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Budgeting = A Work in Progress

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Before blogging here, I’d had a budget but I’ve mentioned that I didn’t really “stick” to it very well. Basically, if I wanted to buy something (within reason) I would just do it…it didn’t really matter if I was already over budget for the month.

I’ve been trying to modify this behavior (through use of the money envelope system). But if there’s one thing I feel I’ve learned since starting this debt reduction journey, it’s that the budget is like a living, breathing thing. It needs to constantly be monitored and adjusted as necessary to work well.

To jog your memory, here was my previous budget (notice the new line-item for my gym membership):

ItemBudgeted
Rent$1055
Electricity$150
Water bill$75
Gas bill$25
Sprint (2 lines)$115
Cable/Internet$85
Car Insurance$90
Health Insurance$350
Waste Management$35
Debt$1500
Gym$50
Miscellaneous$250
Groceries$380
Baby Purchases$600
Gasoline$100
Savings for Irregular Purchases$265
Total:$5125

There are a couple categories that I want to revise moving forward. First, I’m going to have to bump my grocery budget back up to $400. This is what it had been set at before I started blogging and I was hopeful to reduce this number but have failed every single month. Instead of continuing to beat myself up about it every month, I’m going to set the budget at a more realistic number for our family. Back to $400.

 

The other changes all have to do with savings.

 

Here was my old break-down of savings:

$40 for semi-annual fees (car title/registration fees)

$50 for car maintenance (oil changes, savings for new work truck)

$125 for dental/vision (just increased from $50 last month)

$25 for travel and Christmas

$25 for 3-6 month expenses

 

And here are the changes I want to make:

Increase the semi-annual fees savings to $45/month. My “semi-annual” fees were only calculated to include annual car registration costs. Just the other day I got a $50 bill to renew my Costco membership. Oops. So I’m adding the $5/month to cover this expense (and provide a small buffer).

I’m starting a savings for veterinary expenses of $10/month. This came up because our dog (who is like our first “child” – you can see him in my author photo with me) got extremely sick this week. Luckily he pulled through, but my fear at the thought of an emergency vet visit made me realize…we need some type of funds for this. The reality is, our dog is getting old (major sad face!). He turned 9 this year, and he’s a large dog (large dogs tend to have shorter life-spans than small dogs). I hope he’ll be with us for years and years to come. But the fact is that we may need to have some money set aside for eventual vet expenses for old dog problems and end of life expenses (breaks my heart to even say that….but it’d be unwise to ignore the realities of life). Note that his food and regular annual check-ups will continue to come from the “miscellaneous” budget, so this is more of an emergency savings for unanticipated vet bills.

I’m starting a small savings for baby birthday expenses of $10/month. I was conflicted on this one. If I’m going to save for the girls’ birthday, why not also start a savings for all kinds of gift-giving occasions (like family birthdays, shower gifts, etc.) But the dollar amount spent for those is much less, so I think those should continue to come from my “miscellaneous” budget. I could perhaps even reduce the miscellaneous budget since I’ll be appropriating money monthly for all types of expenses that would otherwise be paid with “miscellaneous” funds. I want to monitor this for a month or so before officially deciding whether to lower the miscellaneous budget.

And one last (relatively big) change: I’m going to start setting aside $100 monthly with the intention of eventually investing in a Roth IRA. Per this conversation when I paid off our credit cards and started contemplating the need for retirement savings, the majority of commenters said we should NOT wait on this until we’re completely debt-free. But, I also want some time to do research into different options with different places and feel comfortable about where we invest. In the meantime, it’s easy for me to open a sub-account of my Capital One 360 online savings (<refer a friend link) titled “savings for 2014 Roth IRA.” I will probably stash some money there until the new year (I hadn’t known before people commented, but you can fund a 2014 Roth IRA until April 15, 2015). Then sometime probably in the March time-frame I’ll open up a Roth and make a large contribution (not just the money saved here, but probably adding some surplus funds from February and March, too). I’d love to max out our contribution at $5500. My savings by that time will only amount to about $900 (in March 2015), so I don’t know if we’ll be able to scratch up enough surplus funds to hit the $5500. If I were to set the money aside monthly ($5500 divided by 9 months = $611/month), it amounts to more than I feel comfortable saving right now. Ultimately, this is not a savings/retirement blog….it’s a get out of debt blog. I do feel that there’s a place for retirement savings and it’s an important component of the conversation, but I still have so much debt to focus on that I don’t want to be saving at that level while I’m still trying to shovel my way out of debt.

These changes bring our monthly savings to this:

Monthly Savings

$45 for semi-annual fees (car title/registration fees & Costco membership)

$50 for car maintenance (and savings for new work truck)

$125 for dental/vision

$25 for travel and Christmas

$25 for 3-6 month expenses

$10 for baby birthday expenses

$10 for veterinary expenses

$100 savings for 2014 Roth IRA

Total Monthly Savings: $390 (up from $265/month)

 

Even seeing that amount of money (nearly $400/month) go to savings instead of toward debt kind of hurts. But thinking long-term, having these savings are going to help me prevent accumulating future debt when the unexpected arises. Also, there’s no law that this money has to stay in savings. If, for instance, we build up the veterinary expenses savings and never use it or have no need for it, of course this money can be used toward debt (or toward the 2014 Roth IRA savings, or whatever else we like). But it gives me great peace of mind to have everything accounted for like this.

