Budgeting Basics | Confession Time: I’ve got leaks in my budget.

If you’re anything like me, the end of the year means a rather frantic rush to get organized. I’m decluttering, selling stuff like a madwoman on Craigslist, giving mountains of stuff away (tax deduction!), clearing off my desk, and making lists.

I am also getting ready for my End of the Year Financial Meeting with my husband. That’s when, among other things, we will review how much money we have spent this year – and what we have spent it on.

You see, one of the most important lessons I learned when we got out of debt is that we have to be accountable for what we’re spending. Down to the last penny.

When we’re not “on top of it”, we lose track.

I call it the financial leaks.

And yes, we have them. Tiny little drip drip drips. A few dollars here, another $10 there.

But you know what happens when you add up all those little leaks?

A flood. A flood that even the dams of a carefully crafted budget can’t stop.

It happens when you round down. When you assume. When you don’t communicate.

Take our “blow money” category. Frankie and I each get $25 per month of blow money. It’s for doing whatever we want – getting a coffee with friends, taking the kids to the movies  (if that wasn’t otherwise budgeted), getting a pedicure (yes, I indulge).

In an ideal world, I’d take out $25 in cash for each of us on the first of the month. But this is not an ideal world.

Instead, we use our debit or credit cards.

TROUBLE.

So last night, I logged on to Mint.com. (Mint is that free online budgeting and tracking site I told you about a few months ago.) I do this for a few minutes each week, to update my transactions and make sure they got categorized correctly.

I decided to start pulling end-of-the year reports. I just clicked on Trends, selected the entire year and then sorted by categories. I sorted by Blow Money.

Uh… do you know what I found?

We have spent $1028 on Blow Money purchases this year.

Do you know how much we should have spent?

$600.

Which means we are BLOWING nearly twice what we budgeted.

$428 of leaks.

Apply that to a few more categories in our budget and we have a full-on flood. So, what are we going to do about this?

Well, #1, I’m going to recommit to going back to cash for blow money (are you reading this, honey?).

And, #2, I’m going to increase our blow money budget to $80 per month ($40 each).

And, #3, I’m going to run quarterly reports on Mint.com in 2012. So, if #1 and #2 don’t stop the leaks – at least I’ll know about it earlier. And can change course before we flood $428 over our budget’s walls.

This is my story. About one category in our budget.

But I believe it illustrates a larger and universal point: Budgeting is not a static activity.

You don’t do it once and forget about it. You need to revisit your budget every month. You need to track your spending – religiously – and regularly evaluate what’s working – and what’s not.

If you’ve got three birthday parties and a wedding one month, your spending for “gifts” is going to look very different than a month when you have no affairs. You can’t just budget $20 a month and hope for the best.

This is YOUR money. This is YOUR future. Hoping for the best doesn’t cut it.

I know it sounds overwhelming. I get it. I was pretty upset when I realized we were $400 over budget for blow money for the year.

But it doesn’t have to be scary. In fact, I actually find this stuff rather empowering. Because what happens with your money is completely in your hands.

Now before I step off my soap box, let me just recommend that if you aren’t yet on Mint.com, that you do that now.

You still have to make the commitment to being in charge of your money, but at least let Mint do the math. (Pssst… here’s my tutorial on how to use Mint.com.)

I’ve spilled our beans. Now it’s your turn! Any budgeting confessions or 2012 financial goals you want to “get off your chest”? See you in the comments!

Please note that I am an affiliate of Mint.com. What that means is that even though it’s totally FREE for you to use Mint.com, I still earn a small commission from Mint when you sign up. For more information on how this helps to support Kosher on a Budget, see my disclosure policy.

Comments

comments

Comments

  1. With all the crazy Amazon sales this past month, I totally overspent. My husband and I also got new phones, hosted 16 people for Thanksgiving + Shabbos, joined a new gym, etc… Add all those little purchases to all the stuff we’ve been buying for our new house and our credit card bill (which we pay off every month) is more than double what it should be! Jan is going to be minimal spending on only necessities to get us back to where we should be.

    • I have been toying with the idea of a NO SPEND MONTH (other than groceries and “essentials” – i.e. medication is an essential, new socks aren’t.) I’ll have to talk to DH about this, tho – since he may not be too gung-ho!

      • I am trying to contemplate how it will work. I recently stocked up on meat and chicken for Shabbat and other groceries, but what if there’s a big opportunity to stock up? I could easily live off whats in my kitchen for a month (with the exception of perishables), but is it better not to spend now but then perhaps pay more later? What about preventive purchases – i.e., I bought a case for my new phone figuring it will be less likely to break and hopefully save me money.

