Sunday, July 21, 2013

Estimates, Adjustments, Commitments, Actualities, and Records

Budget amounts almost never remain unchanged from the time they first appear till the time they last appear as a locked-in number-- often not finalized until a new calendar year is weeks or even months underway.

They begin as budgeted estimates for a new budget year, whether estimated income, estimated expenses, or estimated charges.  By their very nature they are based on the future, all of them.  But they are also based on the best knowledge available at the time they are created,  For example, if a car loan payable monthly is due to be paid off in September, the user wouldn't need to schedule its paynent estimates on through December.  Cars, furniture, and other big ticket items with monthly payments as well as home mortgage loans provide the user with the most accurate estimates of future costs.

Estimates of income likewise are based on current knowledge  as well as past experience averages.  Takehome net paychecks. for example, can be estimated into a new year budget as a continuing expectation if the user expects to continue in the same job with the same benefits and deductions.  If, however, he knows of impending raises, promotion, or other basis for adjustment, new year estimates need to be refined taking these into account.

Another important consideration in setting up a new year budget is the dates users need to schedule payments and can expect to receive regularly-scheduled paychecks.  Some months, for example, have five Fridays where most have only four, so Friday paychecks will need adjustment for the extra, third paycheck in those months.  It is easy to appreciate that any new year budget needs to be set up with a good annual calendar in one hand, such as those found on the back of checking account registers.

Credit card payments, like mortgage payments, need to be scheduled each month on the last day certain to be received and credited before incurring added interest charges--usually at least 3-5 days before the due date if paid by bank online payment. even sooner if paid by mail.  A week in advance is usually a safe bet.

Another considation in setting up estimates is rounding amounts.  Since the user is dealing with numbers which are almost certain to change significantly in any case, it is helpful to avoid penny accuracy and go with large, whole numbers that are expected to be close to reality, then refine them as actual numbers begin to replace estimates over a few months' time.

Thus, if the power bill average average monthly paymemt in 2013 is $273.46, use $275 or better yet, $280 for the estimate setting it up in 2014,  The rounding will help it stand out to the eye as an estimated amount when you're scheduling it to be paid on such and such a date, and help to locate it across the cashflow/budget sides until it becomes an exact, to-the-penny known amount.

At that point the amount is no longer an estimate.  But it isn't yet a realized, paid sum yet either.  It is now an adjustment, and because it is still scheduled to happen in a future time, is still subject to revision.  Until it is actually paid or earned, it can't be classified as a commitment.

So when does a particular budgeted amount become an actual, unchangeable figure?  Pagemonth Home Budgets are designed to treat a number differently through its evolution by the use of decimal position, location, and checkmarks, (forward slashes /)

A number doesn't get exact penny treatment till it becomes an adjustment or commitment.  And it doesn't get a checkmark to its right until it becomes an actuality--in other words, writing the check or  scheduling it for online payment is one thing.  Mailing the check or confirming that an amount has been made by the bank elevates the number to a commitment.  But only confirming that the amount has been received and cashed by the recipient rates a checkmark! 

All that may seem needless quibbling over straws, but trust me, it is not.  Until any amount, whether income, expense, or charge, passes the test of being confirmed by the bank at each phase (and reconciled by the user's statement records even beyond that!), any checkmark is premature.

When we get our finalized charge statement either online or by mail, we can check off everything on it to the right of entries,  And in doing so we can visually spot items that still remain to be paid on the next one, or found by backtracking on a previous one.

And when we receive our finalized checking account statement either online or by mail, we can check off each item on it to the right of entries, and again, easily spot discrepancies if any have occurred.  The checked entry says the amount is now a record of actual experience, and says it not only to the computer screen workspace and spreadsheet file for the year, but also to the printed month pages and end-of-year summary page that follows them sometime by the end of January the following year.

At that point I print and bind my final hard copy of the previous year, ready for reference as I study previous experience and set up my next year's budget amounts, prepare for birthdays and holidays, taxes, vacations and trips to come.

Done in this way from rough estimate to bound record, your Pagemonth Home Budget will serve you well throughout each year.

Sunday, July 14, 2013


Our Budgeting101 page offers a table of percentages of net income an average family might spend for housing, food, clothing, and other expenses.

Below that table we caution that the percentages are very general and not fixed. that each user has different goals and needs, and that the experts' percentages are intended as guidelines only.

Yet our visitors seek even these general guidelines to help them create their own budgets more than any other concern about our spreadsheet setup or support matters.  People recognize that effective budgeting begins with a good sense of how much they should strive to spend in these areas.

My source for these percentages was the Today Show on NBC that I taped and used for the table, adding the suggested Pagemonth categories that seemed to match best.  I have used these percentages since 1980 as averages that still seem sensible to me.

