Saturday, February 26, 2011

Budget Auditing

I've been fairly disciplined lately about setting up our budget every month. I have a basic budget with categories that occur monthly. I simply change it each month to add in bills/expenses that occur on a less than monthly basis or fluctuate. I then try to estimate our income as best as possible. My husband works varying hours after school and his paycheck adjusts based on that.

While I've been good at setting the budget up, I've probably been half as good at tracking my expenses and hardly ever audit it at the end of the month to see if we stuck to the budget. Since budgeting will soon be vital to my success as a stay-at-home mom (Yikes! I think that is the first time I've used that word.), I need to get into the habit of giving us a month financial check up or post mortem as the case may be.

I think it is important for us for a number of reasons. While we're good at capturing expenses in the big expenditure categories like gas and groceries, those little things like a $1 at redbox seem to fall through the cracks and don't end up recorded in our budget. On a side note, I do everything manually. I keep an excel spreadsheet with three columns for every month. One column is anticipated expenditures, the next is actual expenditures, and the third is remaining expenditures. I leave the first column intact throughout the month. I change the second and third on about a weekly basis to track what we've spent and see what we have left. My primary goal by doing this is to keep our grocery expenses in check and also keep our cash flow situation good. If you have another system, you may need to adjust it so that you're able to do a monthly budget audit. My budget audit is a fairly simple but sometimes lengthy process depending on how well I've kept up the budget spreadsheet.

1) Go through the online bank statement and check register to verify that all of the transactions are accounted for in the budget spreadsheet. (Inevitably there are some cash withdrawals that I can't track to a particular budget category. My husband and I aren't perfect. We don't tend to keep track of very small transactions so we have some cash leakage through the month)

2) Update the actual expenditures category in my spreadsheet.

3) Compare your expected vs. your actual expenditures. There are going to be variations. For instance, my husband had an emergency root canal this month. I didn't budget for it so we have an additional $300 in our medical expenditures than was anticipated.

4) Highlight trouble spots and try to figure out if these are one time unexpected expenditures or if they are a result of overspending.

5) Adjust budget for next month if needed.

I'll be going through my budget audit tomorrow. I'll post the results of my audit as an example.

No comments:

Post a Comment