Monday, June 15, 2009

Money Monday: June 15, 2009

I was going over some old notes not long ago, and I found a journal entry that sent me down Memory Lane. It was 1998. I had just started back to work after several months home with Eldest…who had just started going to daycare. My journal was full of whining about the high cost of disposable diapers, which were required by the daycare center.

I had $140 a week left after we paid bills. From this, I had to buy groceries, gasoline, formula and now diapers, oooooh, the humanity.

I started thinking about then v. now. I tried to imagine getting by on that $140 now, with a family of six to feed, clothe, and entertain.

At first I was thinking, Sure, I could get by on $140 a week…for a while…but the caveats began coming pretty fast. Except of course when the quarterly CSA payment was due, that'd have to be Off Radar…and the semi-annual Freezer Restocking, ya, that'd have to be not part of that $140 thing…oh, and I guess I'd need a "free pass" for the every-six-weeks Costco trip…

Which brings me to my Sermon Du Jour, which is around budgetary sustainability.

When I take our actual spending over the last twelve months and average it out – ignoring the "buts" and "wells" and "One Time Deal" excuses – I find that we spend $400 in the average week in the anything that isn't an automatic bill payment category.

The fascinating thing about that is…technically, my budget is a little over half that.

I usually give myself $240 a week for Everything Else, and before this weekend I would have smugly said that I'm darned good at keeping to it.

But obviously, I'm not.

When I dig into why my actual spending is so much higher, on average, than my budget…well. It's all Extraordinary Stuff, each individual Event some combination of spontaneous, obligatory, and urgent.

Weddings, funerals, parties with large cash outlays we can't gracefully get out of, broken water mains, sudden announcements that Mom will watch the Denizens for a few days…discovering that none of the winter things I so carefully packed up last April will fit anybody as we headed into what passes for cold weather around here.

And when these things happen, well, what do I do? I end up either siphoning money out of savings to cover it, or I charge it and scrambling like crazy to come up with the money before the bill comes in…or I end up floating the charges for a month or ten, clamping down my budget to the point of no-fun-at-all until I've caught it up.

The more I thought about it, the more I realized that my current budget really isn't sustainable…and getting less so with each passing day.

It's not just those Extraordinary Events, either. I'm also a bit stuck in the past, with ideas around how much things should cost entrenched in 198-something, and twenty-something years of inflation utterly ignored.

Perfect example: I filled up the Civic today. If you'd asked me this morning how much it costs to fill up that little economy car, I would have first thought what, twelve bucks?, reconsidered, adjusted for inflation (haha) and said twenty bucks.

It cost a hair over thirty dollars to fill it up – and it wasn't even completely empty.

Between that kind of things cost more than I think they do and we buy more than I think we do, I'm constantly setting myself up for failure.

And then beating myself up when the inevitable happens.

My action item for the week is to spend a little time going over those actual numbers, and to come up with a budget that is a little more in line with reality.

The emergency fund is supposed to be covering true emergencies – job loss, fires, floods, famines, pestilence, the end of civilized life as we know it. It is NOT there to cover lack of foresight, or to make up budgetary shortfalls I totally should have known were coming.

The fact that I'm constantly dipping into it just a bit, just a touch, just $50 to cover regular budgetary items is a pretty clear hint that my budget is out of whack.

Bottom line, it just isn't going to work…whether I like it or not, my budget can't be based entirely on what I'd like to be spending.

It also has to reflect what things actually cost, and how much we're going to be spending on them.

Even if that means I have to {steady! You can do this…} slow down on debt reduction, or retirement savings.

(Ouch. That hurt. Owies. {…whimper…} )


Kaviare said...

I'm doing this at the moment. This fortnight, I spent less than my budget on food and bills. But that extra got eaten up so quickly by those sneaky 'extras'.

Dinner with old friends - a moderately priced restaraunt but pricier than I would have chosen. Unexpected pizza chip-in that I couldn't/didn't want to get out of. Housewarming gift. Trip to the doctor. And that's not counting all the things I put off - only pair of workpants are on their last legs. Didn't buy a bus ticket, forced self to ride to work in low low temperatures despite being ill. No extra coffees, no buying lunch at work, no chocolate.

I didn't splurge at all, I was godd good good, and I am now down to my last $40 and pay day is a week away. Gulp.

Steph B said...

Once again we're in the same boat. We've been trying harder than ever to stay within our "budget", not be foolish with our money, only buy what we NEED...and yet we're still constantly "borrowing" from savings to make ends meet. Of course since we're borrowing from savings instead of putting into savings, well....we're going to have a problem one of these days! It's making me crazy. Praying we all find solutions we can live with soon.

Kathryn said...

Oh, I've been there...exactly. Then I read somewhere (sorry I cannot remember who I stole the idea from) of a "Freedom Account." It's savings account at my local bank, tied directly to the checking account (for easy access). Each pay period I move a designated amount into the Freedom account to be held specifically for those irregular, one-time, urgent, etc. expenses. THIS IS NOT THE EMERGENCY ACCOUNT. That's separate, in a different bank even, so I cannot easily tap into it. It is for job loss, car crash, or other real emergency.

I figured out about how much to put aside in the Freedom account by doing what you did...looking back over a year or two and dividing out. (I also keep a spreadsheet and divide my stash into mental categories...such as auto repair, school/kids extras, clothing, and home repairs, and also a gift category for those weddings, birthdays, etc...even building up a surplus for Christmas.) Money flows into the Freedom account and flow out to cover these expenses...without guilt! because that is what it is for.