Here I want to comment on each category in more detail, beginning with 25% for housing and utilities: mortgage or rent, power, water, phones (including cellphones), cable or satellite signal), but also including charges for lawn care and pool maintenance and repairs if applicable, trash pickup, and any other charges related to upkeep of the home and property.  However, The 25% would not include the initial costs of purchasing the home or advance payments required to rent the property and held in escrow or by the landlord to be returned after sale or moving.

Food as 15% would include groceries, meals out, cash for snacks and so forth.  Elsewhere I have recommended using a weekly amount of cash for groceries and adjusting it as experience suggests, but I recognize that many prefer to buy all groceries by credit or debit card, and that's understandable, especially for those who do not want to carry a large amount of cash in pocket or purse.

Clothing as 5% of discretionary income is adjustable depending on need.  It isn't even necessarily a monthly expense.  Some may have clothing supplied as uniforms by enployers that may affect the percentage needed, for example.  Or clothing needed for new jobs.  Or families caring for more than one or two children may spend much more than 5%.  Seasonal spikes like back-to-school can skew it as well.  It is a percentage that should be averaged over several months, if not the entire year, to determine.

Medical costs at 5% include any doctor, nursing, dentist, hospital, and prescription costs not covered by the user's health insurance. 

Transportation at 15% might seem high until one realizes it includes not only bus, train, air or boat transportion on a regular basis but also car payments, car insurance, fuel and oil, and all upkeep and repairs.

Debt payments at 15% also include money needed to pay for credit purchases and fees and all loan payments including interest and lender charges.  Debit card purchases, however, are treated by Pagemonth like checks being cashed, in that they are deducted from the user's checking account at the time of use.  They are not included in the 15% for debt payments.

5% for Savings may be the hardest amount to maintain, because it isn't required to be paid to anyone else.  It is also the easiest to reduce or skip in any given month.  But among all expenses it is perhaps the most necessary to financial health.  It builds future security, equity for credit, solvency against catastrophy and a basis for retirement if set aside religiously.  Pagemonth advises treating it as a Regular Expense--the first to be paid each month, before other needs may make it difficult.

These guideline percentages still leave 15% of discretionary income for miscellaneous purchases and investments at the user's discretion, and for many that's about right.  There is no need to force income into the recommended amounts, but they can provide a useful comparison to the user's actual expenses over several months' time.

Saturday, July 6, 2013

A Bit of History

I  created Pageamonth Home Budget in 1980 with the beginning of Windows 3.1.  But I had been developing it as a personal home budget long before that--since Tandy (Radio Shack) offered 40-character widths, in fact, and before that as a hand-ruled pen-drawn matrix of rows and columns on plain paper that I filled in by pencil and changed by eraser--lots of erasures as you might imagine.

My attempts to keep a personal budget go back even further.  I was noting my income and expenses in spiral notebooks by 1970, as a single man in living in Chicago.  It seems I've been obsessed with financial recordkeeping my whole adult life.

When the Internet spread, I offered my Pageamonth Budget for $19.95 through Spreadsheet Marketplace and other affiliates, and sold a few dozen of them to U.S. buyers, eventually building my own website, to support those spreadsheets with setup and help pages. 

In the past several years, however, with the economy sliding into severe recession, my ad costs far outweighed my earnings, and I switched to giving my budgets away to anyone who wanted them, with no limits.  I realized people needed to budget more than ever but couldn't afford to buy a good home budget themselves.  I also hoped that by giving them away I could attract enough more visitors to click the budgeting-relevant ads Google placed on my pages, that my ad revenue could offset my rising Pagemonth ad costs.  I also set up a donation button in case people downloaded my budgets and benefitted from using them and wanted to give back something to help defray my costs.

I truly believed, naively, that users would spread the word and others would visit, download, spread the word even further, and grow my ad and donation revenue..

It didn't work out quite that way.  I was soon unable to advertise to the US market, the most expensive on earth, and had to keep minimal ads going worldwide on only the $1.00 per day I felt I could afford,  A dollar a day given away to advertise a free spreadsheet didn't generate enough ads to enough places enough of the time, even to the world markets, to generate more than a few cents return on my dollar cost, didn't work.   As for donations, no one has ever donated a penny. Not even once. 

A year ago on July 10 I determined to try to sell my spreadsheets again, contacted my former affilite www.spreadsheetmarketplace,com, and asked them to sell my budgets again, which they agreed to do pending editorial preparation. 

If and when they do place my spreadsheet on their pages again at $9.95, I will again quit giving them away and cost them at or above their price so as not to undercut them, and from then on I will rely on them and other affiliates.

Today Pagemonth Home Budgets remain free and unrestricted in any way to anyone who wants them.  They are available at the bottom of our homepage for instant, unlimited  downloads, as are the free blank templates that match them in Excel and Works formats..

We urge anyone interested to get them free now, however, because our free giveaway could change to a cost basis at any time.

--N.B. Kauffman