My 1000 Dollar Budgeting Mistake and How I fixed it

This is a guest post written by YFS at YourFinanceSimplified he is the tallest, most handsome, most awesomeness, coolest guy that I know. You should really read his blog(Corey: YFS clearly wrote this part of the article too, but he has a great blog and you should check it out)

I would like to start this post by saying that we’ve religiously kept a spending plan (aka budget) for the last 5 years. Our spending plan, like many things, changes as we grow, and we make changes to fit our lifestyle.

Heck, I would also go as far to say we do a pretty good job of balancing must haves, savings and wants.

But… and there is always a but! For the last 6 months I’ve f***ed up.. big time!

I can’t believe I didn’t catch this sooner, I preach and preach on how you must track expenses, and I definitely let us down in this department.

Now, I’ve always input our transactions like clock work. I didn’t miss one transaction. Where I failed in our spending plan was how I set it up our categories.

Hear that? If you do not set up your categories appropriately you cannot adequately track your expenses. We had a leak somewhere in our spending plan, and because I didn’t categorize right, we would “fix” the wrong leak.

Let me break down how we setup our spending plan.

INCOME

MUST HAVES

BUSINESS

SAVINGS

WANTS

If you read my post I’m Too Sexy To Budget, you know that we have a zero sum spending plan. But, one thing I didn’t tell you guys was that we live off 1 income.

Anyway, what is a Must Have? Well a Must have is what you must pay for if you lose a job or don’t have any income coming. Business is well the money we put into our side hustle. Savings is well, savings. Wants are our spending money.

Enough posturing lets get into how I fixed the issue.. but, one more analogy before we get into details…

Let me give you an analogy…

You want to lose weight. You go out and get all this fancy smancy equipment, and you work out 7 days a week, but you never change your diet. So, you’re busting your butt in the gym, and you’re only getting moderate gains because you forgot one key piece of the equation–you forgot to address food intake.

Without the right setup you can still lose the game…

I see setting the appropriate budget categories as the key ingredient to a successful budget.

Lets see if you can catch what we did wrong. Below is a screenshot of how we setup our spending plan categories.

The left screenshot is from 2011 and the right screenshot is from 2012. Do you see the difference?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If you didn’t catch it. The issue is in the “Must Haves” section of the old spending plan.

I, like an idiot combined “Food/House/Dating” all in one category.

BIG MISTAKE!!!!

By doing this we had a huge amount of money set aside for this category.

First, let me tell you how we use the Food/House/Dating category.

It’s used for all our house needs/items such as, grocery shopping, house goods and our eating out fund.

Since, this fund was so large I would randomly go to the grocery store and buy what I wanted when I wanted. The bad thing is, on the back end I would attribute our overspending to going out on date nights too much or spending too much money on eating out.

I was wrong!

It’s as if we had a slow leak on our rear tires, and I was suggesting that we fix the front tire.

The Fix!

To fix the slow leak, I separated food/house from dating. Essentially, I separated a must have from a want!

Then, during our monthly spending plan meeting, my wife and I set some ground rules on how to control my excessive grocery store shopping.

We limited the amount of times we go grocery shopping to two times a month.

Did it work?

Within the first month we saved an additional $1000! It was that simple.

Sometimes, the answer is right in front of your face, and sometimes it’s not.

My suggestion is to thoroughly review your budget for slow leaks. Even though we still were hitting our saving goals an additional $1000 a month isn’t a small sum. It’s as if we got a $12k bonus for changing my habits and appropriately categorizing our budget.

Call to action!

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14 Responses to My 1000 Dollar Budgeting Mistake and How I fixed it

  1. That’s amazing you were able to get so much savings from an oversight. I tell everyone that the food budget is the number one place to look for extra savings.

  2. WorkSaveLive says:

    It’s amazing how much some people can spend on food/eating out while others can spend very little. I coached a couple (without kids) that spent $550/month on groceries and $250/month on eating out.

    On the other hand (from experience) I know a couple can easily love on a $280/month grocery budget and $100/month eating out. That’s $420/month savings alone from the above example.

    John is right, groceries and eating out can be cut back by a majority of people.

  3. Modest Money says:

    I think I’m guilty of the exact same thing, but I’m not even committed enough to live on a strict documented budget. I always blamed the dining out for a lot of our money waste, but we were wasting even more on unnecessary groceries. We’d make too many expensive meals, get too many snacks and buy too many foods that would go bad before using them up.

    • YFS says:

      I agree.. we often bought really expensive meat cuts but I would also buy stuff for our deck and little nicknacks to make the house smell good.. it definitely varied on what I bought

  4. What the heck were you buying from the grocery store? $1,000/month is a lot of money. It’s good that you eliminated it, but will that crop up elsewhere? I’m not questioning you, but just want to see if we can do something similar to realize that saving.
    We go grocery shopping about once a week and spend less than $100 each time.

    • YFS says:

      Well it was food and house. So we would buy a ton of food and expensive cuts and we may buy stuff for the deck, home electronics, stuff from amazon etc etc..

    • YFS says:

      Also, 1k isn’t much compared to our income. Percentage wise, 1k is a drop in the bucket compared to our take home pay.

  5. MommaStar says:

    Good thing you caught that and nipped it in the butt. I will be going over my budget now just to see if I too can get a 12k bonus 😛

  6. […] plan, like many things, changes as we grow, and we make changes to fit our lifestyle.” 20′s Finances AKPC_IDS += […]

  7. Good job. Aside from minimizing the eating out, proper grocery shopping is key. First don’t go grocery shopping while hungry. Second, buy things that allow at least one day of leftovers and Three, always eat those leftovers and don’t let them go to waste.

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