BUDGET is Not a 4 Letter Word * Monday Money Matters

Continuing with the daily themes I set up last week, today we talk about Money Matters. Specifically we talk about Budgets. Many people view Budgets or Budgeting as a bad thing. It has taken on the same kind of negative and limited meaning as the word Diet. 

Budgeting is not a bad thing, and it doesn't mean to have limited funds. Instead is it simply an allocation of the funds you have to the liabilities you have. If you are in a position where this leaves you with excess funds it is a way to let you know and track those excess funds so you can plan for them as you will. 

In Blog Posts and the media Budget has only been used to imply poor or lack of funds. 

DIY on a Budget
Budget Kitchen Makeover
30 Things You Can Cut From Your Budget to Save $1000 this month

Who else has opened some of these blogs, posts or articles claiming to be frugal and talking about limited budgets only to read them and find out that someone else's limited budget is Champagne and Caviar to your Beer and Bratwurst?

That is because what constitutes a limited budget is determined by the income one has coming in and the debts one has going out.

When I first became a mother and a wife I learned quickly that we did not have enough money coming in to spend willy nilly. I would set up budgets and I would always forget about something (usually annual costs like vehicle renewals, or birthday/holiday gift money) and my budget was constantly being busted. 

I also blew my budget because I was afraid to have "that" conversation with my X. I was afraid if I told him there wasn't enough money for him to do the fun things he wanted to do, and to buy himself the things he wanted then he would leave, and I would be alone. So instead I used credit cards. I always figured our financial situation was temporary and that we would have increases in our income that would allow me to pay off our debt and get ahead. Yet somehow I just kept increasing our debt and the same amount of money was deposited into our account each pay period (no matter what the X's actual income was).

I used to pride myself on being able to keep the grocery bill low and still have tasty and creative meals (and even have enough left over to throw a casual dinner party every week). Those meals were mostly based on grains (rice and pasta) and now those are not options for me. 

I also went through a very dark time where I resented the fact that I worked so hard and didn't get to spend a dime on myself or as I wanted (it was also when I realized just how much money the X had kept out of each paycheck for himself) and I spent money on my kids to get them things they wanted (not things they needed) to try to fix the situation.
So the first step in my financial freedom is accountability. The $30k in credit card debt is my sole responsibility. I had an obligation to tell the X "No we cannot afford that and you need to start putting MORE of you paycheck into this family and this household". 

When I would create a budget I would typically only track our fixed expenses (that which occurred regularly and month to month). This meant I was always caught off guard and without means when a birthday (my kiddos or their friends) or a holiday came up, I was also without means to pay for things like clothing, shoes, and haircuts. This just wasn't in my budget. 

For a while I would read blogs (and now pins) about saving money and slashing one's budget and it would talk about giving up things like the $5/day Starbucks, eating out regularly, extras on the fancy cell phone, keeping the car a few years more.... all things that I really couldn't do. That isn't to say there are not areas in my budget that I cannot trim the fat, there are. For MOST people there is always one or two indulgences they have that they could give up to get out of debt faster (but only if they wanted to).

However, before I can talk about trimming my budget I need to establish a budget that works. 

I have found that the key to that is tracking. I'll start with what I believe to be my budget and include all the categories I can think of, and then keep track of it over the next few months (in reality one should always be monitoring and adjusting ones budget) so that I can have a realistic budget based on the income I have, not my potential income. 

Housing - Most everyone has a housing cost. Mine is a rent
$575.00
This is a fixed number.

Energy - In this area my Electric and Gas are one company (RG&E) and one bill this is a fluctuating cost. I could request a "budget bill", but this would cost me MORE money over the next three years. You see there was an obscene amount of energy usage in this property before I moved in, and budget bills take the last year of usage and then divide it by 12 months so you have a predictable bill each month. If your usage decreases at the end of the 12 months they will credit you the difference and adjust your budget bill amount. If it increases so will the budget bill. The issue that I currently have with RG&E is my usage is less than 1/3 the typical usage of the last three years so they throw out my meter reads an estimate my usage greater than it is. I have gone round and round with RG&E and I cannot get this corrected (even with having them come out and read - they throw out their actual reads because it doesn't track with their system). If my calculations are correct my energy usage is typically $50-$80 per month (gas and electric) and in a cold winter might go as high as $100 in the month. So a safe budget number for my RG&E would be $100, then the money left over at the end of the month could be used for an energy improvement in the home. 
$100

Water - I used to forget this for years, because we only got billed once every quarter. I eventually started factoring it into my budget but when the money wasn't there for other things (like food) I would use the $10/month I allotted for the water bill for that. Fortunately, water is part of my rent and I don't have to think about it here. 

Refuse collection - Also part of my rent.

Car Insurance - Right now I do not have a vehicle, so I do not have car insurance payments. I am working on getting a car so I will have insurance payments again. I am planning to pay my first 6 months or a year in a lump sum (for the extra savings) but I will need to then put the equivalent amount aside every month so that when it comes due again I have the money for that purpose. When I last got a quote I was looking at $60 per month so I'll budget a little bit more than that to be safe.
$75

Registration - This will be a one time lump sum due every two years. I believe it is $75 every two years but this is one of those numbers I'll need to adjust once I know what it is. That would mean that I would need to allocated $40 per year and $4 per month. 

