Budget: 1 year later

20 Jan

If you have followed my blog this year you know that budget has been on my mind throughout the entire year seen here, here, here, here, here. oh and here.

I was talking to one of my co-workers regarding finances and budgeting and her response after the conversation is “you should teach other people how to budget!” I could only laugh at the remark because I just thought that sentence was the craziest thing I had heard all year. Me? Teach someone something about finances? BAHAHAHA. I couldn’t really say much about our budget because in 2010 I was in the midst of trying out a budget for the first time and so I knew that I wouldn’t have any perspective on budgeting until I had gone through a full year and was able to reflect on the experience. Now, after a year has passed and I have done some research on budgeting and did a budget of my own I can now look back on what my co-worker said and perhaps add some insight to the budgeting world.   I do not have all the answers and as someone who is new to the world of budgeting I am still learning new ideas and concepts every day–but I thought I would share what I have learned throughout this year.    Disclaimer: I am not an expert on budgeting I am just an average person trying to get finances in order and sharing what worked/what didn’t work for the budget.

First off something I had no clue about–budgeting is not the same thing as saving. Wait, what?   When people would talk about ways of saving your money (i.e using credit card points for xmas gifts, or having a no spend month, or cut coupons) I thought all of this meant that I was budgeting my money. This is false.  Budgeting your money is about tracking expenses, finding trends in your spending, budgeting for seen and unforeseen expenses, and the overall goal is to stick to your budget on a consistent basis.  Saving money can be about finding a bargain, finding ways to lower your expenses for the month or year, which can at times lead to having a savings account (other times not so much).   Budgeting your money can help with having a savings or increasing your savings–but budgeting does not equal saving and saving does not mean you have a budget.

 Here is how our budget works:

We both get paid bi-weekly and they are on off weeks and so essentially we get paid every single week.  Our budget isn’t on a weekly budget though it is on a monthly basis.  Approximately 1/4 of our budget are numbers that are fixed and come directly out of our bank account: {loans, insurance, phone bill, Tivo, Netflix}. The other 3/4 of our budget is completely by choice of what we choose to use our money with {clothes, groceries, eating out, entertainment, car needs, home decor, health, education, travel, savings, etc}.

*we do not have rent, cable, utilities bills and so most people it is more 50% fixed budget and 50% choice in budget. 

What we wanted out of doing a budget for the first year is seeing where we spend our money, try to stick to a budget for each month, and to start having a plan for saving.

How we kept track of our budget:

Both my husband and I have a google doc account that we set up specifically for this purpose and so the budgeting excel spreadsheet is on google docs so that we both can look at it.  We can both make changes to it and see the changes immediately.  For the very first time I am going to share the google account doc with the formulas although items have been altered as to not share our finaces with the blogging world.** None of the numbers are accurate.**    You can alter this budget as you need all you need to do is make a copy of this file under “file-make a copy” and once you make a copy you will want to rename it for your family, and lastly but MOST importantly you will want to go to “Share” and then make your document private.  You can add collaborators (like your husband) so that both of you can view it but make sure you don’t make it public as then the entire internet can view your budget.  You can alter this document for your own personal use–it has been altered from That Wife  website to fit our financial needs. 

Here is a breakdown of the google document: 

Budget Tab: This tab shows all our line items in our budget, our monthly budget amount for each line item, how much we would spend yearly on the budget item, what we spent on the line item, and how much money we had left on each line item.  Also had bottom the total for monthly, yearly, spent, and left over.

Summary Tab: This tab shows for each line item how much was spent each month so that we could see how the line items fluxuated by each month.  We were also able to get the average spent each month on the line item to make sure we were close to the budgeted amount each month.  It also had our monthly income and then the total we spent each month and then the difference between the months.  For people who do not have fixed incomes you can start to see trends on months you make more or less and you can see the average you make each month.   For this tab each month you just have to go to every single tab and add up (using the sum button in excel) for the month and puttin that total on the summary page.

