Monday, January 7, 2008

Adjusting the spending plan January 2008

I received my first paycheck of the new year on Friday, January 4 and the new total take-home salary meant I needed to adjust my spending plan for the month. What did this involve? There were three factors that required me to change my spending plan:

1. The first of several $50 deductions for charity were subtracted from my income. I could choose to have my charitable contributions (matched by my workplace) deducted from my biweekly paycheck. In fact, I have my company do it at the beginning of each year so I know I have some charitable deductions for tax purposes for the new year.

2. Contributions for medical and dental insurance and FSA increase at the beginning of each year. I did not know how much effect these would have on my take-home pay.

3. The rising cost of gasoline meant I needed to allocate more money for gas. It is difficult to change a spending plan when the income decreases caused by #1 and #2 have yet to come into play.

In fact, when I added up my take-home pay both before and after the changes, I found I had $2 more in my spending plan than I should. Not a big deal since I usually have a category or two with money leftover, but I did fix it as I was reevaluating my spending plan.

The end result: I only had to decrease my total spending plan amount by $4. The changes to my insurance and my voluntary increased contributions to my FSA seemed to have less of an effect on my take-home pay than I anticipated. While the $50 per paycheck is not insignificant, between no longer saving $25 per paycheck and adding back some of the money I had previously saved from the $25 per pay period, I have easily covered this $100 per month decrease without major changes to the spending plan.

As for money allocated for gas, I subtracted $5 from eating out and $5 from entertainment to give myself an extra $10 for gasoline. There are still other categories I can use for additional money if my spending plan for gas proves insufficient. The extra $4 I needed to remove from my spending plan came from the gift category. I still had some money for gifts carried over from the end of 2007 and anticipate I will not need much more money than the $26/month that remains.

My annual workplace review is approaching and that may affect my take-home pay at the beginning of my company's fiscal year (April 1). This means I will review my retirement savings, spending plan and any other savings in four months, sooner if any of my spending plan categories need adjustment. Stay tuned for those changes!

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