It is that time of year again . . .

I have gotten an early jump on our 2012 Annual Spending Plan.  Last night I started working on our 2012 Plan and I've resolved to revisit each number on the Plan rather than just reusing the numbers from our 2011 Plan.  I've already determined that my 2011 numbers were outdated and the data was off for many of the categories.

What is an Annual Spending Plan you ask, it is our form of an annual budget/plan for our money. 

First, we start with how much money we bring in via our jobs, we use net numbers (deducting for taxes, health insurance, and we deduct our 401k monies). 

Second, we create sections for each item that has a bill associated with it.  Start with utilities, that would be phone, cell phones, data plan for cell phones (we add back any amount that is reimbursed by our jobs), Internet, water, sewer, electric.  Next on our list is our primary home, that would be mortgage, property taxes, hazard insurance, wind storm insurance, improvements, principal prepay (this was a 2011 savings goal, but since it deals with our primary home it goes under that heading).  Our next category is auto expenses, which would include car insurance, car service repair, and if we are going to start a nused car fund (which is a maybe for 2012) that goes under that heading.  Each line item has both a monthly amount and an annual amount. 

Third, we create a section for each investment property.  That includes the mortgage, property taxes, hazard insurance and wind storm insurance, and any services/utilities that we pay for (i.e. lawn service and water at one property).   We also list out things like rental license, business tax fees, a chunk for repair and improvements.  Finally, we add back in expected rental income.  Again, each line item has both a monthly amount and and an annual amount.

As I mentioned above, I'm drilling down on each number by going back through how much we are actually paying for each line item.  For bills I pay via e-payments, it is quite easy to review the payments for the last year, add them up and divide by 12 to get an average monthly amount.  For those items I pay by check, I'm digging out the paper file and adding up the bills to get an annual and average monthly amount. 

Fourth, we create a line item for each spending category that is not associated with a bill.  I call this discretionary spending, but at least half is really not discretionary.  Discretionary includes things like gas, grocery, eating out/entertainment, holiday/gifts, travel/vacation, fun, clothing, personal expenses, charity donations, etc.  And we use our Quicken data and/or past budgets to try and figure out how much we want or plan to spend in these categories.  This is the section of our Plan that really is much more in our control, to the extent we want to save more we need to squeeze the items in this category.

Once our 2012 Plan is done, we will use it to help us (1) set up our monthly spending plan/budget; (2) identify and set up our 2012 Savings Plan; and (3) identify bills/items that deserve our attention (i.e., I already know I'll be calling DirecTV to ask for a reduction).