Our regular columnist, Mom2KG, is back for this month’s updates on what’s happening with her family on the finance front. This month she needs your help! Please read on and provide any comments, suggestions or encouragement. Thanks.
Hello readers. This month I have to report on a huge setback that occurred over the last few weeks. You might think I’m referring to the market crisis, but I’m sanguine about that. We said good-bye to that money when we invested it, intending it to be long-term, and knowing we’d have to weather market fluctuations. It’s in nice secure (Canadian) bank stocks, and if historical data can be trusted, we’ll be fine in thirty years when we cash out.
Instead, my husband and I had a setback personally. Lately there have been some…emotions, surrounding money. In the last several weeks, I began feeling like something wasn’t right. I felt like the budget and goals were actually working negatively: there were too many constrictions. The goals were too long-term. What about now? What about if we ever wanted to move to another neighbourhood? What about a manicure?
We have prioritized paying off the mortgage and making major savings. In spite of my feelings, I do not want to change that. But where will the money come from? Perhaps a better question is, what do I want? A manicure is not exactly a budget-buster. Even a new patio set won’t kill us financially. But will those things help?
I think I may just be looking for more flexibility and less guilt related to spending. I do most of the family-related purchasing, which means I’m “at fault” if we blow the budget. Which we do, pretty much every month.
And maybe that’s another point. TMW readers, please, please help me here: I know you don’t meet budgets by increasing them to meet a certain lifestyle. You set a budget and live within it. But we’ve been blowing ours every month for years now, in spite of genuine best efforts. The guilt. The frustration. What do we do? Comments and advice welcomed.
On another front, we are doing a reno of the kitchen. It’s old, not just dated. We debated long and hard about whether to do basic changes (new cabinets, countertop, backsplash and a few new appliances), or really go all out. That would mean tearing down walls, at least very least. But we put off the dream kitchen to be a little more prudent. We bought at IKEA on their big kitchen sale (we were literally the last couple to place an order on the last day of the last extension – we were really waffling!). So far, we are even on budget! We saved up for the kitchen and aren’t putting any on credit. My husband will do the demolition and most of the installation as well. We’ve been planning this for a long time – can’t wait to see how it turns out.
April 22nd, 2008 at 9:10 am
How did you come up with your Budget figures? If your top priorities are Debt and Savings that’s fine but it sure doesn’t look like it (well not anymore anyways). I guess you’re missing a category in your budget: Fun money
We don’t budget savings. I don’t budget period. I tend to monitor expenses which remove the guilt of the whole exercise. I guess it’s just because we’re savers. As for the manicure, I have my money, my spouse has her money we pay shared expenses based on our after tax income. Even on mat leave, I paid her a “salary” which was the same % as she had while working. Basically I was making 55%, so I would “give” my spouse 55% of my after income as a salary off which she would pay her part plus have some money left to do whatever she likes.
Our only exception: House. Not household (taxes and minor repairs are split).
April 22nd, 2008 at 10:05 am
I would have a serious discussion on why you are budgeting. It sounds very simple but are you saving money to retire early, move to a tropical island, give it to your kids etc. It seems like you may be saving money for money’s sake which is an endlessly and unhappy quest which is why budgeting has become an emotional process for all.
The other thing is that you may be unrealistically setting your budget. Food costs now are not what they were 6 months ago. Perhaps you are simply being unrealistic in the amount of money you are budgeting.
I also agree with Nick. Get a fun money category in there and spend it as you please as a release to self-restraint.
Good luck.
April 22nd, 2008 at 1:26 pm
Well, budgeting can be an iterative experience. You may have a fixed bottom-line, but you can play with each component of your budget to make sure that it fits you. If it’s more important to have a discretionary/manicure component to your budget, then find somewhere else to sacrifice and make it happen. Look at your spending: how well did you live up to your budget? Where did you go over? Did you over spend because your budget doesn’t adequately represent reality or your desired trade-offs? Or is it more a matter of just sucking it up and sticking to it? Budgeting is as much about prioritization as it is about dollars and cents.
April 22nd, 2008 at 1:53 pm
The “why did we go over” changes every month. One month, it’s 5 kiddie birthday parties, and the next it’s eating out too much. Some expenditures we can avoid, some we can’t. I also feel like we’re already “sucking it up” a lot - but at least those dollars go to debt reduction and savings.
Part of the frustration is looking at the spending each month, but not finding anything we could have avoided. There’s a good reason for everything - but should/does that matter?
I like what I’m hearing, and will try to re-negotiate fun money, as well as adjust for months where some costs may fluctuate.
Thanks - more comments welcome.
