Friday, December 12, 2008

The Budget is ~DONE~ !!!

Whew. It took hours and hours and hours, but I have completed our budget for the next year and I think it's something we can live with. It'll take some getting used to, but it'll work.

Let me take you back a little ways ...

Tom and I both make good salaries. Well, I make a good salary whereas Tom makes about half as much, but he makes some kick ass commissions, which brings his totals right up to mine. We're pretty much 50/50 in what we take in.

Tom and I also have some very bad spending habits. I like wear mostly gap/old navy, but I'll admit to my occasional $500 handbags and $200 designer jeans habit. Tom likes to spend just as much on his own vices (tattoos, sports memorabilia, shows, snowboarding, etc.). We are also both VERY guilty of compulsive buying patterns. It's not unusual for me to stop by Target for a set of towels and leave with $700 of "stuff". It's not unusual for Tom to stop in a sports store with a brand spanking new snowboard setup. We would just throw this on our credit card which we had always just paid off each month.

Add to our spending habits the other things we had to spend money on too. IUI cycles, IVF meds, the IVF cycle, FET meds, the FET cycle. The surgeries. The acupuncture. The testing supplies. The vitamins. The supplements. True, we were lucky to have some of this covered under insurance, but adding up all our costs, they still reached a little over $10,000. Then, of course, we were blessed with conception and I needed a new maternity wardrobe because I've never been "big" pregnant in the midst of winter nor "new" pregnant in summer. And then we find out we're pregnant with a ~boy~! That meant creating an entire new nursery for a boy! A new boy wardrobe! New toys fit for a boy! And like I said, we've got bad spending habits. I could have made due with a billion different choices to outfit his room, but all I had to do is simply "stop by Pottery Barn Kids for a look" and out I walk with $700 here and $500 there. I'll admit I'm terrible. Oh, and since the nursery took up our guest room space, I deemed it ~necessary~ to buy a brand new bed so there would be a place for guests to sleep (we'd take baby in our room during visits of course), complete with matching PBK bedding and comforter. And the matching PBK throw rugs to pull the whole room together.

Beyond these types of purchases, we also spend a ridiculous amount of money on "normal" monthly bills. Where I used to budget groceries and clip coupons, I'd just blow $400-600 on groceries every few weeks. Our directtv bill was outrageous with the payments for NFL ticket, UFC fights and MLB Extra Inning charges, not to mention the bajillion movie channels I deem "necessary". I have a storage unit I really don't need just because I wanted to have a home gym in my garage so I needed everything else out. And yet, I pay for a gym membership! So much just gets charged to us without limit.

We are simply spending way above our means. Oh yes. I knew this but we just continued to charge those cards for our shopping trips and use all our incoming cash on our monthly bills. I just assumed we'd simply buckle down, get back to a budget and pay off our cards.

I started to add things up.

And then I re-added everything up because, well, what I found just couldn't be right.

But sadly, it was right. We. Are. In. Debt. Big time.

My biggest surprise wasn't the amount of credit card debt we have right now, I was pretty much expecting that. (although I didn't think it'd be quite so much, but I can't say I'm blindsided.) But in working out our monthly bills which includes ~everything~ besides credit cards ("allowances", gas, groceries, daycare, household bills, mortgage, insurance, car payments, you know - everything), we only make $14 more per month than what our bills are!

Actually, that sounds worse than it is. When I figure our incoming cash flow, I do ~not~ count Tom's commission checks, tax refunds, my yearly bonus or the four "extra" paychecks we receive each year. This will be our saving grace, as this is what we'll need to use to pay off our credit card debt. AND, it's what we'll use to pay 6 months of a 50% increase in daycare costs for when all 3 kids are in daycare at one time.

I know I'm giving out way too much information. Not that I'm telling you any details of actual income dollar amounts (the spending $ amts were just to make the point of how fucking stupid I am). And I'm NOT writing all of this out as some way of bragging, in fact, it's for the exact opposite reason. I'm embarrassed. I'm really, REALLY embarrassed. And I kind of feel that in order to get through this, I first have to admit my faults.