Inspection - This is an annual fee and I believe it is $50, again a number I'll update when I can confirm. Over the course of a year it would require $5 per month.
$5 

Oil Changes - I am not a change your oil every three months or 3000 miles. I know that most vehicles can go longer. If I use an oil change company it has cost me in the past (and this number will constantly increase) $60. If I figure on changing my oil every 3 months just to be safe that would be 4 oil changes a year and cost me $240 a year or $24 per month (yes all of my math is based on the even 10 not the 12, I have learned it is better to overestimate and have left over than to estimate to the penny).
$24

Maintenance (aka Peter) - This is another category I never had in any of my budgets, or if I did I would rob from to pay "Paul". I have never in my life had a new car, so I cannot count on warrantied repairs and scheduled maintenance. Instead I am looking at purchasing a 2003 Chevy Tracker. This vehicle is in good condition and has been properly maintained, but that doesn't mean that it won't need repair. One of the things I plan to do is take it to my mechanic and ask him what he sees as potential repairs and needed replacements in the next year.  Because of the age of the car and the fact I am buying it outright I won't have a payment on it. Instead I am going to allocate $100 each month to maintenance an repairs - until I have $2000 set aside in a vehicle emergency fund. 
$100

Total for Vehicle Maintenance -  
$135

Gas/Tolls - With Lulu training in Bville I NEED to account for 2 tanks of gas per week. One for the trips out and back to Bville and then one for the rest of my week. I am guessing that this will be $60/week, however this number will constantly need to be adjusted as gas prices fluctuate pretty steadily. The tolls to/from is roughly $6 trip and is factored into the $60/week
$240

Lulu's Dojo costs - This is also a fixed number I spend $144 per month on her Dojo fee. Then there is the matter of new gear. Gear should be update annually an if I have the funds set aside I can purchase in Nov/Dec when good manufacturers have end of year sales. Items she'll need wrist wraps $15, shins $60, Head Gear $90, gloves $90 and mouth-guard $20. She doesn't use rib gear. Total Annual Gear: $275
$175

Fight Fees - There are fees and costs associated with her fights. WKA Fight Registration - $30/annually. Travel & Lodging
$110

Groceries - This is a category I have really had trouble with. I want to keep my costs down, but I also want to support local, ethical sources. This makes meat expensive. It also means that we don't have meat with every meal. Although I have gotten away from meatless meals and I'll need to ease back into that keeping in mind what the Boy and Lulu will and can eat. For NOW I am estimating I can feed the three of us for $125 per week. I will adjust that up if by tracking I find we are eating MORE per week than this amount, or once I have a hard number that I can live with start working at whittling it down.
$500

Hair Cuts, etc. - This is another category I never counted on. With short hair, like my current style I'll need to get regular cuts. I am looking for a stylist I like that I can afford (and/or one I can trade services with) but until then for myself, the Boy and Lulu I am setting a monthly amount of $60. Likely, this means only one of us can get a haircut per month and it may be a number I need to revisit. Things like color and prom styling will have to find another category.
$60

Holidays/Miscellaneous - This is a category I NEVER had in my previous budgets. But as discussed in a previous post I am planning on setting aside $20 per pay for Christmas. Since I am self-employed and my pay is not regular I have decided to make that $20/week and to "pay" myself first when I do have money coming in. But that doesn't allow for Birthdays or Holiday Meals so I am setting aside an additional $30/month for that.
$110

Entertainment - Movies, take-out, delivery, general fun
$50

Student Loans - I have quite a bit of student loan debt $30k, and I would like to start paying something (anything to it) so I am setting a minimum of $100 month.
$100

Credit Card Debt -
I also need to start paying something toward this as well so right now I am setting $100 per month and as my income becomes established and grows this category will grow as well. 
$100

Retirement - I will likely be cashing in my current retirement accounts (when the divorce is final). I know I'll lose 20% off the top AND may owe penalties on top of that on my taxes. This is a risk I am willing to take. I'll use those funds to pay off SOME of my credit card debt - I'd like to pay all but my $17k ESL debt using these funds, and then hold the rest as a cushion while I get my business up and running. I am giving myself a break until I am 40 (less than 2 years now) to start saving for retirement again. At which point I will contribute the maximum amount allowed annually to a retirement account (currently $5,500 which works out to be $460/month or $120/week).

Those are the numbers I can think of, anything you see that I am glaringly missing?

I mentioned in the last money matters post that I would be listing some items on a FB page. The pages starts items at $.25 and goes up in $.25 increments. As of writing this post I sold 3 items for $.25 each which give me $.75 to put toward debts. I know it doesn't seem like much, but it is three items out of my house and gone from my clutter and $.75 closer to ending my debt struggles. I plan to hold the cash until I have $25 and then make a $25 random debt payment to my highest interest debt (ESL). It might not look like much, but it is. 

Additionally, I received an offer to settle one of my credit cards for for about 40% of what is owed on it. I have the funds available so I am going to take that offer and get rid of my smallest debt in one fell swoop. I am hoping to receive a similar offer on my next smallest debt (owned by the same bank) and that I will be able to take advantage of that offer as well. Baby steps. I am not yet a Gazelle, but an infant learning to walk in the world of personal financial accountability. I am certain that I will stumble, and that I will even fall, but I know that I will learn and grow...