April 22nd, 2008 at 2:53 pm
Does your budget have a float in it? I think most people make the mistake of trying to plan to spend every dime in a month and it just doesn’t work. Life happens and you know you can’t predict ever dime of spending. So just plan for that fact. I know we started with a float of $100/month beyond our basics. For a while we tended to use it, but in recent months we haven’t use it that much.
I hope that helps,
Tim
April 22nd, 2008 at 4:55 pm
I think that developing and sticking to an expenses budget is almost impossible for most people. It takes a lot of work and you’ll always struggle to meet it. We do budget savings goals, but beyond what comes out of our account monthly — savings, mortgage, and various other bills) we spend what we want when we want. Part of our savings goals, by the way, is a ’slush fund’ that we add to every month so that we can take unplanned trips, buy a new washing machine when the old one dies, or whatever. If you’ve never met your monthly budget then you should accept that this form of financial planning doesn’t work for you (insanity: doing the same thing over again and expecting different results). Try something else.
April 22nd, 2008 at 11:05 pm
As a lot of readers of the different financial blogs out there, we tend to become obsessed with figures and goals. All this is great but was is greater is a solid relationship. Otherwise, those figures and goals serve no purpose.
My advise is obvious. Invest in your family.
April 23rd, 2008 at 12:11 am
Tim from CD has a good suggestion — a float. Plan to be surprised.
Another suggestion might be to focus on a yearly or 6-month budget which you should be concerned about sticking to, but which allows some leeway within individual months. For example, I have a set amount I can spend towards eating out. From October through December it seems there’s one special occasion or birthday or grant deadline or something that comes up so I end up eating out just about every week, completely blowing my budget out of the water for those 3 months. Then in January through March, the weather is nasty and I just don’t feel like going out, so I make up for my earlier extravagance, and at the end of the 6 months come out pretty close to what I budgeted.
Also, look to what other things you can cut back on even more to make room in your budget for the things you really enjoy. For example, do you buy books? Could you cut that out entirely and just use the library, freeing up more money for things you really like? (And the library is also a great place to bring your little ones for story time, which might also help with your child’s entertainment expenses). At the bottom of that list lies your savings goals: would you consider cutting back on them to make sure your budget suits your life? It might sound painful, but since that’s what’s essentially happening by not staying within your budget, you might as well be honest with yourself, give it a shot and see if you can pick up the skills/tools to stay within a more “realistic” budget. Then once you get the hang of staying on-budget, start looking again for ways to redistribute spending to savings.
Finally, have you considered just handing off responsibility for the majority of the purchasing to your SO, even if just for a month? That might help with the “emotionality” of the whole budgeting process.
April 23rd, 2008 at 7:03 am
I have two budget goals a month. An Ideal Goal and a Realistic Goal. My Ideal Goal is to save 35% of my salary, while my Realistic Goal is to save 25%. I never go below the Realistic Goal. Psychologically this works great, as always hit the Realistic Goal, as it’s not rediculously hard. I hit the Ideal Goal about every 3rd month and come close one or two more times a year, which is a great feeling.
April 23rd, 2008 at 7:55 pm
Good post. If you feel your budget is realistic, you could try to do your discretionary spending in cash. Have all your fixed bills taken directly from your bank account, but anything with wiggle room could be paid for from cash. You can set up separate envelopes for groceries, eating out, and clothing. If you run out of cash in these envelopes, you have to cut back on these items until next month. Spending cold, hard cash on items has more of an impact than putting a credit card down.
I would avoid setting up a “misc” item on your budget, unless it’s fairly small. I agree with someone else on the thread, that you could easily put $30 a month into manicures and the like and let it accumulate month to month. Then you could get a manicure every other month and not break the budget.
April 24th, 2008 at 5:14 pm
My wife and I first started out setting a budget in which we thought we could handle. This budget was heavely arranged with the help of our financial advisor, in which maximum savings (by cutting each category)was acheived every month. Of course, these savings were then used to buy mutual funds through the financial advisor. This worked for a year or so, but was very difficult to stick to, and my wife felt like she had no room to “treat herself”. Our life changed (had a child, changed jobs) and then decided to introduce a “pay yourself” category in which we each had a set amount per month that we could do as we wish, with no questions asked. This has worked for us, and now we both feel that we are not loosing out on the things we enjoy or want.
To me, a budget is only useful it it reflects what you want out of life (i.e. are you saving every cent, do you balance spending with savings). It also needs to be updated regularily as prices of goods increase.
We also sit down once a week to do a quick review of our spending to date for the month to see if we are on track or where we need to focus restraint on spending. We use an excel spreedsheet where all spending is recorded and can easily be referenced to the amount budgeted in that category.
We both want a comfortable working and retirement life, which requires a balance or spending and saving
May 30th, 2008 at 5:03 am
[…] you to all who posted with suggestions on my budget and angst last month. There was a general consensus that there should be fun money, or a slush fund, the spending of […]