Warning: This post is a bit of a doozy! Reminds me of when I first started blogging and would basically write a novel for each post! But everything is related so instead of breaking it up into separate smaller-sized posts you’ve got one monster post to contend with. Maybe make yourself a cup of coffee and settle in with a little snack. This is gonna take awhile!
One of the things I did over my winter blogging break was to analyze my 2014 spending and do some planning for 2015 budgeting and savings needs. I’m trying to shake up my budget categories a bit for 2015. For one, I want to do away with my “miscellaneous” budget all together. I want everything categorized. This will make it infinitely easier in future months/years to look back and easily see exactly where my money has gone (as opposed to this year…where I had to look at each month’s spending individually and start to categorize things on my own).
Basically, I wanted to see where this “miscellaneous” money was going and see if I could plan and budget for it. In addition to my normal budget categories (see latest budget here), here are some new categories I’ve come up with:
- Gift-giving. I’ve greatly reduced the amount I’ve been spending on gifts since starting to blog here at BAD, but it’s not down to zero! This needs its own category.
- House maintenance. Looking at the past year, this is mostly gardening-related stuff (some tools, plants, mulch), but it also includes things like light bulbs and cleaning supplies. There’s nothing too major cost-wise, but still enough random miscellaneous expenses to justify its own category.
- Phone/Computer Items and Repairs. I broke my phone twice this year. I now have a serious heavy-duty case on it, but should the unthinkable happen again (fingers crossed), I decided to make this it’s own budgeted category. In addition to phone repairs, this year I had to buy a new charger for my computer and an external hard drive to back up my work, so expenses like that fall into this category as well.
- Holiday expenses. Non gift-giving holiday related expenses. Things like Halloween costumes, 4th of July sparklers, and holiday decorations. This was also a relatively small category of spending.
- Clothing purchases. I’ve actually successfully avoided the clothing-shopping bug this holiday season. I’ve mentioned before I’m not a big shopper in general, but I usually have one or two big shopping splurges a year where I’ll spend over $100+. This year I’ve done really well with making do with what I have and only filling in with absolute necessities (like when I had to buy a new pair of pants when my old ones had already been mended twice and were falling apart). Again – a small category in terms of money spent.
- Work-Related. This was primarily for parking-related expenses when I would drive to campus for meetings. I haven’t been going to campus as regularly in recent months so some of these expenses have fallen away, but this also includes anything specifically work-related (e.g., licensing for special data analytic software, printer paper, ink cartridges, etc.)
- One-Time Expenses. This was a tiny, tiny category but there were still a couple random things that came up that don’t fall within any other category. I’m calling them one-time expenses.
Please note, I will certainly NOT be spending money in each of these categories every month! For instance, I only spent money on work-related purchases 6 months out of this past year; only spent money on holiday expenses 3 months out of the past year, etc. But these will be categories that may pop up from time to time along with my regular budget categories, depending on what that month demands. Instead of having such a rigid, set number of budget categories, my new 2015 budget will be more fluid depending on that specific month’s needs. I think this will be a much better system overall.
What Else is Changing?
I did a careful analysis of all my monthly savings categories. It’s obvious that we were not budgeting enough toward dental and car maintenance, for instance. By tallying up our actual expenses for the full year, I was able to get a better picture of our real needs in these areas. Let me address each one individually:
|Annual Expenses||$100/mo||$100/mo||This is a perfect amount. It covers annual life insurance premium, car registrations, and Costco membership. It actually also left us a little bit extra leftover, but I’m not reducing the monthly amount saved because we’ll be adding life insurance for hubs soon, too.|
|Car Maintenance||$100/mo||$200/mo||My calculations actually amounted to only $166/month needed for vehicle repairs, but I’m rounding up to $200/month because I know we will be needing to replace husband’s work truck at some point (probably this year), so I want to save a little extra. This will amount to $2400 saved for the year. Note that when we come up with an exact time frame to buy a new (new-to-us) work truck, this figure may need to be bumped up for a few months.|
|Dental/Vision/Health||$125/mo||$125+ ???||Our actual costs here would amount to needing $3651 for the year (just over $300/month). BUT, we’re going to purchase a dental discount plan in January and will see how much it will save us. Husband is going to go get a full exam and see exactly how much dental work he is quoted. I think we’ve covered the “big” stuff at this point (fingers crossed) and, in the meantime we’ll continue saving $125/month, but will adjust this number depending on his dental appointment with an in-network dentist.|
|Christmas/Travel||$25/mo||$25/mo||Of course, this doesn’t fully cover our travel and/or Christmas-related expenses, but it was never intended to fully cover those costs. It does what it needs to do, which is to off-set some of the costs incurred. Any extra money needed will come from that month’s budget.|
|3-6 Months Expenses||$25/mo||$25/mo||Ugh! Still owe you guys a post about the emergency fund. Right now, though, the amount being contributed will remain the same on a monthly basis.|
|Dog Expenses||$10/mo||$500/year||Previously, I was only saving for potential vet expenses. I’m changing this category to cover food costs for the full year (about $50 every other month), plus the pet registration required by our county, and a couple hundred dollar buffer for potential vet expenses. I’ll likely fully fund this savings in January and just draw from it all year long.|
|Girls’ Birthday||$10/mo||$10/mo||Staying the same|
|2014 Roth IRA||$100/mo||$100/mo||Staying the same|
|(+ one-time $500 expense from the dog expenses category)|
This brings me to…
My 2015 Financial Goals
In 2014 I paid monthly debt payments that equaled $25,091!!! This is actually a conservative number because it only includes the planned debt payments. Remember that before I was living on last month’s income I would often make debt payments bi-monthly: once was the planned debt payment (which this figure represents), and then I’d make a second payment at the end of the month with any extra “surplus” money from the month. (Side note for new readers: I did this because we have a variable income so I made conservative debt payments initially, then when I figured out exactly how much income we had for the month, I’d put any money leftover toward debt. Now that I live on last month’s income I know exactly how much money we have at the beginning of the month and, thus, have eliminated the need for any extra payments because I do a zero-based budget so there is no money leftover at the end of the month).
