Budgeting on an annual basis — what an eye opener

October 5, 2009

Part of buying a house is getting a mortgage; part of getting a mortgage is figuring out what repayments you can afford; figuring out what repayments you can afford requires budgeting; and to make a budget, you need to figure out what you spend already.

I use a program called Gnucash to track our spending. I export statements from internet banking, and Gnucash sucks the data in and categorises it.

Now I often run reports on a monthly basis in Gnucash, but there’s an obvious thing I should have been doing but only just thought about now.

Obviously, there are a lot of expenses that only happen once a year, like paying our insurance premium. And there are other expenses that are irregular, even though they’re certain, like holiday spending, or going to the doctor. So the right way to work them out for a monthly budget — we both get paid monthly, so that’s the best way to work it out for us — is to total expenses over a whole year, and then divide by 12. Or maybe even over two years, and divide by 24.

And what a sickening revelation that was. It turns out that there are things that I think of as “one-off” that really are recurring expenses, just not frequent or regular ones. For example, we spend quite a bit flying around the place visiting friends and relatives. I drink a lot. I buy $40 of books every month, on average. And so on.

The only comfort is that our grocery bill tells me that I am a supermarket ninja. We eat well on only $125 per week, and that includes a fair amount of wine and a teenage girl 12 weeks of the year. But apparently I have a long way to go in other departments.

I do sort of have a system for irregular stuff. I have an account called “bills” and put a fixed amount in it every month, and pay all the bills out of it, so if some months we spend less, there’s a buffer building up for the months when we spend more. But maybe it’s time to actually do a real business-style budget, with a forecast for the coming year, and a monthly update to track actual spending against the forecast.

As always, your suggestions on budgeting for irregular, infrequent things are welcome.


  1. Wow! Supermarket Ninja! – some tips for eating well on $125 per week (incl wine) would be great… (mind you, Dunedin groceries are more expensive ;( – and we don’t have either Moore Wilsons or MFW down here for decent bulk buying) That’s around our weekly budget (2 adults and a 1yo) – that I rarely manage to keep within.

    Re irregular spending, i reckon the buffer spending is the way to go, that’s what we try to practice for things like the rego etc.

  2. OK, in a day or two I’ll try and figure out exactly how we’re supermarket ninjas. I have some suspicions, but I might go over a few old dockets to confirm them…

  3. Ninja photos too pls? K thx 😉

  4. Hey Stephen,

    What I do for my yearly expenses is have something I call a ‘Freedom Fund’. In it, I put in 1/12th of what I need each year every month. Whilst the odd little expense passes me by I get most of what I need it for. This includes:

    * car insurance
    * WOF
    * car repairs
    * online subscriptions (Flickr etc)
    * football season ticket

    Luckily for me I don’t own a car anymore so my need of a Freedom Fund has severely diminished, though I still use it.

    I also use it for quarterly expenses like council rates (but this time each payment is divided by three).

    Also, where possible, I switched from paying yearly or quarterly to monthly on other bills, which I find is a lot easier. 🙂

  5. Andy’s approach, and yours Stephen, make a lot of sense. It’s important to budget for things that are semi-regular, even when the exact amounts aren’t known. If you know your energy bills are going to be approximately twice your summer ones, you can spread that cost around the year.

  6. It is easier having monthly bills, but a lot of things are cheaper if you pay annually.

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