After a prolonged period of avoiding the task of managing the domestic budget, I have finally succumbed to the pressure. I’ve spent some time over the last few days rummaging through the bank accounts and figuring out the current financial situation.
It turns out things are OK (ish), so, always the engineer, I began to figure out some way to keep an eye on expenditure that makes sense to me. What I have come up with is something quite nifty, well to me at least.
Now most of you are probably one of two types: the first type (the Surfers) don’t care too much about money: so long as there is some loot sloshing around somewhere, everything is fine and dandy. The other type (the Turfers) are ultra-organised: with discrete, and closely monitored categories for expenditure: clothes, petrol, groceries, dog shampoo, I-can’t-believe-it’s-not-butter, that kind of thing. I firmly belong to the first group with a small proviso: I worry, every so often, about how close I am to there being no loot to slosh around. I’m a Surfer with a small “s”.
The idea of classical budgeting sends me into goosebumps. Who says I can’t buy the latest book on Japanese toe-painting because I have already overspent on my monthly Oriental Book Purchasing Budget? Gaaa!
Instead I have come up with the concept of a “run rate” – how much dosh is available to be spent on a daily basis, and how am I doing against this figure. The run rate is calculated by subtracting all non-distretionary expenditure (bills, in other words) from my monthly income (salary, wages), and then dividing this remaining amount by the number of days in the month.
I exclude bills because I don’ t have much control over them. I could, of course, decide not to pay them, but then burly people would come to my door and start stamping on my flowers. Or worse. Not nice.
So, if my monthly salary were 1000 euro, and I knew I would need to pay rent, electricity and cable next month of 400 euro, then my run rate would be 600/30 = 20 euro per day. If I go over this amount any day, that’s bad. If I can stay under it, that’s good.
That’s pretty much it. A small elaboration is where I look at my last week’s expenditure compared to the total weekly run-rate (20 euros x 7). I do that just so I don’t feel guilty about blasting money on a 180 euro book on Japanese toe painting if I so wished. (I also use a monthly run-rate, but as I said, I’m an engineer at heart).
What’s nifty about this is that I don’t need to keep too many figures in my head, and the whole analysis thing can be done on a computer in 5 minutes or less. It means I can monitor frequently how I am doing, thereby changing my spending behaviour in mid-course if that is what is required. I don’t need to wait until the end of month to start pulling out my hair. It also means I can decide very quickly if I can afford something or not.
That’s the idea anyway. The practice may be different but we’ll see.
So what about you? Are you a Surfer or a Turfer? How do you manage your budget?