February 15, 2011

Budgeting and Hard Decisions

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Budgeting

When you have a growing list of things you want to buy and do, finding the funds is often a constant pursuit. I know how much comes in. I know how much is spent on fixed(ish) things like the mortgage, electric, insurance, cell phones, etc.  I budget a certain amount for food and household items. And then there is the ‘other’ category.

Even writing it makes it seem like a black hole of money. That catch-all category where expenses get put when you don’t want to classify them, are trying to justify the expense or reason that it’s not really an ongoing expense. The other category for me is one of those very large groups of all kinds of random expenses that impact the budget but at the time seem insignificant. It’s the aggregate that is the shocker.

The other category is like going to the dollar store and getting to the checkout and realizing you’ve just spent $50. At the dollar store. On stuff that only costs a dollar. And you think, ‘What did I buy?’. And you reason with yourself that it’s just a dollar. When it’s really $50. And you shake your imaginary fist at the marketing geniuses who have convinced us to think that no matter what we buy our brain says ‘It’s just a dollar.’

So when looking for places you can cut in your budget, one of the first places to look is in that abyss of ‘Other’. Even if they’re uncategorized, just putting them in a category with it’s own description, all by itself, at least it will be there to see. Breaking out all the categories often helps give insight into how much the subcategories really cost.

Instead of ‘Utilities’, break it out.  Look to see what your gas, water, electricity and phone bills are individually. It was because I do this that I caught large increases in our water bill during the summer last year. Sure, I reasoned that we were using more water for landscaping and such but it was so much more that it didn’t make sense. Especially when I found out we had the main sprinklers off. Naturally, I’m not shutting off the water to the house. But it alerted me to what might be a problem. Part of it was that I had been washing a bit more, but as it persisted a few months I began to question is maybe something was wrong. And there was. One of our underground landscaping pipes had come apart. A relatively easy fix, but I’d never have even gone searching for it if I wasn’t focused of narrow categories.

It got me thinking though, where to cut. What are things in the budget I could cut so that I could better save for a cool new bag for my camera or new luggage or for a calling and data plan that will work should be make our trip to Europe this year. One of the first places many people go are to the ‘luxury’ expenses such as cable, cell phones and dining out.

Yes, cutting the luxury expenses is one place to start. But, you need to know what YOUR luxury expenses are. Yours may be different than mine. Cable (well, satellite) is not a luxury for us. CycleGuy and I have discussed this at great length and while we have pared down and made significant changes, giving up cable is not something we’re willing to do. It makes me stay on top of any price changes are out there though. I still have a landline. My grandmother and marketers call it. I could get my grandmother to change. It would take some time, but she’d pick it up quickly. Problem is that my internet and security system have connection to my phone line. It makes me more beholden to the utility, which I hate. I’m working on it though!

Here are 5 tips to help you with your budgeting so you can feel that you’re not the only one making these hard decisions.

1. Identify your luxury expenses

2. Separate out the ‘other’ expenses into real categories

3. Watch for big variances in your usually fixed or almost fixed bills

4. Evaluate by yourself or discuss with your partner about eliminating or reducing rate plans

5. Always leave in a category for “fun”. You must budget in money to do those things you enjoy.

You don’t need a fancy spreadsheet or computer program to create your budget or monitor your expense. The hardest part is actually doing it and keeping track of where the money is going. But once you know where your money is going you can make more informed decision about what gets cut or what is a must stay.

For me, knowing where my money goes has made me a better consumer over the past years. With plastic being so readily used for purchases (regardless of debit or credit), it’s easy to lose track of where the money goes. You don’t ever really see it. Which makes it more challenging. If you’re thinking you want to buy something or go somewhere, consider what your luxury items are and how you can cut spending on some categories so you can make room for your ‘Someday’!

Sara

{ 1 comment }

Jess February 15, 2011 at 2:33 pm

Husfriend and I literally just had this very sit-down over the weekend. There are some trips we’d like to take, purchases we’d like to make for the home, additions we’d like to make that will help in relieving the emotional and physical stresses on the day-to-day. We’ve found ourselves, so often, “Saving for the Big Someday” that we fail to keep our focus or realistically prioritize. Write out, with your hands, (I know, I know) a list of desires and their exact or approximate price. Work from the least expensive to the most expensive, contributing a percentage to each in a separate, interest accruing account (or jar on your bedroom dresser) while you slowly “get there”.

We’ve taken this approach a couple of times but lose track of things because all of the things and places were verbally exchanged and not tangibly visible. But man oh man does it feel good to cross something off of the list. 😀

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