The new budget starts immediately and I think I have a pretty good system. It's actually the system which worked for us in the beginning years of marriage, when we both made jack shit and we were saving for our wedding. I know the system works and I know how it can keep me honest. I know how it simply doesn't allow for cheating without having to fess up to any extra spending to make room for it. I also know I'm still leaving some wiggle room at the beginning, because it would be hard to move from spending freely to an immediate 75% cut.

I sat down with Tom tonight and explained it all. It's also printed out in black and white and displayed within our home so we won't forget about it. He's cool with it and I'm relieved. If we stick to my plan, we'll be 95% out of debt by 12/09. This means no new cars like he wanted for next year and staying in our little house for at least another year. But we need to do this. Especially if we want to provide the kind of life we want for our three children. This is big.

24 comments:

Nikki said...

It takes a tough mind to make a budget and to stick with it! Good luck - I'm sure you'll do fine!

It's amazing how much small cuts here and there add up to in savings, and even more amazing how much small spending here and there adds up to in bills!

MrsSpock said...

We always have paid off our CC each month. This month, for the first time ever, we couldn't. When I got the high-paying agency nurse job, I bought my mom a big X-mas present, and larger sized clothes for J. Then there was the unexpected car repairs for my husband. And I got a different job, paying well but paying less, and had to buy career clothes, since I am heavier and no longer wear scrubs to work.

I had been lax about our grocery budget, and my husband was used to just going out and buying tools for projects without worrying.

Now, it'll be 2 months before I can pay off the cards, and I'm paying for everything but gas with cash, so I'm not tempted to spend more. $60 a week in groceries only, not including formula.

Jendeis said...

I am so proud of you! You are making the tough choices now to reap great benefits in the long term.

Poltzie said...

$500.00 on hand bags - wow! I'm jealous. I know you like to talk about what you have but I bet your handbag collection is amazing!
Budgets are so hard (for me anyways, hubby has no problem with them), good luck!!

Kathy said...

Sounds like you have a good plan!!! I need to plan a budget as well.. but have no idea where to start!! Good luck with it!! 12 months is really good time frame to be debt free!!!

areyoukiddingme said...

Debt free is the best way to live (if you can possibly swing it). I'm cheap, but I like quality goods, so I rarely buy anything that's not on sale. All we really have is the mortgage and monthly bills. We could probably pay off the mortgage if we liquidated everything. But it's nice to not worry about major unexpected expenses. Although it hurt to pass up those Gucci sunglasses for $69 today...but I had just finished all my Christmas shopping and was having sticker shock!

Glad that you have a plan. You will be really happy next December!

nancy said...

Lilah, its not like I have a bajillion of them. It's actually my luxury expenditure when I get a bonus or a lump sum of cash. I never just ~buy~ a handbag when the mood strikes me. It's been 2-3 times a year, this year, only being 2. And one was for my birthday that happened to fall on an 'extra' paycheck day. I know I drop more than that on ~stuff~ in a simple target trip, but $500 on ONE item? That one needs special rationale. And really, I shouldn't be buying them at all. I'm no posh spice.

Monica Fayth said...

Congrats on getting your budget worked out and a plan for being debt free. Josh and I need to budget better. Our little expenditures that turn into big expenses are eating out (esp fast food) and DVD's.

Anonymous said...

Good job coming up with a plan!! That's awesome.
~Velma

AJ said...

Oh my! Don't be embarrassed! I am totally embarrassed about how much hubby and I owe (majority of it is his credit card). I'm glad you've figured out a budget. I think everyone needs a budget, no matter what! Good luck :0)

Meredith said...

Its a great thing to stick to a budget. We aslways had one but never stuck to it. We are finally sticking to ours this year (going strong 3 months anyway). We buy everything in cash only (even gas) except for the bills which we pay online. We will be out of credit card debt in on 1/10 if we stick to it. We also learned that it helps to budget every single month and not just an overall budget. Makes us remember things like birthdays and stuff so things just dont come up and ruin the budget. Good luck!

nancy said...

meredith - i totally agree. I budget every paycheck and it works great. My "yearly" budget is just how to get out of debt.

margelina said...

