In the household financial management example described previously, annual budgeting is done around September/October/November each year. The initial setup is simple – the partner responsible for the budget sheet makes a copy of the current budget sheet and then reviews and modifies it. Generally speaking , a notional increase for inflation is applied to most annual charges such as Council Tax, Insurances, Subscriptions, etc.; and for the remaining items, the monthly figures are reviewed by considering a) the actual expenditure that has already occurred in the current year; b) any need to reduce expenditure, c) any particular activities or changes in the coming year that will impact the likely expenditure on that particular item. This exercise produces a draft which is printed out and given to the partner responsible for Statements who goes through and marks up suggested changes. Finally, any uncertain points are discussed by the couple, after which the partner responsible for the budget produces a final version.
It is worth noting at this point that the budget sheets are designed to be printed out on a single A4 page – any bigger would just not be very useful. To achieve this, the margins are set to ‘Narrow’ and the spreadsheet or printer setting ‘Fit to Page’ is selected. Although this reduces the size of the text, it should still be readable unless there are a very large number of rows. The current version of the example Budget Sheet we have been discussing has 97 rows and 15 columns and this is certainly readable when printed out on a single A4 page.
The creation of the new budget is also an opportunity to review and modify the items of expenditure. Some of these, such as Housekeeping, have appeared on every one of the 27 yearly budget sheets. However, others, such as Childminder for example, appeared only on the earliest four budget sheets, and in the final year of its appearance there was no actual expenditure recorded. This illustrates how the items of expenditure often stay in place until they no longer have any actual expenditure for a year or two at which point they are removed when a new annual budget is drawn up. An analysis of all the items of expenditure that have ever appeared in any of the 27 years of budget sheets, and the number of years that each one has been present, shows that there have been about 80 items of expenditure of which about a quarter have appeared in every year. In summary, while some items of expenditure are generic and will probably apply to most households, others will reflect the immediate circumstances of an individual household. It is an important aspect of annual budgeting to ensure that such new categories are identified and included on the budget sheet as early as possible before the expenditure actually occurs.
To provide a guide to Items of Expenditure and to the overall structure of a budget sheet, the items on the example Budget Sheet have been generalised to eliminate specific products, services, subscriptions etc. This has produced a list of 65 Items of Expenditure of which 38 (about 65%) are deemed to be ‘core’ i.e. likely to be of use in a large number of households.