So my goal for 2015 is to pay at least $30,000 toward debt payments.
Whoa. That’s a big, huge number. $30,000 is a full annual salary for many people! To say we’ll put that much toward debt is certainly a lofty goal. But you have to shoot for the moon, right? ; )
What debts do I plan to eradicate from our lives with that $30,000???
Well, some of the money will be going toward minimum payments for all of our debts and interest, of course. But with extra debt money I plan to eliminate the license fees, car loan, and highest interest unsubsidized student loan. Then our only debts remaining will be medical bills and additional student loans. Don’t get me wrong – we’ll still have a ton of debt (I have almost $100,000 in student loans, alone), but it will feel so good to knock out some of these smaller debts in their entirety! So, so good, indeed.
How Will I Do This?
I’m a firm believer that all goals require careful and strategic planning. If you just pull a goal out of the air its really more of a hope or a dream. Goals, in my opinion, require more careful calculation than that.
So it might surprise you that my answer to this question (How Will I Do It?) is….”Who Knows!?” ; )
This year could potentially be full of many big changes. If I land a job here in Tucson then my salary will double and we won’t have any moving costs. Win! If I land a job elsewhere then my salary will more than double, but we lose husband’s salary and incur moving expenses. If I don’t land a job then I keep making what I’m currently making, try to find additional work, and husband focuses on building his business. Oh yeah, and I’d love to start saving for a house down payment at some point (once we know where we’ll be)! There are so many unknowns!
What I do know is that I want to keep working as hard as I can on reducing our debt. BUT, that being said, I do still plan to let up a little steam (just a teeny, tiny bit) in March 2015. Remember this whole post about finding balance??? It still stands. I don’t think I’ll give up the blogging (I love it and you guys too much), but don’t be surprised if you see a “date night” pop up in the budget every other month or so. That’s a big expense that we’ve done without for the majority of this past year (honestly, for the majority of the last 2.5 years since we had kids!!!). But I also think it’s important to nurture our relationship and while our kids have been infants/toddlers our marriage has taken a bit of a back seat. Don’t get me wrong – there’s no trouble in paradise or anything like that!!! But I think it’s time to make dating my husband and nurturing our relationship more of a priority in our lives. And even if we do so cheaply, it still costs money.
I’ve got one more curve-ball….
I’ve spoken before about retirement savings and how we’d like to start funding a Roth IRA. Although our contributions for 2014 are pretty measly, I’ve been talking more to hubs about it and we’ve come to an agreement about the matter. Once the highest interest student loan and license fees are paid in full, I want to bump up our Roth IRA contributions. Ideally, I’d like to work toward having fully funded Roths for both hubs and myself. We haven’t committed to an exact number yet at this point, so it may be that we double our current savings (go up to $200/month) or triple them (up to $300/month), or we could even aim to have fully funded Roths (about $458/month x 2, for each of us). We’re not there yet so I’m not sure how comfortable I’d be with saving that much while our existing debt is still incurring so much interest. It’s something we’ll think about more moving forward (and feel free to weigh in on the topic). But just let it be known – once these two fees are paid in full (license fees and highest interest unsubsidized student loan), our Roth contributions will be increased…while still trying to hit the $30,000 mark for debt payments this year.
So cross your fingers for us or wish us luck (or call us crazy).
No matter what 2015 holds in store, I feel like it will be a very good year!
What are your financial plans for 2015? Any big budget changes? Any lofty financial goals? What do you think of our goals and plans?
Hi, I’m Ashley! Arizonan on paper, Texan at heart. Lover of running, blogging, and all things cheeeeese. Late 30’s, married mother of two, working as a professor at a major university in the southwest. Trying to finally (finally!) pay off that ridiculous 6-digit student loan debt!
