To budget or not to budget?

My monthly health insurance payment has risen by $40, starting now. The increase was anticipated, or at least announced. I’d managed to block the amount, though, so I was still surprised.

My bimonthly electric bill was $22 higher than the previous one, thanks to a Seattle City Light rate increase. An extra $11 per month won’t kill me. But it got my attention.

Time to start tweaking expenses to make up the difference.

My needs are fairly simple: Rent, utilities, food, savings, retirement funding, insurance (health, renter’s, life). Since I’m a freelance writer, there’s also the wild card of quarterly taxes.

How much does it add up to? I have no idea.


Where to cut?

I don’t keep a budget on paper, let alone use personal finance software. Somehow I associate budgeting with people who are looking to plug financial leaks, or to decide whether they need to tweak specific types of spending.

When bills come in, I pay them. When I deliver a piece of freelance writing, I invoice. My savings are automated; so are my insurance payments. The only potential screwups are neglecting retirement fund contributions or my quarterlies; I remind myself through notes on the calendar.

Maybe I should give budgeting a try, though. It might make it easier for me to decide where to cut back.

I already know a few items I won’t cut – not yet, anyway:

Extra payments on the electric bill. I buy power at a slightly higher rate to encourage wind-based energy, and I pay an extra $5 per month to a fund that helps lower-income customers keep the lights on. Total: An extra $96 per year.

Money to my elderly aunt. Aunt Dot is 87 years old and living on Social Security and a small pension. Every time I get paid I send her $50, or $1,300 a year.

Church money. The UCUCC believes in service and provides funding and/or space to programs as varied as rent assistance, affordable child care, the feeding of homeless teens, and help for seniors and people living with HIV/AIDS. My $100 a month by itself wouldn’t go nearly as far by itself as it does when combined with other donations.

Other charitable giving. I may need to cut back, but I won’t curtail it entirely until I’m forced. Among those I want to support this year: the GBS/CIDP Foundation International, the North Seattle Community College Foundation, the UW Comparative History of Ideas department, the Red Cross and Heifer International. Amounts vary.

Should I be writing this down?

Finances ebb and flow. Some recent ebbs:

  • The electricity and health insurance, as noted
  • I have to pay for public transit now that I’ve finished my degree, i.e., no more student bus pass (I gave away my car last year).
  • Treatment for neck and shoulder issues ($70 per month)
  • The cost of a couple of my meds has risen slightly, and I’m now required to take extra Vitamin D and iron tablets in addition to the daily multivitamin. (Upon seeing my array of bottles a friend remarked, “Welcome to the old people’s club.”)

And the flows, both current and upcoming:

  • I have decided to end my monthly counseling sessions ($75)
  • When my fairly decent cell phone contract expires in January I will have shopped around for an even better deal.
  • Site advertising has brought in a small but steadily growing income. With luck it will continue to increase.
  • I’m talking with another PF blogger about a big project later this year.

Obviously I’m not terrified about my finances. After all, I’m writing this from Alaska, where I’m spending about 10 weeks this summer. But thanks to two house-sitting gigs and a kind friend I haven’t had to pay for lodgings. My biggest expense was the $436 airline trip (which will result in almost 3,300 frequent flier miles toward a trip somewhere else).

While I have eaten some meals out, I’ve mostly dined in – and I’d have to buy groceries even if I were home, right? Besides, I had a head start because I travel with mayonnaise.

I’ve treated my niece and her kids – incidentally, Chuck E. Cheese is like the Seventh Circle of Hell, only louder and with Skee-Ball – but I have also been treated by friends. A few people have loaned cars or given rides, so I haven’t needed a rental.

Overall I think it’s evened out. But I’m not actually sure. Maybe it really is time to start using personal finance software.

Anyone want to weigh in on this? Do you keep a strict budget so that when your cost of living goes up, you can look at a spreadsheet for hints on where to cut? Or do you sort-of keep it in your head, the way I’ve been doing?

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  1. Budgeting is income vs. outgo. You already have the bare bones of it written down in this blog entry. Don’t be afraid.

  2. FranticWoman

    I used to keep it in my head – and wasted a lot of money. I am not rich enough to do that.

    I did start writing it down, and writing, and writing, and rewriting.
    I find it fun believe it or not.
    Not fun to follow but fun to plan.

  3. I’m all about the paper budget. I keep a spreadsheet (nothing fancy, just plain ol’ Excel) with all of my projected expenses, and as the month goes by, I fill in those expenses and also keep a detailed list with the business, the amount and what the money was spent on (because seeing “Food City” on a list five times tells me nothing).

    Budgeting on paper has helped in exponential ways, but the biggest thing has just been tracking my spending. I don’t spend frivolously, but I can now say, “Ok, I’m going over my gas budget this month because I’ve been driving home every weekend. I need a new solution.” Instead of previously, when I would have said, “Oh! I’m running low on gas! But I’ve got money in the bank! Better fill up!” Detailed budgeting has helped me examine my actions more closely.

  4. Excited to hear about a potential new project!

    We’ve never really formally budgeted. But when we were poor I was definitely aware where every penny was going and before we rented or bought anything big I wrote down everything to make sure we’d be ok if hit by a negative shock. Sometimes I was still surprised but my natural risk aversion always kept enough of a buffer, even if we cut it uncomfortably close some months.

