Tuesday, February 24

What does 'budget' mean to you?



Free From Broke posted recently with "Excuse Busters for Not Having a Budget." FFB then asked what other excuses we could think of. Being my opinionated lil' self, I chimed right in.


I explained our current situation and said it was simply not possible to budget for the problems that crop up between the two of us and our health conditions.


I said that the closest we got to an actual budget was:

  • My disability check to cover our rent
  • Making sure there was $500 in checking on the first Friday of each month, for Tim's insurance.
  • Each week, keeping $220 in the bank -- $20 for our IRA, $65 for therapists kind enough to work on a sliding scale, the rest for groceries and other incidentals -- and throwing the rest at the credit card debt.

In fact, I ended up emailing with FFB to discuss this a little further. I explained just how many unexpected expenses come up, making it very very difficult for any real concept of budget.


Then again, I added, I suppose it depended on your definition of "budget."


FFB agreed with me. He wrote back:

I still see a budget as valuable so you can more accurately track your expenses ans spending. A budget doesn't have to be concrete, it can float. Unexpected expenses always come up and if you have a good budget then you can re-work it to free up money for the new expenses. Or at least know how you are going to pay for it.



By these sketchy outlines, Tim and I do have a budget. As expenses come up, we divert some money from credit card payments. Other times, we put it on a credit card (which we make sure to pay in full each month, to avoid interest) and then pay that down before any other credit card. Either way, our system does fall under FFB's description of why a budget is useful.


So do we have a budget?


My opinion is no. I think we have a frugal lifestyle.


We try to keep grocery costs down. But I don't have the energy to record all receipts from groceries. And when I am on Quicken, I use my time to be sure we're not going to bounce -- not to go through and find transactions from any of the four stores we might have visited.


We make sure there's enough money in the bank for the EFT from Tim's insurance. But that comes about only through careful planning of money allocation 10 or so days beforehand.


We don't buy many things on a whim. But we also don't rationalize that it's "not in the budget." We ask ourselves (or each other, depending on the situation) if we really need it. Especially in light of our current financial situation. Usually the answer is no.


And while I try to limit the amount spent on dining out (or ordering in), it's hit and miss. My goal is about once a week, or a total of $30. Some weeks, we do great and have no trouble providing food for ourselves. Other weeks, we're both feeling completely rundown -- whether from chronic fatigue/depression (me) or eczema/painful MRSA infection (Tim). Those weeks, we'll probably do very little cooking. I'll eat PBJs, Tim will scrounge for food. But at least twice, we'll give up and order a pizza.


About the only things we truly budget for are:

  • Checks to therapists
  • IRA contribution
  • $10 each per week to do with as we please

On the whole, I'd have to say that, if our plan is a budget, it's a pretty terrible one that only sometimes gets followed.


Of course, perhaps I'm putting the cart before the horse. Just because we don't follow a budget, that doesn't mean we don't have one. Perhaps I'm being too strict in my definition of "budget."


To me, a budget is a plan that, while fluid, is something that you can generally stick to. It's something that has goal numbers for each sector: groceries, utilities, fun, dining out, etc. It has to be somewhat changeable, since life is hard to plan for.


But can you really have a budget if you don't have the energy to track each penny? Can you really have a budget if it only works about half of the time?


I'll put it to you readers: What is your definition of a 'budget'? How does yours work? How often do you not meet the goals you set out?

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3 Comments:

Blogger Free From Broke said...

I think what you have is a budget. It may not keep track of every last penny but I don't think it has to to qualify as a budget. You say you can make it better...that's ok. I know I can do a little more work to keep track of things. As I learn I tweak.

February 25, 2009 at 8:07 AM

 
Blogger Cents in the City said...

A budget is the amount of money I take home per month minus my expenses with the goal to never spend more than I make. If I allot a certain amount of money per month towards my expenses, I can determine my savings goals. I came up with my numbers by first assessing my fixed costs rent, student loan, gym membership, cell phone, etc. Then I examined my spending and determined what would be a reasonable amount to spend on the rest of my expenses that are not fixed like utilities, food, entertainment, shopping, misc, etc. Sometimes I go a little bit over, sometimes I go under in a category, but usually they balance out.

Once I came up with those numbers I was able to figure out how much I could save per month. I have X amount of money I put towards my emergency fund, vacations, and Roth IRA. Anything else left over goes into my "for fun" savings account or can be spent.

I track all of my spending in a spreadsheet. Once I came up with something that works for me, it only takes about a minute a day to keep it updated. I will notice immediately if I am spending too much and can balance accordingly from there. Confronting your spending habits regularly really does curb the desire to overspend.

February 25, 2009 at 12:51 PM

 
Blogger Abby said...

Cents,

When I download our bank and credit card data into Quicken, a quick look generally tells me when we've been overspending -- and where. (Usually, it's the small expenses that add up: a soda while we're out at the mall, a small piece of jewelry that was on sale... Stuff we now actively try to avoid while out and about.)

Unfortunately, our expenses vary so much each month (more on that in another post) that it's simply too difficult to guess how much will be used vs how much we can "save" to throw at credit card debt.

I've tried a few times to estimate. So far, no luck. On the other hand, they say, on average, it takes smokers 7 or more times to quit. So it may be constantly evolving.


FFB,

I think I can see where you're coming from. But I'm not saying I can make it better. Quite the opposite, I'm saying this is probably about as good as it's going to get.

I'd be interested in getting your thoughts on my next post, which will be about why it's really not plausible for us to estimate or average our unexpected expenses.


That said, I'm trying to stay open to the idea that perhaps there are ways to get more of a grasp on planning for expenses.


Part of the difficulty lies in the aforementioned unexpected expenses. Part lies in the fact that I'm a depressive with fatigue issues, which means I can only handle so many items a day before I feel overwhelmed and/or too exhausted to reliably plot out numbers. And there is some difficulty with the sheer number of checks we get: one for disability on the 3rd, one each week for unemployment, and two from my contract work (which arrive 10 days after I bill). On the one hand, having a weekly influx of cash is great for buffering against overdraft. On the other, having 7 checks arriving throughout 30/31 days is a little tiring to keep up with.


Now I feel like I sound whiny. I guess my point is, based on our capabilities right now, I think the budget won't get honed much further. That said, there may be lots of folks who agree with you about whether our plan is cohesive enough to be called a budget. I'll be interested to see what others think!

February 25, 2009 at 2:16 PM

 

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