I’ve hesitated to use numbers because I’m all about anonymity on the internet, but that’s going to be difficult and make these month end reviews mean a bloody thing, so here goes:
Within our budget, we have certain line items we can, in theory, influence:
Gasoline for our vehicles: $600/month
Utilities (Gas, electric, Water/Sewer): $300/month
Entertainment (movie rentals, events): $100/month
Household Supplies/Groceries (catch-all): $1,000/month
Restaurants (eating out, fast food, etc): $250/month
Incidentals (gifts, clothes, stuff not in above) $150/month
(wordpress isn’t real strong on tab/alignment, so forgive the formatting above while I’m learning)
What!? Those numbers are insane/too generic/absurd!
These numbers are not arbitrary. The Gasoline was the average we were spending/month in 2011. It was high like that because of our long commutes and road trips to visit family. The household budget, because I use Mint.com, is the 2011 average for all purchases from big box stores, grocery stores and pharmacies. You can imagine the good run from diapers to toiletries to make-up to food. We tried breaking this one up and track the individual items, but it lead to budget fatigue and many of the expenses were irregular in their interval because of buying in bulk to save money.
Incidentally, I honestly believe that the random crap that goes into Incidentals & Household/Groceries are the reasons why most people fail at budgeting. They don’t take into account the absurdly expensive cost of periodic make-up replenishment and fail to prepare for clothing needs or the fact that every single month, SOMEONE in your life has a birthday (and it’s usually more like 2 or 10 in the fall months). Or when starting up a budget, they vow to brown-bag it more, which saves money, it really does, but it also means you need to make more for dinner (or have lunch fixings beyond leftovers) which can quickly bust your grocery budget. It can then lead to leftover-burnout and suddenly you’re eating out at lunch AND throwing away leftovers, doing a double-whammy on your budget.
Ok, So what?
My wife and I have committed to doing better this year on these items. All of them. Some are easier than others, such as the gasoline budget: My wife’s commute was reduced significantly and mine was increased slightly, giving us a net positive, in theory. My wife’s car is more fuel efficient, so it becomes a challenge of me hyper-miling, being more conscious of road conditions and remaining calm.
Some budget line items are particularly stubborn, like the Restaurant budget: This item is the bucket we pull from when we grab something fast for dinner on the way home, or grabbing a bite to eat before a road trip at a fast food joint (the only time we eat there). We also use this budget for dinner on date nights. Dinners out with friends goes against this too, and while thankfully our friends are price conscious like we are, feeding 2 adults and one toddler at any sit down restaurant is going to be a significant chunk of this budget.
How I’m going to beat my budget:
I can’t speak for my wife’s concessions right now, but I’m aiming to drive slower (to save on gasoline); keep the temperature lower in the winter and higher in the summer (to the point where the wife changes the thermostat); Get discount tickets to movies or try and watch a Netflix available B-Movie instead of a first release from RedBox; Quit drinking all alcohol and don’t let any leftovers go to waste (I don’t drink much already and few leftovers go to waste, but this line item is hard from the changes I’ve already made in the previous two years); Avoid suggesting we eat out to save time/energy and instead plan ahead with cheaper alternatives like a prepared meal from the grocery store (still more expensive than making ourselves, but we have to save time in order for the action item to meet the intent of the problem); Shop for clothes strategically (Maybe hit the thrift stores?).
This last month was December, the bane of all budgets everywhere. We were able to make our goal of beating the above budgets, but just barely: $52 left over. We busted the incidentals (Christmas tree, clothes, Christmas decorations and a company expense). We also busted our grocery budget and restaurants budgets.
The fine print:
There was also some funky accounting which was disappointing that we executed: In order to buy Christmas presents, we vowed to use our cash-back on our credit cards to fund those, which we were able to do, although it made for a much smaller Christmas than we have had in years past. My wife also had some clothing expenses for parties which we decided wouldn’t go against Incidentals because I’d give her one set of boots for Christmas and she’s pay for her dresses out of her allowance/”mad money.”
Still, the sacrifices were made: Smaller Christmas, mad money going toward incidentals (instead of splurging on ourselves), no champagne for New Years, and several other small things. The effort was there and no matter how you slice it, the family budget was net positive.
The point of this blog post:
That was not what I’d expected. I’d expected to write about how December is a hard month for most American Families. You can’t let a month destroy your goal to make budgeting work. If anything, you need to learn from it. Double down your effort. If you had a cash cushion to make up for busting your budget, then put 2013 behind you and focus on doing a better budgeting job in 2014. If you finished Christmas with debt, NOW, today, is the time to budget for getting back into the black.
Welcome New Years Resolutioners!
If your New Year’s resolution is to get your finances under control, congratulations! It’s a great time to do it. Do you know why? Holidays are relatively fewer and further between in the early months (you’ve got Valentine’s day in February) and most of your expenses should be predictable.
That said, don’t throw away your receipts from December. You’ll want to have an idea for this coming year how much the holidays cost your family and plan accordingly. That can mean saving with the goal of having as much (or more, to account for growing families and/or inflation) or it can help spark serious conversations with your loved ones about how you love them more than just how much you gift them material possessions. Either way, you’ll want a plan.