Budgeting Review = Red Flags!

We’ve been tracking our expenses for nearly 18 months now. With our first full year of data we decided it was time to review where we stood. What we found was reason to celebrate and reason to cry.

Our expenses came up 4.9% under our initial annual projection. Yipee! I am so proud of my wife, she did much more than I to get spending under control. In some areas we spent much more than anticipated, in other areas, we’ve just realized we are still blind.

We killed the budget in a few categories including Pets, over by 238%. Ouch! Our dog had a couple health issues this year. Apparently eating soda cans is not good for them. Trooper is part of the family though so there’s not much to be done. The root cause however is addressed, I quit drinking soda’s earlier this year so, no more soda cans!

This article was featured in the Carnival of Money Stories hosted by Funny about Money. Please check out this carnival for many other great articles about personal finance.

Spending on tools and equipment was 78% over budget. But the good news here is that all of this was offset by sales of pieces I have created.

Groceries were also over budget for the year. With the exception of December though, there was a marked decline in grocery spending in the last two quarters as a result of efforts to spend more wisely and price comparisons. This year should be much better.

Overall here is the breakdown of where our take home pay went:

The chart above is a summarized version of what we use but we still have an opportunity to improve the detail. For example we lump virtually everything into groceries that is bought at any of the stores we frequent. Cleaning supplies and personal hygiene, I think, need to be separated from food.

Now here’s the really bad news – We screwed up!

I am also getting ready for tax season. Pulling together all the documents we will need. In doing so I downloaded a copy of our last paystubs. It was at this moment that a big red flag started waving with fireworks in the background.

Our total after-tax, after insurance, after-everything else take home pay was over $6,000 more than our total expenses plus investments and savings. Double ouch! Where’s the beef?

We need to improve our spreadsheet, and we’ll have to improve our process.

My wife is a pencil and paper kind of gal. I want the ability to slice and dice, so we ended up with both handwritten sheets and an excel spreadsheet. She writes it down and I transfer it into a spreadsheet. With a little root cause analysis tonight we found at least a couple flaws that will address some of the difference.

• She has been collecting the data primarily from receipts. Occasionally there are charges to cards that don’t have a receipt conveniently available to put in the pile.
• We are both in a habit, mostly, of dumping our receipts on our desk in the kitchen. Upon reflection there are times we (I) fail to do so.
• I have a separate account for travel. Reimbursements generally cover 100% of costs during travel but occasionally we transfer some cash over. We have not been tracking this.
• My hobby income and expenses are not always accounted for.

I am sure there are other issues we have not yet identified. But identification of this discrepancy will only help us get better control over our finances and help us take the next step towards eliminating unnecessary expenses.

Goes to show how true the saying is, “you cannot manage what you do not measure.”

If you like to be challenged to see things with a fresh perspective, if you like to learn new ideas and different concepts, sign up for my RSS feed or enter your email address here to receive updates directly to your inbox.

photo by luke hoagland