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.
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?
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!