Breakdown Tab: This tab I didn’t make up until the very end of the year so that I could break down our expenses.  For instance in the Food section I wanted to know how much I spent on dunkin donuts in a year, how much my husband spent on his cafe in the building, how much we spent on take out, how much we spent on fancy meals, etc.  For clothes I wanted to know how much we spent on clothes for myself and how much for my husband.   

Line Item Tabs: These tabs are for every line item we have in our budget {groceries, car needs, health, photography, savings, credit cards, etc}.  On these tabs I categorize every purchase we make and put it in a tab {you can’t put an item in more than one line item-you have to choose one}.  It had the date of purchase, how much the purchase was, and where or what we bought.   The budget tab has a formula on it that as I put expenses into the line item tabs it calculates the sum for me automatically.

What worked for us:

  • The summary page was very revealing to us as we were able to find out months that we spent a great deal on entertainment, clothes, groceries, eating out so that next year we can learn from those mistakes and work hard to change our habits.  For instance we learned that in the summer (especially june/july) we ate out a great deal, and in the winter our gas/transportation line item went down, but in the summer it went up significantly.  These trends will help us out when looking at our 2011 budget and being able to adjust our finances or our lifestyle to fit these budgeting needs. 

 

  • Tracking each and every budget item was very helpful during the month because I saw we were spending more than we should while tracking, and at the end of the year I was able to do breakdowns because I tracked each and every item. 

 

  • When we put a value to each line item (example: 100 dollars for groceries) it was a number out of the air because we really didn’t track the numbers prior to 2010 and so when we would go over our budget line item we didn’t take it too personally because the budget number we were trying to strive for might not have been realistic for our budget needs (i.e we spent closer to $150 for groceries instead of $100).  Our goal was to save X amount and to not to spend more than our income each month.  The first year we tried not to dwell too much on where our money was going (i.e. more one month for laundry, or less one month for health as long as in the end it equaled out to our income for the month).  Now that we have a year to review and look at the average each month and where we can improve we will now focus not only on the overall budget and not extending over our income, but making sure we come close to each line item budget.

 

  • Having our family finacial meeting.  This will be an annual meeting from now on because we were able to talk about our personal flaws with budgeting (mine with beauty and gift giving expenses, my husband spending money on food).  We were able to talk about strategies to bring these numbers down, hold each other accountable, and find a compromise in the budget for these expenses.  We were able to talk about line items that aren’t relevant anymore (i.e unknown and other and finding new line items that are important for the upcoming year).  It was over 3 hours and it was one of the best conversations that we have had regarding the budget as there were numbers to look at (NUMBERS DO NOT LIE), and a place and time to talk only about finances and not let other issues get in the way. 

What didnt work for us:

  • I was in charge of every part of the budget and so I took on a lot of the burden.  It was stressful, time consuming, and really hard if I were to be honest.  Even though I will still take the lead on the budget and our finances–the hubs will have more of a role in our budget.  We have decided to do a quick run down half way through the month to make sure we were staying on target and areas we can improve on a monthly basis rather than just facing the music at the end of the year.  He will have the passwords/ids to all accounts so he can be more in the know as he really had no clue about any transcations happening for our household.

 

  • There were expenses that we just didn’t think about when making our budget and so when we went to purchase items we had to squeeze them into a budget line rather than having the money already in place.  For instance we have wanted a larger TV for a very long time and we talked about getting it in 2010–but we never budgeted for this TV so when we had the itch to get the TV we put it under birthday gift for husband.  And really who are we kidding that gift was for me just as much as it was for him.  This year we talked more about irregular items that could come up and how we will budget for them (i.e. attending out of state wedding, valentines day, anniversary present amounts, my 30th birthday, etc).  This helped us make more of a realistic budget rather than a dream budget for the year–but last year we had more of a dream budget. 

