In this week’s update to my challenge, I discuss lessons I’ve learned so far and expose my February budget in all its gory detail. [For previous installments, go here: Intro, Week 1, Week 2, Week 3, Week 4, Week 5]
I’ve become one of them.
What do I mean by them? Well, to illustrate what I mean, here are a few of the “symptoms” I’ve been experiencing:
1. heightened awareness of small price differences
2. aversion to store-bought meals
3. inexplicable desire to stare at spreadsheets
4. unnatural attachment to small coins and bills
5. fear of cash registers
Yep… I’ve become a budgeting fanatic.
It all started when I pledged to pay $480 per month toward my credit card debt for 3 months, as part of our New Year’s Challenge. Before then, was I frugal? Yeah, sure, but I didn’t really pay close attention to how much I was actually spending on different things. I figured I didn’t need to pay really close attention, because I only bought things that I needed. Or did I? It’s funny, but the word “need” is one of those words whose definition is kind of abstract. Despite the fact that I was supposedly only buying things I really needed, I was still having a hard time saving up money. And in fact, I had a credit card balance that I was not happy about.
So what was the problem?
Ready to pay off debt faster?We can help you make a free, personalized plan to pay off your debt as quickly as possible. Our free tool shows you which debt to pay off first. Try it now.
The problem was that I was not always being honest with myself about what was a true need and what was simply a convenience. One of the worst examples of this was my tendency to buy lunch instead of bringing something from home, which meant that food costs made up a disproportionate share of my monthly spending.
To regain control of my monthly spending, I decided to use the budget spreadsheet that Azra created. I committed to writing down all my purchases in the spreadsheet at the end of every day. I was excited to do this because I knew that if I did it for the whole month of February it would help me understand how frugal I really was – or wasn’t – being.
And lo and behold, I found that it made a huge difference in my spending habits.
Whereas before, I would justify purchases based on their convenience and/or minor cost, once I started looking at the total amount growing day-by-day in the spreadsheet, it made those decisions hit home. And that’s when those “symptoms” started showing up: heightened awareness of small price differences, the aversion to store-bought meals, and the fear of cash registers – they were all due to the fact that I was finally focused like a laser on sticking to my budget.
My Budget – How Did I Do?
Now February is over, so now it’s time to see how much all this budgeting really helped. First, let’s look at the budget goal I set for myself at the beginning of February (i.e. the amount I wanted to spend):
I think this was a pretty reasonable goal for my first monthly budget. Living in the Bay Area is quite expensive, which means rent and transportation costs will always seem high, especially to someone like me who just moved here. When I used to live in Sacramento, my rent was significantly lower, but there’s not a lot I can do to change that, so the way I look at is there’s a fixed part of my budget and a flexible part of my budget:
Fixed budget (rent + bills + insurance + gas + cell phone + gym) = $1160
Flexible budget (groceries + eating out + clothes + travel + misc) = $840
So the question for February is whether I was able to keep those flexible categories from totaling more than $840. If I did that, then I would come in under budget for the month. If not, then I’d have more work to do… Okay, the suspense is killing me, so let’s unveil the results of my first month of budgeting.
Ready to pull back the curtain? Here it is…
That’s it – in all its red, white, and blue glory. So what do you think… should I be congratulated or scorned? [Whichever way you feel, leave a comment for me below]
Clearly, if we’re using a very strict definition, I went over budget. But what’s the fun in using a strict definition? The truth is, I’m actually pretty happy with my effort this month. After all, it was my first attempt, and as we’ve said often on this blog, the most important thing is that you stay positive and stay motivated. I came within $29 of my target budget for the month, and that’s pretty darn good. That’s only one dollar for each of the 29 days in February!
I’m going to use this as fuel to do even better next month. Over time, I might even be able to lower my target budget a little bit. [Oh, and if you're wondering how I pay only $15 per month to use the gym, check out our Zero Debt Action Plan - you’ll find the answer in Week 2]
But in the meantime, let’s dig a little deeper into that Flexible Budget and see how I spent my money in February (and how I can spend less next month)…
I’ve already talked about this part of my spending. Throughout the month, I made a concerted effort to avoid buying food during the work week and to instead cook food and bring lunch to the office. I still ended up buying lunch about 11 times on weekdays this month. Here’s how my food spending broke down:
Eating out for lunch (weekdays): $90
Eating out for lunch (weekends): $38
Dinners at restaurants: $64
Breakfast (at Denny’s): $15
Super Bowl party food: $20
Regular groceries: $220
Total food costs: $447
I did overshoot my food budget by $47 but I noticed some serious improvement in my attention to the costs of buying lunches and dinners instead of eating at home. I think that will allow me to continue to reduce this amount in the months to come.
And it should be noted that I didn’t buy any sodas or bottled water during any of those meals! (Assuming an average cost of $1.50, those would have added $30 or more to the total)
When I set a budget of $50 for the month, I didn’t really know if that would be accurate. In fact, I wasn’t sure if I would spend anything on travel in February. Then, midway through the month, my girlfriend and I decided – somewhat spontaneously – to spend a weekend in Napa for Valentine’s Day. We stayed at a very affordable hotel for one night, and had two reasonably priced meals while we were there. It was really fun, and we were able to enjoy a full weekend there without breaking the bank. All in all, the experience was worth much more than what we spent. Personal finance experts always say that you should allow yourself to spend some money on fun things each month to avoid getting “burnt out” on saving money. Anyway, it did put me over the $50 I had set as my travel budget by $100. But I think I’ll keep this category at $50 for March, because I don’t expect to do a trip like that every month.
I budgeted $140 for clothes and spent $0. That’s a win! And that in itself was enough to offset the amount by which I exceeded my travel budget. Next month, I may shift some of the budget for clothes over to the miscellaneous category, because it seems like I need a little extra room there…
This was another category I wasn’t sure how to plan for at the beginning of the month. I decided to budget $250 for all expenses not included in the other categories. Here’s a breakdown of the things I actually bought:
Re-filling my BART card: $40
Non-food groceries: $105
Parking ticket (in best Homer voice, “Doh!”): $50
Space heater: $60
Total Misc. Expenses: $272
I think these costs were all fairly unavoidable. Living in the Bay Area, a BART card is like one’s lifeline. And a haircut and a parking ticket are just… well, a part of being alive. As for the space heater, my room was getting pretty cold and I decided $60 was a very fair price to pay for being nice and toasty.
I think I have a really good chance of coming in under budget next month. It’s only been one month of doing comprehensive budgeting and already I feel like I have such a better picture of my spending and how I can keep costs down.
But I want to hear from you! Help me by sharing your experience:
- Do you see any opportunities for me to reduce my expenses further?
- What percent of your monthly budget goes towards food?
- Share your own budget lessons!