606.64 (18% of income)

Savings (other than life insurance) - 10% of income
Estimate: $490.94
Actual Expenditure for January 2010: $528.44 (16% of income)

When you add up my actual expenses in these categories for January 2010, they only total 71% of my income. (My gross income for January 2010 = $3371.71 (pay + interest)). So where's the other 29%? Well, 19% of it went to taxes ($640.48). Another 4% went to payment on debts ($134.64), and the remaining 6% is accounted for simply by the fact that I happened to have $204.57 more cash on hand on January 31 than I did on January 1. (Not to fear! It'll be spent.)

The authors of The Manual recommend your income be spent in the following proportions:
Food (20-35%)
Shelter (20%)
Advancement (15-20%)
Clothes (15%)
Operating Expenses (10-15%)
Savings (10%)

Here's how my expenses for January 2010 break down:
Taxes (19%)
Advancement (18%)
Savings (16%)
Shelter (14%)
Food (12%)
Clothes (7%)
Operating Expenses (4%)
Payment on Debts (4%)

Phew! Balancing my books was exhausting... I'm going to try this again for another month to see if I can gradually get a more accurate picture of my budget. As you can see from the figures in italics, my estimates were close in some categories. In others, like clothes and food, I was way underestimating what I'm spending! I suspect the food one is off because I ate a couple meals out in January (salads only, of course) and did some treating, as well. This has been a very useful exercise, though, and I've been able to identify several specific financial goals for 2010:

1. Once I begin buying new furnishings, I need to investigate the cost of renter's insurance. After going years without, it's time to take the plunge. I'm making a deal with myself - no new goodies if I don't insure them.

2. I've just made the very last payment on my car. (Yippee!) My plan has been that after eliminating that monthly bill, I would upgrade my lifestyle a bit and invest in a broadband internet connection (at last) and purchase a cell phone for emergencies. I need to begin researching bundling plans and see if I can't cut the cost of my landline (averages $55.37 per month) by carrying coverage for all three utilities through one provider.

3. Here's a tip from The Manual that I've been especially mindful of lately: "Don't sacrifice good lighting, but don't keep lights on in empty rooms." With an electric bill that averages $56.90 per month for a one-bedroom apartment, I'd like to see if I can make some savings here.

4. I'd like to double my emergency reserve from $500 to $1,000 by again transferring $25 each pay period from my checking to my savings just for this purpose. At $50 per month, this should be done by the end of November and be relatively painless.

5. Spend wisely! It's time to put some of that reward fund toward feathering my nest. I must be conscious, though, and invest in sturdy things that will stand the test of time. I want to continue growing my reward fund as I go, however. A new car will be necessary at some point - mine is nine years old now - and, as my credit score improves, I know I'll begin wanting to save toward the down payment on a condo or house. (Note to self: it's been a year, face the FICO and find out where you stand!)

6. When my auto insurance expires in June, I'd like to renew the policy with a single payment and save the interest I'd otherwise be paying with monthly payments. If I begin saving now specifically toward that goal, I ought to be able to make that payment in June.

7. Continue paying down my last remaining credit card.