 

  • Numbers do not lie.  I will let you in on a little secret–i spendt a little over $500 dollars on mani/pedis last year.  I cringed when I had to write that number down in the breakdown but I had to be honest with myself, the budget, and of course my husband.  I couold have fudged the numbers but in the end they just don’t lie.  After the initial shock factor we had a good discussion on did I feel I was going rarely, regularly, or a ton because then that helped us either keep that number the same, lower, or perhaps higher if I felt I was going rarely. Plus it gave some perspective if I want to save X amount of dollars perhaps I need to bring that number down to help out the family budget.  Taking the time to realize that if I spend X amount of this then it has to come out of some line budget and normally what is first to decrease is the savings line item–and really thinking is it worth the expense never really crossed our minds last year.  This year will be much more reflective.   

 

  • Although we didn’t spend more than what we made we also didn’t hit our financial goals that we wanted. And to take this one step further we didn’t really know what financial goals were–and how to achieve them throughout the year.  There are a few factors involved with this statement, but the biggest part was that we put more emphasis on our overall budget for the month rather than trying to hit our budget for each line items for each month.   When you try to hit each line item for each month you start to become more of a consistent consumer rather than a frenzy spender.  You start saying no to purchases more often because it doesn’t fit in the line item for the month even though it would fit in your income for the month.   

 

  • We have 3 credit cards we use plus our bank account that we use for expenses.  It was really difficult each month to check all of these places on where we spent our money.  We are hoping to cut this down to 1 credit card and our bank account in the future (we are down to 2 credit cards and our bank account at the moment).  Simplfying where you use money will help with figuring out your budget and budget needs. 

*In regards to how to track credit cards–this is difficult.  For people who have debt (aka expenses not paid for prior to right now) when you pay for these expenses you will put that in your budget line item “credit cards.” So if you make a $500 dollar payment on a credit card this month and you didn’t use your card in January all those purchases were made in dec 2010 or beyond you would put that $500 dollars under the credit card line item.  BUT if you spent $500 dollars on your credit card in January 2011 you will want to break down what you spent your $500 dollars on (say $250 for clothes, $100 groceries, $50 gas, $100 car needs) and put them under those categories.  This is important because you will want to have an accurate account for your January month of what you spent on clothes, groceries, gas and car needs and if you just put it under credit card you don’t have an accurate picture of your budget.  My suggestion is until your credit cards are at zero you do not use the card so any payments made to your credit cards you can just put under the line item credit card.  Or if you can’t go without a credit card get it down to 1 that you use so there isn’t confusion with where to track your budget.  I told you a difficult answer but tracking with credit card debt is possible.   

Overall Thoughts:

Some people don’t believe in needing a budget and all I can say to that is that I understand, but a budget is truly and completely necessary.  I use to be one of those people who said, oh I want those boots for 50 bucks and the only thing I asked myself at the time was “do I have it in my bank account.”  This does work for people and for families, but in the end it is really hard to have financial goals for your family, plan for untimely expenses, plan out your year, and plan for your future.  Now when I see those $50 dollar boots I say “do I have it in my budget” and “Are those $50 dollars work 1/2 of my budgeted amount for clothes” It puts money into a different perspective of not about do you have it, but where you want to spend it (or not spend it). 

If I could give any piece of advice for someone just starting off with trying to have a budget is don’t get fustrated because there will be a lot of ups and downs trying to make a budget. Get everyone on board in the family on having a budget. Be honest with your budget and track every single expense (even those pesky bank ATM fees–as we found out we spent 100 bucks on ATM fees last year–WHATTT???).  At first the budgeted numbers will seem eroneous and have little meaning to your family, but as your budget starts to take shape during the year and you start to realize where you are spending it will make all the difference in the world.  Seeing is believing and believing is seeing.  When you see the numbers on paper it will definately be a AHA! moment.   We did change a few monthly budget numbers after the first month as we were way off on some expense line items but we didn’t touch it after–we let the numbers at the end of the year tell us where we need to be.  I would recommend taking a look at your budget at the half way mark and making changes 6 months into the budget rather than wait until a full year is over.  Ask for help! If you know someone who skilled at budgeting and financing ask for help to try to form a budget. It never hurts to ask for help!

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: