here’s a pretty sunset, since I’m talking about budgeting
Early in the year I set out some pretty simple budgeting goals. Last week I mentioned that Robert and I had some unexpected bills pop up. While we definitely aren’t broke by any means, we need to keep a closer eye on spending, cut out some of our (my) project-spending, and increase our emergency fund. I know many experts recommend a $1,000 emergency fund, at least to start with, but that doesn’t seem realistic to us as homeowners. Especially after a few years of realizing that the unexpected things tend to pop up more often when you own an older house (or possibly any house).
Robert has a spreadsheet for most of our bills, but I prefer to keep more of a mental tally. Generally speaking we’re doing pretty well, but when I was doing our taxes this year, I noticed that we made significantly more in 2012 than we did in 2011 and yet we don’t have as much as we’d like to show for it. Yes, we bought a new fridge, we went to Seattle, and we’re working on a bathroom renovation, but even factoring in the cost of those things it was pretty apparent that we splurged or “rewarded ourselves” a little too much last year. We resolved to do better this year, to pay down or eliminate our debts, and bolster our savings accounts and emergency fund.
Projects and eating out are Robert’s and my weak areas. We don’t have cable or gym memberships, Robert cuts his own hair (and mine), we make our morning coffee at home, and we pack our lunches. With the exception of our ancient water heater we have energy efficient appliances and mainly use CFL bulbs, which help to keep our power/water bill low. Other than our recent Seattle trip, we don’t take big vacations. We don’t even go out to the movies, concerts, or bars. I don’t buy new clothes very often, and when I do they’re inexpensive or good quality but on sale. We do tend splurge on food, whether it’s eating out or something like the Whole Foods hot bar, and projects/things for the house. It’s partially why I lovingly refer to our guest room (future master bedroom, after the bathroom is complete and we install hardwood) as a mini-warehouse. Embarrassing.
Yes, I know. We are totally boring. My birthday Lowe’s gift card for drywall (and my extra margarita at dinner) was very exciting, ok?
What I haven’t mentioned is that sometimes when I am stressed out I overspend. So you can imagine where this is going. While I was crunching the numbers on our taxes and unexpected bills, I went a little project-supply crazy. I’m trying not to feel that bad about it, I liken it to how people often overeat before starting a diet. Did you know that studies have even shown that budgets can actually increase spending?
So, I bought sockets for the dining room light, a West Elm light that was on sale (I had a gift card, but it won’t ship until March anyway, so I should have waited until shipping was free two weeks ago), some hardware for the china hutch (which I later returned), and supplies for an ottoman for Dottie. I may have bought a dress and cardigan from ModCloth. I also didn’t object when Robert suggested we go out for tacos.
grainy iPhone photo of drop cloth covered ottoman
After all of that I thought about that fact that we would have been royally screwed if Dots had needed surgery right away, or if we had another unexpected house repair. I went though bank statements and made a list of how much money we had spent on unneeded purchases, a list of all our bills/payments (including payoff amount), and a spreadsheets to help keep better track of saving. Then Robert and I took a hard look at our monthly expenses and discussed which ones we can reduce/eliminate. I numbered them in the order we’d like to pay off, starting with the one with the highest interest rate. We also heavily focused on the fact that we need to stop spending money on things that aren’t necessities. We did budget in the possibility one weekly dinner out, typically at the end of the week to unwind.
found on Pinterest
I loosely based our saving spreadsheet on the 52 Week Money Challenge above. (Many commenters suggested reversing the amounts, so that you are not paying yourself $202 at the same time as buying holiday gifts.) I think the challenge is a good idea in principle, and the amounts are reasonable, especially if you’re single or supporting a family on one income. I also really liked the fact that it’s a very visual representation of a goal, and can be updated or checked off weekly, similar to the feeling of crossing a task off a To Do list. Personally, I know that Robert and I can easily save more than $1,378 in a year’s worth of time, so our goal is $100 per paycheck, which brings us closer to $5,000 for the year. We want to pay off or reduce the balances on credit cards, car loans & Robert’s student loan, and refinance the house.
So how are we doing? In total we had eight debts that we want to reduce or eliminate, and that includes our house and Robert’s truck. We also paid off a small loan in January before making the list. As I mentioned last week, I paid off my credit card, and we are on track with out savings. We decided that once we pay off three of the eight we will celebrate by doing a larger project, possibly having the ceiling in our hall bathroom repaired. Maybe an odd splurge to some, but you know we’re DIY & renovation junkies. I also told Robert that his graduation present in August is new cabinet doors for the kitchen, so I’ve been looking up quotes on that in preparation. Feel free to weigh in on how easy/hard it is to build shaker style cabinet doors.
We’re both feeling pretty good about the path we’re on, but we’re also realistic about the fact that sometimes you need to have a life, in addition to paying things off.