    Now that we’re financially secure, I just keep a month’s expenses in short term savings and if we spend more one month then we have to spend less the next month to make up for it. I like having all that mental energy free. 🙂

  5. I resisted making a budget for the longest time, but once I bought into some of Dave Ramsey’s thinking, I found it very helpful. Like you, I tend to pay the bills as they come in, but there is something very satisfying in crossing out the budgeted expenses line by line. And it makes it very clear to me what items I routinely forget to put in the budget or what items I under-budget. I also can tell what items I can cut if necessary.

    About Chuck E. Cheese–how did you raise children and avoid the place until now? Three seconds after I brought my first adopted child home (she was 11), she hauled me to Chuck E. Cheese. I have yet to fully recover! But these days, I hand the kids tokens, and I stay at the table reading and eating bad pizza.

    • Donna Freedman

      @Grace: Oh, I’d been there before. When I first moved to Anchorage I would take my daughter once or twice a month in the winters, always on Tuesday evenings when there was some kind of special. It may have been an attempt to get myself out of Seasonal Affective Disorder doldrums: I felt less blue if I were watching her have a good time.
      But my tolerance for noise has greatly decreased, so I now wear earplugs as I wander through the place with my older great-nephew. My niece takes the younger boy, who can’t do the kinds of things his big “brudder” does (in fact, his favorite activity is feeding the tickets into the counting machine).
      Thanks for your thoughts on budgeting. I haven’t yet ruled it out.

  6. Chuck E. Cheese…oh dear. It’s still in business? What a shame…

    I keep a budget in an Excel workbook with several spreadsheets. One is for monthly can’t-get-out-of-it expenses — like that power bill. The other is for what I call “discretionary” expenses, tho’ it’s hard to understand how food is something you can buy or not buy at your discretion.

    For the nondiscretionary expenses, I enter the historically highest power and water bills as the amounts allowed. Then when the bills come in under that amount, it feels like a small victory. When they don’t, there’s enough set aside to cover them. For the discretionary expenditures, I budget a certain total amount and then try, roughly, to parcel that amount among the categories that I routinely spend in — food, clothing, gasoline, etc. Then I enter bills as debits in the columns headed by the amounts allocated.

    I do find it helpful. For example, this month I know I will put off getting my hair done until the first day into next month’s budget cycle, thereby freeing up $60 to cover something else I diddled money away on. It’s easy to see, at a glance, where an overrun is happening, and (usually) pretty easy to figure out what to tweak.

  7. Sort of keep it in my head like you. When I bought my condo (since sold many years ago), I actually worked out a budget–but these days it’s mainly an intuitive thing.

  8. Leah in the Interior

    My (very responsible) husband keeps an Excel sheet that really helped us stay mostly solvent while he was still in school & I was working. Now that he has a job, he updated the Excel just yesterday to give us a guideline. His student loans are about to come due and by doing that update, it shows us what payments we can make to eliminate some debt (like paying off the car) before the loans come in. We don’t always follow it exactly, life does happen, but it just helps us keep track & plan for the year ahead.

  9. Leah in the Interior

    Oh yeah, as a former paid employee of the Red Cross, thank you for your donation!

  10. Tracking my spending the entire month of July, every cent of it, was a really eye-opening experience and not even a third as painful as I thought it’d be.

    Budgeting on the other hand I’m just awful about. When I sit and budget I start to get stressed because I don’t know how I can cover this that and the other and I get burdened with details. I’m still trying to figure out how on Earth to manage August’s finances and am pretty sure I’ll end up with a combination budget/no budget. I’m definitely going to keep tracking my spending though. That’s been super helpful. Like another reader, I use a super duper basic spreadsheet.

  11. You know how I count everything but I think since you truly are an expert, it is just second nature to you. It’s automatic because it is so ingrained in you. Weaker minds like myself, need to see it on paper!

  12. I don’t have a fixed budget either for the simple reason that I think it prevents me from spending as little as possible.

    For example, if I had an entertainment category in my budget I would be tempted to spend it all every month, but because I don’t have that I have to do a cost-benefit evaluation for each situation. If I really want to do something and I can afford it, I do it, but not because it’s almost the end of the month and I still have $20 left in my envelope.

    It’s the same with clothes. If I had a clothes budget and I saw a skirt on sale and there was money in my budget I would feel like I had permission to buy it, whether I really needed it or not.

    Simply living below my means works better for me than budgeting.

  13. I should budget. I always know I only have so much money to spend, but I spend beyond my means. It’s things like groceries, eating out, liquor that I really have to budget, oh and buying yarn.

  14. sharon

    It’s not strictly a budget, but I do keep track of income and expenses in an Excel spreadsheet. I started doing it by necessity, when I left my full-time job (it was 75 miles one-way) to work part-time and go to graduate school. I graduated last year, sold my house, paid off all the loans and credit cards, and moved for a full-time job, but I still record expenses so I can see where it all goes.

  15. Rochelle

    I use a simple spreadsheet – income on top, expenses on the bottom and a separate area to track my coupon activity (showing how much the stores are paying me to take the merchandise home). This works for me and is good for those plan ahead expenses – in my case I have a big payment for my son’s college lodging due next month and it’s in a yellow square the pay period it’s due as a reminder.

    I make my entries right after I do my online banking.

  16. Yesss!!! DO IT!!!!! It’s nerdy NOT to budget 😉

    • Donna Freedman

      @J$: How could I not listen to a man who gave George Washington a soul patch? 😉

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