Budget Review

As I've previously posted, I don't normally budget these days as most things are running on "autopilot". Even our grocery shopping doesn't vary much from week-to-week. However, since I want to start tracking my expenses fully in Quicken, I've decided to do a rough budget in order to work out what categories I need to setup and use that will be meaningful to me.

This budget is somewhat unusual in that I only count "my half" of our rental property income and home and rental property loan expenses. The rental income almost covers the rental property expenses, and the difference (negative gearing) is counted as "investment" as it's tied to the eventual capital gain we expect to make on the rental property. I also ignore the interest costs of my margin loans, on the assumption that the dividend income from theses investments more-or-less covers this cost (any shortfall tends to come out of realised capital gains).

By excluding the investment income and expenses that net out to zero, my overall budget therefore corresponds to how my income is being allocated for everyday expenses:

 
housing_________________31.6%
retirement savings______22.8%
income tax_______________9.3%
food_____________________7.8%
transport________________6.3%
healthcare_______________5.4%
self-education___________4.4%
investments______________3.9%
children_________________3.9%
unallocated______________3.0%
entertainment____________1.5%
total__________________100.0%

It should also be noted that the "children" category only covers incidental expenses such as school fees, music lessons, and sports fees. The kid's clothes and food expenses are just absorbed within the general "food" category.

The housing cost is largely the repayments on our home loan, so some of this should really be allocated to the "investments" category.

I'll setup these eleven categories in Quicken and use them for my initial budget for tracking purposes. I'll setup another category ("portfolio") to lump together all the dividend income, capital gains/losses and margin loan interest expenses.

Copyright Enough Wealth 2007