Planning for those annual expenses and non-monthly expenses is key. Way back what started our journey to getting on top of our finances was running out of money after 6 months of auto insurance premiums landed at the same time as Christmas gift-giving. I call them “irregular” expenses, but it doesn’t mean you shouldn’t expect them to occur!
Is the Roth your only retirement savings vehicle? If so, I think it makes sense to contribute at a lower level while paying down debt. Everyone has different opinions on this, but I simply don’t want to go years and years without setting something aside for retirement and then have to start from scratch.
We contribute a small amount pre-tax that doesn’t even make it into our monthly budget. We will still have to go back and increase our savings rate a good 15-20% once we are debt-free, but at least we will have less ground to make up.
I agree on the retirement savings. You might be able to find a modest Roth IRA account througha local bank or credit union that will accept small deposits. You won’t earn much on it, but just getting into the habit of regularly contributing is a good thing, and over time that small amount will eventually build up… tax free!
I’m changing the way I do my budget too because more of my income has become variable. I like that you will be adding and subtracting categories as needed for each month. I didn’t do this in 2014 and I wish I would’ve. I let a lot of my “extra” income be used for spending instead of debt or savings and that is something I’m working on for 2015.
Exciting stuff! You said you were going to concentrate on the license fees, car and high interest rate student loan. I am curious as to what order you will tackle those debts. I am glad that you are going to tackle the dental work. I think that is a smart move.
I am SO INDECISIVE about this!!! I’ve said it before, but its strange because I’m typically a very decisive person so it’s weird for me to keep waffling back-and-forth like this! So, yeah… I don’t know. But I do know those are the “big 3” up on the chopping block (order to be determined, lol)
I love your optimism and enthusiasm!
Thanks! : )
You did an awesome job last year on the debt repayment. Good planning for 2015. I think the focus is good (lisc fees/car loan/student loan) and I think the occasional date night makes sense. I also like that you broke out the misc category. I disagree on funding the retirement right now and would wait until all of the debt is done but that’s me. Regarding the dog expenses, I’d just cover the food and registration now in terms of savings and handle the rest as it comes up. The one category that I’d like to see broken down is that baby expenses category although I don’t remember what you call it. I am unclear if it’s diapers/daycare or what so that would be helpful. Also, I didn’t comment on the previous post but in terms of birthday money or any money that is unexpected, I think you should have a plan for that money-perhaps 10% savings, 10% fun and the rest towards debt repayment. Your goal is to get your car paid off and I was thinking that the birthday money might be half a car payment or so after allowing for the 10% savings and fun. That gets you into the habit of saving and doing something fun but keeps the focus on the debt repayment. Overall, a nice budget and really good job.
Thanks for the suggestion on the birthday money. I may break apart the baby category more. I can tell you that the majority of it (about $1,000) is for their daycare/preschool monthly payment. I’ve also included diapers (though we’ve been potty training, so we’ve drastically cut diaper consumption, though we still use them at nights/naps and on busy days), and in the past I’ve also included baby-related medical expenses (like doctors’ copays or medicine), but I think I’ll start tracking those with the rest of our medical expenses instead of separating into the “baby” category.
Great idea to track the actual type of expenses instead of lumping them together into a baby category. You will be buying clothing and paying for medical expenses for your girls until they are self supporting adults so those are definitely ongoing family expenses. I track each person’s clothing expenses separately and then add it up as an overall category. Medical we separate into insurance, Dr/DDS fees and Rx/OTC as a way to know what to budget for year to year. However when I needed braces as a mature adult I tracked that separately because I knew it would end – sort of a long term one time expense.
I go back and forth on funding sinking funds each month or just funding them the month they are needed. Our big set back to paying off debt was my husband changed jobs and his salary was cut in half, which is seeming to add another year to our debt repayment. You are inspiring and I look forward to reading about your 2015 posts.
I’ve thought about just paying for items in the month they come up (I feel it would be much simpler that way), but I’ve ultimately decided to stick with the monthly savings for now because it somehow feels safer/more conservative to me. If we happen to have a bad month and THAT is the month that [insert huge expense] pops up, then we’re screwed. This could certainly be something I re-evaluate in the future (especially as our debt load becomes more manageable/smaller minimum debt payments), but I’m sticking with the sinking funds for now.
$25k+ to debt repayment? That’s bad ass girl! Keep going!
Thanks! I seriously can’t even believe it myself!
Great planning for 2015. The idea to further categorize your miscellaneous is excellent and it seems to help eliminate excuses for “unexpected expenses” that may not be so unexpected. Very nice planning.
Happy 31st birthday Ashley!
Hope you have a fun day!
All the best for your 2015 plans & the progress you’ll make.
I love that you are stretching your goal of debt payoff to $30,000 for 2015 – that’s awesome! Just imagine next December being $55,000 LESS in debt – won’t that feel incredible!
Your budget looks good – detailed and realistic – and I still agree with you on keeping your focus on the license fees and car loan – get rid of ’em!!!!!