The Personal Budget – A Sobering Status Checker

budget

Long story short, my wife and I have been discussing the possibility of her being a stay at home mom when we start having children.  Don’t get too excited, because there’s nothing cooking (um, excuse the pun) right now to speak of on that front. Just food for thought really at this point.

Anywho, being the financially focused person that I am, I thought I had a pretty good sense of where we were financially from an income and expense standpoint on a monthly basis.  Since we’ve been (relatively) successful so far in saving my wife’s entire paycheck, not having that income would certainly require a significant ramp down in our spending rate and most definitely our savings rate.  Needless to say, the thought of this literally kills me, but alas, I thought we’d still be ok.

As I’ve discussed in previous posts, I have a general aversion to budgets and believe an “automatic pay-yourself-first” method is generally more sure-fire and hassle-free. But alas, I thought I’d make a quick visit to the “Trends” section in my Mint account to take a gander at our level of spending over time.

So there I was staring at my page yesterday in sheer disbelief…

I was absolutely shocked at how much our spending had gotten away from us over the past year or so since we purchased our house!  My heart was racing and my head spun as I tried to fathom how this could be possible.  I clicked through my transaction history to see what caused all the madness.  Yep, lots and lots of home furnishings, appliances, decorations, updates, etc.

I calmed down a little once I convinced myself that most of these home projects were behind us, but I still needed to dig a little deeper.  I needed to actually map out our income, as well as our regular/recurring expenses to see what’s left over for discretionary “one-time” purchases that we convince ourselves are “just this once”.  You know what I’m talking about: A new pair of shoes, a purse for my wife, an expensive dinner out, a new coffee table, a toaster oven, whatever!  Every month it hasn’t just been SOMEthing, it’s been A LOT of things.  And they all add up!

So I decided once and for all to build an actual, dare I say, BUDGET!

So here are my recurring monthly expenses in all their glory:

Recurring
Home Mortgage (incl. T&I) plus $50 towards principal      1,503.00
Rental Condo Mortgage         521.25
Rental Condo Association Fee         225.00
Lawn Mowing           27.00
Total Home     2,276.25
All Other Insurance        261.26
Church         216.67
Bible Lesson           12.95
Total Church        229.62
Bar Method         155.00
24hr. Fitness ($55/yr…nice deal, eh?)            4.58
Heather Hair ($160 per quarter)           40.00
Total Health/Fitness        199.58
Student Loan        158.04
AT&T Uverse Bundle         151.47
Cleaning service ($95 bi-weekly)         205.83
Cell Phones         133.00
Ameren (12mo. Avg. = $68)           80.00
Leclede (12mo. Avg. = $80)           90.00
American Water           40.76
Sewer           35.09
Haircut           30.00
Trash/recycling ($62.85/q)           20.95
Transunion Credit Protection            9.95
Total Bills        797.05
Barron’s ($103.18/yr)            8.60
Amazon Prime ($99/yr)            8.25
Netflix            7.99
iTunes Match ($24.99/yr.)            2.08
Total Entertainment          26.92
Total Recurring   $3,948.72

My monthly recurring expenditures total roughly $4k, and this is before food and gas!   My food bill has averaged $1,100/month and gas has averaged about $230/mo.  So all in, that’s almost $5,300 in monthly spending!  That’s just ridiculous, and this has to be cut down.  Again, these are mostly recurring expenses, so they don’t include all the one time spending we’ve been doing as new homeowners.  My hope is that we’re squared away on that front for now, and will be able to significantly reduce our home related outlays from now on.

But anyway, I made the first step in spending control by cutting our AT&T Uverse subscription, and signed up for Charter Internet only for roughly $40/month. I think we can get by on Netflix for a while, considering we rarely watch TV anyway. This will save $100+ give or take.  Ok, that’s a start, but it’s still a far cry from where I need to be.

We also are cutting our cleaning service ($95 bi weekly). Ouch! I guess that means we need to buy cleaning supplies and vacuum cleaner.

In addition, we’ve got to focus on our food bills, which are incredibly high.  No more eating out on the weekends, as this tends to boost the number quite a bit.  Two people should easily get by on $800 per month on food, so we’ll need to cut at least $200 here.

I mentioned above that we’ve attempted to save/invest my wife’s entire paycheck which has taken the form of an automatic transfer from my checking account into my Scottrade brokerage account.  Unfortunately, we had to put this on hold for about 6 months following the closing of our house in order to get all of our huge expenses (appliances, furniture, decorating, etc.) out of the way.   And we still haven’t quite gotten over the hump yet.

Well as they say, the past is the past.  We’re moving on with a determined goal to reduce our expenses by cutting luxuries and more actively challenging ourselves on purchases.  Hopefully our home expenditures have finally begun to trend downwards as well.

Like I’ve always said, Income – Spending = Savings and Investment as the perennial equation for wealth.  In order to make the right site of the equation bigger, you have to either increase saving or decrease spending.  In many cases, it’s easiest to focus on the controllable: your level of spending.  I’ll keep you updated our progress.

How do you feel about budgeting vs. an automated pay-yourself-first method? How are you cutting back your monthly spending?  I’d love to hear about it!

Sincerely,

Wes

 

Comments

  1. Kelly Nichols says

    We are nowhere near perfect on this topic, but we found that even the last minute, 5 pm, let’s go to Jimmy Johns for dinner purchases were adding up. We’ve cut WAY back on eating out food, but or grocery bill has increased. I think this is a good decision overall, but I don’t feel like I’m seeing the monetary benefit. Trying to be patient with it.

    It’s hard to always know what kind of random purchases will come up each month(there always seem to be some unexpected new items), so I’m thinking through keeping a certain amount for those.

    What’s a good percentage to save each month to aim for?

    Thanks for this post! So helpful to think through these items.

    • Wes says

      Hi Kelly!
      Thanks so much for the comment. Yes, you’re absolutely right…it’s life’s little, daily, seemingly inconsequential purchases that all add up to impede your savings plan and future wealth generation upside. I think we really have to train ourselves to just stop and think for a second…”do I need to spend this money, or can I find a way not to spend it?” Chances are, there’s probably a reasonable way or reason not to spend it…especially the random purchases!

      As far as a reasonable amount to save, start out automatically saving and investing 10% of your total gross income. An automatic bank transfer to an out of reach brokerage or IRA account is the way to go (I outline saving priorities in my eBook). Once you feel comfortable month to month as you adjust your spending levels, tick up the savings rate to 15%. Keep adjusting this number upwards until you are saving/investing the most possible while maintaining a decent quality of life (not asking you to live off Ramen noodles here). There’s going to be some growing pains here, for sure, but your future self will thank you.

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