It’s that time of year again, when I tally up the numbers for this year and see how I did compared to my budget.
I use the results to create next years' budget. Here is a shortened list items in my monthly budget, with proposed, actual and difference calculations.
2009 Budget Reflections
Annual $ Difference
ELECTRIC & GAS (heat)
CAR & INSURANCE
PRESENTS / GIFTS
KIDS & school
MEDICAL & Fitness
Food – According to my budget, food inflation was 7% this year with respect to my projected budget. But with respect to my 2008 budget of $510, food has increased 10% this year. Of course we also have to consider our three growing kids. When you break it down to a daily costs, $564/30.3 days per month = $18.6/5 people = $3.72 per person per day, which is relatively low. Our food budget would be about $200 higher per month without our garden.
Because our food budget seems to be growing for several years, I took a look at our food costs over the last decade as shown in the graph.
Our food costs have more than doubled in the last ten years, but then again so has our family so it’s hard to tell how much of this increase is from inflation and how much is from the kids eating more. At this rate, our food expenses are likely to cost more than our mortgage within the next few years.
If inflation picks up as I expect it to, food is likely to be one of the first places it will be noticed and that could be a lot of trouble for anyone on a fixed income that does not adjust for inflation.
Car Gas – In anticipation of a weakening dollar, I increased our gas budget for 2009 but the recession also weakened the demand for gas offsetting the effects of the weakening dollar and prices remained low keeping me well within budget. Next year we will probably see the increase in gas prices that I anticipated in 2009.
Electric & Gas (Energy) – According to our budget, our energy costs decreased by 8.75%. Again the recession weakened the demand for natural gas and electrical energy that kept prices lower most of the year. Energy demand is low in the U.S. right now but it continues to increase around the world and I doubt energy costs will remain low next year - especially with Cap-and-Trade legislation.
Water, Garbage, Sewer – According to our budget, our water utility bill has decreased by 43%. Last year we saw an increase of 17%. I’m not exactly sure why. We have consumed about the same amount of water and produced the same garbage. I did add a garden irrigation system that runs on a timer to help reduce the water we need for our garden this year. We also had much better rain this year so I didn’t have to water the grass hardly at all. I didn’t think these things would have saved us almost $500 this year.
Car & Insurance – This increase can be explained. We had a little fender bender this year that cost us about $1000. Our deductable is $1000, so we had to eat the cost of the repairs. We also had a few more expenses than usual this year with new tires, brakes, etc. Next year I’m anticipated this expense to drop back to normal range but I obviously need a like more room for maintenance.
Mortgage – The slight change here is because we refinanced this year to take advantage of the money that the government is giving away with ultra low interest rates. The sad part is that the governments’ monetary policy to reduce the value of money is only creating more problems in the long run by further reducing the motivation to save money.
The value of money must be preserved or real savings will be depleted, which are vital to economic recovery and economic stability. Without an increase in savings the economy will not be able to fund new production or produce new wealth. The consequences will be a continued decrease in real wealth and an increase in inflation. Welcome to an age of stagflation.
Presents & Gifts – My wife handles most of the gifts and presents in our family. I guess I should have expected this number to increase as our extended family grows and our kids want more expensive gifts.
Home Repairs – This can be explained. We’ve been enjoying the low maintenance cost of our new home for nine years now and nothing major has needed repairs. This year was the end of that. Our appliances are starting the age and that led to the replacement of our water heater this year. I also had to replace four windows. Next year, it could be the washer and drier or the dishwasher. I’m going to have to get used to home repairs like everyone else.
Miscellaneous – I was surprised to see our misc column increase by 24% this year. My guess is that the increase was primarily related to the baby we had last year, dippers are very expensive. Also our other two children are ever increasing their consumption of household items.
Kids & School – This is about right, a few hundred dollars is pretty close.
Medical & Fitness – Last year I under estimated this item by quite a bit so this year I increased the budget to get closer to actual and it worked fairly well. Within a few hundred dollars is pretty close.
All in all, we had a good year. In total, we were off our budget by about $3000, but last year we were off by $4000. Maybe next year I can get this under $1000. The uncertainty in the economy right now is making it a little difficult to estimate next years’ budget.
Each year we also set some goals for the next year and at the end of February this year we achieved a milestone in reaching a positive net equity excluding our assets like our vehicles and our home. Most people like to include their assets in their net equity, but I don't think that makes sense unless you are planning to down size. In my case, I'm not planning to sell my house or vehicles and they are unlikely to produce any income for me, therefore they are not really assets. You can read the full story here.
We also finished the basement of our home this year, which was a major project that cost a lot of money and time away from my business last summer. It was a major success and we are enjoying the additional space.
I hope your budget went well this year and good luck budgeting next year.
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