        • I absolutely always buy a case and screen cover for things like phone and kindle. I think it’s 100% worth the investment, Shana, but that doesn’t mean that I buy the most expensive cases/covers, either. Buy.com usually has a lot of great options.

  2. How do you divide your budgets/spending on mint.com, say at Target. Where you may spend $20 on food, and $20 on clothes, but mint.com sees it as just $40 at Target?

    That’s an area I find tricky.

    • Good question – and it’s actually really easy to do. Go into Transactions, click on the transaction you want to divide and click on Edit Details. Then at the top right, there are two buttons – click the one that says SPLIT. Then just divide out $20 into clothing and $20 into groceries.

      Let me know if that does the trick for you!

      On mine, I set up a rule for Target to automatically be called “Groceries” (since Mint.com wants to automatically call it “Shopping” – dumb!). Now, I just need to go in and pull out the few random things – like gifts, medications, clothing, etc.

      I don’t know if I’ve talked about this on the blog or not, but I also lump together food, personal care and household cleaning supplies into one category, which I call Groceries. I realized that I was always buying those three things at the same types of store. Rather than divide it out all the time, I just made one all-inclusive category.

      • Awesome. I’ll take a look at that later.

        It was always something that bothered me.

        Any great mint.com tutorials that you’ve found? I know it does a heck of a lot more than I use it for, but I’m unsure how!

        • Worked great!

          Recommend any mint tutorials? I KNOW this program can do a TON more than I use it for… but unsure what!

  3. I am reading this. And my first reaction is:
    Woo-hoo! More blow money!

    • LOL – only it’s actually less, since if we spend what we budget in 2012, we’ll be spending less than we after Actually spent in 2011. Follow me?! xo

  4. I love your blog! I also want to let the KOAB readers know about doughhound.com. It is a site where you input your expenses, can tag them with various categories, and they do the math, but you don’t have to input any credit card data. You do have to stay disciplined to enter everything, but if you feel funny, like we did entering all that personal credit card info into mint.com, this is another tool which is helpful for budgeting.

  5. What are the advantages of using mint.com versus Quicken?

    • I don’t have Quicken, but Mint is a Quicken product… and it’s free… but if you have Quicken, that is probably as good! (Does it link up to your accounts, or do you have to manually enter it?)

  6. I’d rather be able to carry around my information so that I can put it on paper before adding it to the computer. Also, putting all my information online makes me nervous.
    This guy has fantastic templates http://www.vertex42.com for everything from spending, to fillable calendars, to packing lists, to menus etc. They are all free. It is really worth checking it out. (Oh, and once when I had a problem I emailed him and got an answer almost immediately. I’ve emailed him a number of times since…. that is because I use his a few of his budget templates, a few of his different calendars, and his monthly menu prep (he also has weekly and maybe even daily).
    In all…. it is worth taking a peak at the site to see if it can help you.

    Thank you Mara for this fantastic blog!

  7. $25/month in blow money? That is not much. Maybe the fact that you overspent in this category indicates you are not budgeting enough for it. If you take 2 kids to a movie, there’s your $25.

    As for budgeting being fluid — Dave Ramsey is the first money management advice-giver that I heard recommend you re-do your budget each month. It makes so much sense! For me that is even not enough — when I am “good” I do a budget for every paycheck.

  8. Speaking of budgeting issues — I find it really does not work for me to budget online via excel spreadsheet or mint.com or anything like that. I want to use a pencil and paper. But I can’t find the “right” template or method to use for this and it has hampered my efforts to keep track of my money. Everyone seems to do budgeting electronically.

    Any suggestions? I am good at following systems that other people devise, but lousy at devising them myself.

  9. Great post Mara. We use http://www.mvelopes.com so when the paycheck comes through we put the money in the virtual envelopes. As I drag the new transactions over to each envelope it deducts the transaction amount from the envelope and gives me the new total of what is left— or worse– it shows me a negative number in RED! And it stays negative until I move money over to bring it back to zero. I find this to be really helpful in staying on track on a daily/weekly/monthly basis. No end of year surprises. After a few years of budgeting (and a few raises) we’ve been able to adjust the budget so that it is stable now. We do level pay for gas & electric so we only re-do the budget when my husband gets a raise. We’ve added a little to the food budget each year (3 growing boys keep eating more food!), but other than that the extra money just goes to college, retirement and bulking up emergency savings.

  10. I want to remind everyone what I just learned about doing finances like Mint online: don’t do it at a public hotspot outside the home; can be easily hacked.

  11. I want to remind everyone what I just learned about doing finances like Mint online: don’t do it at a public hotspot outside the home; can be easily broken into.

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