Perception of Finances // Part II

Last week I learned that my perception of my budget and the reality of it were 2 different things. Not only that, but the amount of money my husband and I spent, when figured in different ways, was different.

I’ve examined the numbers and I think I’ve figured out the reasons for the disparities.

First, though, I want to articulate my goals for looking at our finances carefully. My goals are:

1. To determine how much my family lives on per year so we can be realistic about what it’ll take for me to leave my full-time work.
2. To determine if we want to change how we spend now.
3. To determine if we need to change the amount of money we put into our budget~in other words, if we don’t change how we spend, we need to increase the amount of money we put into our account.

Originally, I guessed that our annual budget to cover needs (not hobbies or other wants) was about $36K a year. I realized this was incorrect almost right away. I had put the budget as $3300 a month because I had forgotten I was moving $300 from one pot to another, so I thought our budget was $3600 a month which is $43,200 a year.

Today I realized I was not moving $300 from one pot to another, I was moving $400 from one pot to another, so really our budget is $3700 a month which is $44,400 a year.

Already this is a far cry from my original estimate that we were living off of $36K.

Finally, I knew we were going over budget. When I added up how much we spent looking at the totals for each month, it came to about $3700 this year. However, if I added up how much we spent by category, the total came to $4600 this year. Though there’s a $900 difference, I’m calling it even. It’s likely that I added or subtracted a larger expense (maybe our back fence?) incorrectly. If I add $4600 to 44,400, we come to 49,000.

When I look at our spending categories, I see we overspend on our miscellaneous expenses by quite a bit. It turns out we spent about $4900 on the dogs’ health care last year. That’s about $408 a month, which seems terribly expensive. Having dogs has been considerably more expensive than I realized since we first got them though. I also enjoy them a ton more than I thought I would.

I have met my first goal—I now know that my husband and I spend $49,000 a year for our living expenses.

Goal 2, which is to determine whether we want to spend differently—less per month, is a really tough one. My husband and I have tried the envelope method for spending and we’ve tried to restrict different types of spending, and the only way we seem to be able to spend less is to let go of services like Netflix and getting a new internet provider (Metronet instead of Comcast). It’d be interesting to explore why the two of us struggle with certain types of restriction, or maybe we just need some different systems for certain types of spending. I don’t know. Since this is our money and not just my money, we’ll have to talk to see what we might be able to change—if anything.

Goal 3—to determine whether we should simply increase funding to our budget–depends on goal 2. Whether we put more money into our shared account for living expenses depends on whether we’ll change how we spend. However, I am pretty sure that our budget from 2017 no longer works for us and that we’ll need to put more money into our shared account if we don’t want to go over budget monthly. When we pay off the mortgage, we’ll have $540 more a month in our budget. That won’t happen for another 2.5 years though, so we’ve got to do something in the shorter term.

I have to admit that overall I’m a bit frustrated with how much everything adds up to. My husband and I can’t control certain expenses and the ones we can, well we have a hard time controlling.

I also am wondering if $49K is more or less than what many people in my cost-of-living area spend.

Though figuring out budget and spending can be a bit frustrating, I think it’s important we do it. We’ll be able to make better decisions moving forward because we have more knowledge.

Peace Out (and In),

Julie