 

So there you have it, another revised budget. Hopefully the next revision I make will be to reduce the amount appropriated toward “miscellaneous” and increase the amount toward debt. Here’s hoping!

Updated Budget

ItemOld BudgetNew Budget
Rent$1055$1055
Electricity$150$150
Water bill$75$75
Gas bill$25$25
Sprint (2 lines)$115$115
Cable/Internet$85$85
Car Insurance$90$90
Health Insurance$350$350
Waste Management$35$35
Debt$1500$1500
Gym$50$50
Miscellaneous$250$250
Groceries$380$400
Baby Purchases$600$600
Gasoline$100$100
Savings for Irregular Purchases$265 $390
Total:$5125$5270

What do you think about my planned monthly savings? Is there too much or too little to each category? Are there any other categories you would suggest to include or any you would exclude?


11 Comments

  • Reply Homes |

    I absolutely agree with you decision to start saving for retirement – the benefit of compound interest when you start younger rather than later cannot be overstated. The are many (many!) examples to be found on other debt blogs and money managing sites that show haw every year delayed in starting retirement savings means that much larger a monthly contribution you have to make in the future just to catch up. Especially since you have paid off your highest interest rate loans, retirement savings are a good idea – your future self will thank you! My husband and I max out our Roth and 401k every year, in addition to various other investment vehicles and we are track to retire no later than 50 – not sure we will but knowing that we can is amazing!

    Also, I know you aren’t at this point yet, but I just want to point out that your max Roth contribution is $11000, not $5500 – that’s because both you and your husband can open and fund a Roth – definitely a goal to work towards!

    • Reply Ashley |

      Oh man! I hadn’t realized (this is what I’m saying – I definitely need time to research). You’re right that we surely won’t have that much for 2014, but I’m hopeful on kicking some serious debt-butt in the next year. Then who knows what 2015 will have in store for us!

  • Reply Mysti |

    When we started pre-saving for expenses, it seemed like a huge change….now it is just part of “life.” I would consider saving a little more for your unanticipated vet bills though. At $10 a month, that is $120 for the year. When my cat got sick last year, it was $350(ish) the first time, and $700 (I think) the second time (he needed an ultrasound). You may want to bump it up to $20 a month, and even in a year if you haven’t used it….just keep adding to it. Those emergency visits get pricey. If the account really starts building up, you can always change your savings back to $15 or $10, or use it toward meds, food, etc.

    Otherwise, I think you have reasonable numbers for the moment! I say for the moment….because we all know that we can’t predict the future and in 6 months, this can change. But you are crushing it!

    BTW, what did you decide to do about your 4th of July trip?

    • Reply Ashley |

      That’s a good point, Mysti!
      We’ve decided to go up in two days and back in one. I picked up a couple little Dollar Store trinkets to make the drive bearable (hoping to save mostly for the way home, since the way there will be broken up). This is actually something I need to work on today because I still haven’t officially booked a hotel. Looked at a few, but haven’t reserved any yet. It looks like the price range will be about $100ish for the night.

  • Reply scarr |

    Groceries – how I love grocery shopping but hate paying for ALL the food! We busted our grocery budget for so long I finally raised the limit. I bake a lot of our food from scratch and we rarely eat out so our total money spent of food per month is low.

    I think you are making a very wise decision by increasing your savings for future financial obligations. My husband and I do this same thing for almost all of our upcoming bills – car maintenance and insurance, veterinarian bills, birthdays, etc.

    I’m really happy to hear that you are going to start saving money for an IRA. You have plenty of time now to research and find the best place for your needs.

  • Reply Kayla @ Shoeaholicnomore |

    It sounds like you’ve really thought through the decision to start saving more $$ for these categories each month. I like that you laid out your thought process for us to follow along. I agree that these seem reasonable and like you said, you can always re-allocate the money later if you find that you don’t need as much saved as you thought.

  • Reply Den |

    I like your new budget – and I agree that budgets are living/breathing things – constantly changing with life! I think you’ve really thought thru what works for your family and what your goals are!

    I’m still not sure about contributing to retirement when you are still so far in debt, but I like that you’re setting aside money while you do your retirement research and then make a decision down the road – that gives you lots of flexibility.

  • Reply SAK |

    Great that you are saving and still throwing a lot at the debt. One thing we did (mostly after we got out of debt) was build a bunch of little EFs in our ING accounts – mostly at 1K each (each pet, each car, taxes, vacation spending, medical, etc). Obviously if we had a big emergency we would tap all the accounts we needed to! I like having separate accounts for each just to keep track and it was easier to check off reaching a goal quickly – 1K in savings vs 10K in saving.

    • Reply Ashley |

      That sounds like a really good plan! I definitely think we need to tackle more debt first, but I like this idea for when we are a little closer to being debt-free! : )

  • Reply Carrie |

    I think you really need to look at life and disability insurance for your husband before you fund any retirement savings. Your husband is self-employed and he had the mysterious illness that was not able to be diagnosed last year. You have some savings set aside for monthly variances but you should consider long term consequences of him possilbly not being able to work for a while. Things would be very stressful for your family in that scenerio. I think that if you work these two insurances into your budget then consider retirement savings that would be a better option. Just something to consider . . .

    • Reply Ashley |

      Ugh, I know! I have actually gotten a quote online that was really reasonable but my husband has an insurance “guy” that he really wants to stick with and timing just hasn’t worked out to go in together and sign the papers. This is definitely on our “to do” list and should 100% be happening sometime in the month of July.

So, what do you think ?