First, take a look at your typical monthly bills. Bills for electricity, natural gas, heating oil, water, etc. All of these can vary month-to-month. You'll need to gather all of your last year's bills in order to calculate averages, minimums and (most importantly) the maximums. The maximums are the most important because the maximum amount is always possible for any one month. Many utilities will allow you to pay by a "monthly average" billing process. They usually have some restrictions, but it's really worth checking into. It's much easier to work on a budget when you know exactly what your monthly bills will be ahead of time. We highly recommend that you check into an average billing method for all monthly bills that vary from month-to-month now.
Other bills may be paid on other schedules. For instance, most recurring bills will be paid on one of the following eight most likely payment categories:
Gather your last year's bills, your checkbook registers for the last year and your last year's bank statements. You will need to find all recurring expenses for the last year in order to predict your next year's liabilities. Don't forget credit card payments, bank drafts, automatic payments, automobile tags, etc. It's extremely important that you determine how much you spend during a typical month. Categorize each expense with a number relating to one of the eight the categories above. We'ill provide a formula and directions for how to determine your estimated monthly living expenses in our next List - # 7. FYI, the formula will figure the daily cost of each bill, and then will expand that daily cost to account for a 31 day month - in order to allow for the most expensive months. For now, write down all of these categorized bills on a sheet (or sheets) titled "Categorized Bills."
On another sheet, write down the last year's unexpected or emergency expenses - doctor bills (including co-pays for medical expenses - plus medication co-pays), veterinarian bills, auto expenses (including oil changes and breakdowns), and any other emergency expenses. Title this sheet as "Other Bills." Only you can determine which of those expenses are likely to be considered for recurring expenses. For example, if you had LASIK eye surgery last year, it's unlikely that that will be a recurring expense. Any "elective" medical expense should be put on hold anyway - until better times in the future at least. But, even some non-elective medical expenses are likely to happen only once in a lifetime (appendectomies for instance). Nobody can accurately predict the future. Therefore, we can only predict our future expenses by relying on our past expenses as a baseline. Sure, this will be a guess, but it will be an educated guess if you work at it hard enough. When you finish gathering all of the information that you can, total all of the unexpected expenses that even might be recurring expenses during the next year. Consider this total as a yearly (Category 8) paid emergency expense for now, and add it, as such, to your "Categorized Bills" sheet(s).
Again, if you don't currently have a spreadsheet program on your computer, we strongly encourage you to check into OpenOffice. It is a full suite of programs (word processor, spreadsheet, etc.) that you can download here - for free. This is all much easier to manage when you use a spreadsheet. We have a template for you to use as a starter. If you would like the mini budget spreadsheet that we use, download it here. There is no charge for the template and it is compatible with MS Excel, OpenOffice 3.0, and WordPerfect's Quattro Pro X3. Our initial one is just a simple spreadsheet that will do the calculations for you. If there is enough demand, we'll build a more comprehensive one that will do much more budgeting and tracking. Let us know if you would like a more thorough version.
Continue to document your daily spending habits during this time. Item #7 will require that all of the expenditures that we have outlined in Item #'s 5 and 6 have been collected and categorized. Don't hesitate here - by performing these two tasks, you will be on the road to getting a necessary handle on your financial situation. You will, eventually, know more about where your money actually goes than most of the people you know are of their spending habits. Knowledge is power, and you are gaining that knowledge (and therefore power over your situation) right now. Keep it up!
Don't forget to make your required job search contacts this week.
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