My 2017 Annual Budget - Part 1 of 3

This year I am doing my annual budget differently.  Typically I look at everything on a monthly basis, add in semi-annual (e.g. car insurance) and annual expenses (e.g. Christmas!) and roll it all together.  Then triple check it.

Not this year.  I want to keep a closer eye on where the money is going and tighten it up a bit.  I have realized that much reliance is placed on the bonus I receive from my company.  I tend to use that to fill the coffers (so to speak).  This worries me as when I rewire, I am expecting to drop the bonus.  (Or rather that the amount of current base salary will encompass my total compensation.)

It is fine for me to use extra monies for paying down my mortgage, investing and building *other* saving accounts but I want to avoid using it to, as an example, put money in savings for my annual home insurance fee.  IMO any bonus or extra money should be used to support you in your goals and to help protect you (e.g. building an emergency fund) but should not be used for known annual expenses.  Avoiding relying on the bonus is key.  Known expenses should always come from your base salary if at all possible.

I realize that not everyone gets paid every 2 weeks or 2x a month and may need to rely on bigger checks.  But it is important to have an idea of what the known (i.e. base) salary is and what it can pay.  Don't kid yourself.  If you are using a bonus or large commission checks to pay basic expenses then evaluate what monies you are spending on splurges/fun/entertainment/non-essentials.  Because in this scenario, you need to make sure you save as much as possible for those days, months, years when the bonus or commission checks do not come in or are much smaller than anticipated.

Unfortunately, I have fallen into a trap that many people who spend less than they earn fall into, in that I know I have a buffer so how the money gets where it needs to go is less of a concern.  Currently.  But that is a bad habit since again avoiding relying on the bonus is key.

I also use my bonus for travel which is somewhat okay because I do know that travel is a luxury.  But I'd like to aim to fund my traveling from my base salary.  This means traveling in 2017 will be very basic (if at all) and I will have to save save save for anything major.  That's life!  And that will be my life in rewire phase so I need to start getting used to it.

(Note, I am not planning to rewire anytime soon but I realize that making major changes does take time and I have to allow a time buffer for learning/mistakes.  Hence, now is a good time to start!)

This doesn't mean that I will not use my bonus for some splurges.  I do not believe there is a point to purposely living a life without some rewards.  But these need to be measured.  

Getting back to 2017's budget, this year I decided to focus on quarters which (surprisingly!) also correspond to seasons.  My behavior does change each season so this will also help with planning.

One thing that is important to remember is that most of us tend to think of months as being made up of 4 weeks but there are 52 weeks in a year.  My quarters thus consist of 13 weeks.  However, many expenses are paid on a monthly basis.  To address this, I did the following:
- Summed 3 months of my after-tax income.
- Subtracted my known monthly expenses for the 3 months.
- Subtracted 3 months worth of savings and investment transfers.
- Divided the remainder by 13 and that is the amount that I have to spend each week.

More on this in Part 2!
Pru