“Budgeting has only one rule: Do not go over budget.”
― Leslie Tayne,
“Not so sure I agree”
[ Day 49 of 2000 ]
Every single financial article and blog out there told me to make budgets. And I did exactly that, for 2018. For the first time in my life. Let me tell you, I am not very happy about it.
Before I get into details, let me tell you this – Even though I never made a budget in my life, I have done pretty well in terms of how much money I spend. Like I said before, I keep track of everything we spend on mint. Of course, there are some expenses that mint doesn’t know about – The deductions that happen even before the money hits the bank. It doesn’t know about our health insurance premiums (subsidized by the employer), our car insurance payments, and the part that goes towards mortgage interest and property taxes. Those are huge expenses, I agree.
However, the purpose of tracking for us, is to see if we can live within 40,000 dollars per year in retirement. The health insurance premiums are going to go up and the car insurance will go way down – we will sell one of our cars, and keep only the part of the insurance that covers damage to others. We plan to pay off mortgage by then, and will drastically reduce the property taxes when we sell this house in 5 more years after retirement.
We also do not include travel expenses – mainly because that is budgeted. We move a fixed part of my husband’s bonuses to another bank account, and use that money for travel. I then move half of anything left in there at the end of the year to bring down our mortgage balance.
We do not travel a lot – a one week long break to some part of the US we haven’t seen yet, and one or two weekend getaways to which we drive. The weekend getaways are usually very cheap – we stay with a friend, or get the rooms for free through points on credit cards. I also fly once a year to meet a friend, and the expensive part is the flight tickets. Last year was our most expensive year travel wise – We drove cross country and flew back. Car rental was so costly that we spent close to 8000 dollars on travel. Usually, we spend less than half of that per year.
Now that I have explained what I don’t track, I can assure you that we spend around 35,000 dollars per year for the rest of our expenses. I know this because I have been looking at expenses after the fact. Once a month, I pull up the expenses on mint, and go through them. If either of us had to travel on work, I would have to tweak it a bit, but the whole exercise takes less than 30 minutes.
When I set out to make the budget, I expected that it would be around 40,000 dollars per year. Because that is what we normally spend including travel. Two hours later, I came up with a budget for 75,000 dollars!
Okay, so I included the items that I don’t normally count. But even if I take them out (the last three rows), it still comes to $53,145. Let me assure you, we haven’t spent that much in any of the last 4 years. Including travel, it comes to somewhere between 35,000 and 40,000 dollars a year.
So what did I do wrong?
Over estimation. I am a kind of person who cannot make a budget and then go above it. The only way to avoid something like that is by estimating more than I think it will take.
This is how I think – That 4000 dollars for gas and maintenance? We normally spend about 100-120 dollars in gas per month. That would come to 1200-1500 dollars per year. But then, we take the cars for servicing twice a year; times two for two cars. What if they cost up to 600 dollars each time? I don’t think that has happened in any year before, but the cars are getting older.
Oh, and the 1350 dollars for cell phones? After I told you not to buy a phone and that we use Project Fi? Well, currently we spend about 65 dollars per month on the phones. That is for two of them, and paying off BusyDad’s phone (We didn’t pay outright because we were getting it for 0 percentage interest). It is going to come down soon because the phone will be paid off. That is about 700 dollars on phone, how did I get to 1350? I was thinking about his phone being 2 years old, and considering that his last phone promptly stopped working once it hit the 32 month mark. I don’t think it is likely he will need a new phone this year, but it is possible.
Once I realized what I was doing, I went online looking for directions on how to make budgets. As usual, all it told me was that I am not normal when it comes to money matters. Most of the links told me to first find my income, use a certain part of it for needs, another part for wants, and save the rest. And the percentages were ridiculous – I would end up saving only 10-20% of my income. No, thank you! I do much better than that already.My expenses do not depend just on my income. Nor should yours! Click To Tweet
I also looked for viable alternatives – Didn’t find anything! Please let me know if you know of something.
If you are struggling with containing your expenses, don’t listen to me – please go ahead and make a budget. It will make you think before you spend, and what I do normally is essentially the same – Except I do it retrospectively. It makes you analyze where you spend, and helps you think of how you can make specific spending patterns better.
I have given up trying to make a better budget for now. But since I started it, I want to continue using it for a year, as an experiment. To see how it goes. I do most of it anyway. Additional work is just updating the spreadsheet. Will it actually cause me to spend more just because I allotted it? That budget is at least 25-30% more than what we normally spend. I will keep updating my expenses every month.
If you know of a better resource that will help me trim my budget to more reasonable numbers, let me know. I really could do with some help.
Our December expenses:December was an expensive month. It always is! Click To Tweet
Even though we don’t buy too many gifts for us, we still need to gift others around us. But then, I am not going to subtract anything from the expenses (like I did in November), because there is a December in every year.
Our expenses not typical of every other month also includes soccer ($290), Russian School of Mathematics ($800+), a new chromebook for my blogging – didn’t want to use my office laptop ($200). The rest of it is typical.
Not so bad! Especially if you remove the 1,300 dollars that is not typical of every month. The “shopping” category is mostly the chromebook and my usual stuff at Amazon – BusyDad jokes that they should pay me for keeping them profitable. (I do get 5% cashback for using their credit card.) I find buying everything online helpful because whatever I want is home even before I get a chance to stop at a shop. This time, all the gift giving from Christmas was part of that expense.
Now, the important question is if we can maintain this in spite of having a budget 🙂
Let me know of what you think, whether you think there is one particular area we should curb our expenses.
Here are our expense reports from other months: