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Honest Budget Building: A Revelation

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Anonymous
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Honest Budget Building: A Revelation

I'm new here, but I've been spending a lot of time here recently and noticed a lot of issues could be solved by building a simple, yet (most importantly) HONEST budget.

 

And what I mean by an honest budget, is one that is TRULY representative of what you can expect to spend each year, ESPECIALLY those UNEXPECTED expenses, which torpedos budgets, but will inevitably come up.

 

I'll be frank, I was very lassaiz faire with my money when I first graduated college.  I went from dirt poor to (in my mind) the lottery and my money just flew out of my hands.

 

It wasn't until recently, where I noticed the amount of money I had, after all of my bills, kept shrinking and shrinking, no matter how much more I made.  So I decided I needed to do something and you cannot fix something unless you know precisely what is broken.

 

In other words, how do you know where to cut back if you don't even know where your money is going?

 

I know there's software out there, but I just built one myself in Excel.

 

I created multiple sheets, one where I created an overview if what I thought my expenses were per month.  I itemized everything, but did create categories for similar items, like consumer debt, utilities, tv/phone, groceries, gas, savings, and miscellaneous, etc.

 

I then created a separate sheet that would record all of my transactions and I would label each according to their respective category.

 

I then created a separate sheet that automatically totaled the data per month, by category and kicked out averages, maxes and mins, etc.

 

After a few months of doing this, the revelations were EYE OPENING.

 

I realized that my initial estimates were way, way off, especially what I would categorize as miscellaneous, entertainment and restaurants.  I initially pegged those at $500 a month and soon realized I was spending on average $1500 a month on these categories.  I couldn't believe it.  I honestly didn't think I was spending that much on stuff that I didn't necessarily considered essential, but just part of the lifestyle I was accustomed to.

 

To examine this even further, I created additional categories in my miscellaneous expenses based on what I was doing.  Clothes, iTunes (a big surprise on what I was spending), restaurants (wow) and home stuff.  Another surprise were unexpected home and auto repair costs THAT I DIDN'T BUDGET for. I shoved into into my miscellaneous categories and these were another culpret to my $1000 over initial budget estimates.  I have sinced pulled those out.

 

I couldn't believe the discretionary junk I was wasting my money on and have since cleaned up my act considerably.  I was wasting, on average, $1000 a month beyond what I would consider really essential miscellanous stuff.

 

The moral of the story is that everyone should create a budget, but most importantly, create one that is brutually honest.  I have since revised how I track and now budget for those unexpected expenses and if I don't use them, I just roll them over or put some into savings.  I took previous year's averages for these categories and used that as my budget for the next year, taking into account any known/expected expenses for the coming year.  And, most importantly, I knew precisely what, where and by how much I could cut and save.

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Anonymous
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Re: Honest Budget Building: A Revelation

Franticone, excellent and timely post!

 

I had a a similar wake up call a few months ago when I downloaded my 2014 spending report from Discover. Granted, many of the things I bought, I needed and couldn't have otherwise obtained with my lowly college work-study income, and I always paid in full. You are very very right though; while it's a project to sit down and itemize every receipt, check, transfer, etc, the illumination is worth it. I'm still a little ripe with myself - I reckon half of that total number, could have gone into savings - and I don't yet have the full load of bills that most myFICOers do. Now graduated, and having found a wealth of healthy information via prayer, personal finance blogs, and credit blogs, I'm beyond thrilled to see how much better I will do, financially and otherwise, into the new year (and new job).

Thank you for sharing your experience, I think you should do a little "grateful dance" if you haven't already. Smiley Very Happy

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