Heh, Nancy, I hear ya. We have tons of debt, too. It's bad, it's scary, it's real. Most of our was from stupid stuff, too...crap that just added up. Friviolus purchases(although I can't claim to a $500 handbag or even $200 jeans) but still. Good for you for making a budget. I'm still working on that one.

Sugar and Ice said...

When I was a kid I was not a saver. As soon as I got my allowance (when I actually GOT an allowance) or birthday/Christmas money, I'd spend it immediately on whatever I could afford. If I had $5.00 I spent $5.00. If there had been a way for me to go into debt, I would have, no doubt. It's a good thing they don't give credit cards to 12 year olds.

Then something happened...I actually started working for my own money. Once I got my first job I became the biggest cheapskate you'll ever meet. OK, that might be a slight exaggeration, but I admit I am very frugal. Neither of us graduated from university until after we married, and we never took out a single loan (though I did have scholarships covering most of mine). We haven't had a car payment since we got married (I've had my Honda since 2000; he has a 97 Ford Ranger). We have always paid off our credit card at the end of each month as well. Somehow we managed to save enough money so that we didn't need to purchase mortgage insurance when we bought our house, and the $40,000 we've spend in IF junk has all been paid for in cash up front (actually charged on our credit cards so we get the reward points,and then paid off at the end of the month).

With all that said, when we decided I'd stay at home with the kids, we had to change our spending habits quite a lot too. Since we knew there'd be little left over every month, we had to make some major changes so that we are still able to save some every month for out of the ordinary things that come up (like finishing our basement b/c we need more room for the 2 extra people in our house) or a vacation every once in a while.

Good luck with your new budget, Nancy. You seem like the kind of person that just DOES something when she puts her mind to it.

Lilith Silvermane said...

Nancy.. that is so great that the two of you will be doing better debtwise, etc within a year!

So proud of you for taking that step and living more within your means!

It will help teach the children budgeting as well!!

Good for you!

Hey.. I updated my post on Bettie Page.. I had just thrown it up there right as I was getting off work. I felt as if I didn't do the iconic woman justice by my one sentence... so I revamped it this morning. She will be fully missed and I had been debating on getting my bangs cut again (I let them grow about two more inches because I'm too lazy to get my butt to Babooshka's :)) this sealed it for me!

Thanks for swinging by :)

KatieM said...

Oh yes...budgeting...this is on my list of things to do as well. I'm glad to see you got yours all figured out AND have a goal for paying off debts. That is definitely something I need to do for Thomas and I. However, unless I can continue working full time at Jefferson AND being a full time OT student (oh, and now Mom), I will be racking up more student loans over the next three years.

I'm usually pretty good at sticking to a budget once I make it...except for the grocery bill, I ALWAYS seem to go over...apparently I like food A LOT ;)

jenn said...

Congrats & good for you. I know how hard it is to sit down & say- 'what the hell do we ~really~ spend all our money on?' I'm in the same boat as you, albeit for different reasons... The only real difference is we've been there a lot longer (hub not getting paid for over a year tends to put on in the hole no matter how good you are at budgeting!) I budget every single paycheck which is easy for me since I only get paid once a month. He's responsible for a set # of bills & the 'extras' where I pay the essentials & the debt. It's painfully slow, but it is slowly working. Just make sure you also are able to put something away- even if it pushes your debt payoff another 6 months. Having to scramble for extra money when an emergency comes up wrecks the whole plan! (we aren't even to that point yet because of some serious emergency setbacks!)

Now you know why I'm so cheap! ;o) I wish I could go into Target & walk out with $100's worth of stuff, but my frugal sense of impending doom always gets the better of me, lol! I ~actually~ have to ask myself 'do I really need this- or just want it' almost every trip out & sacrifice a lot of new clothes & shoes in the process... but seeing the balance go down & knowing we actually will be able to afford this kid baking in here makes it worth it!

Wow- this got to be a novel- sorry!!! I just wanted tot add that craigslist & ebay are my best friends if I do want a bigger ticket item. I am okay with a lot of things being used (never shoes though!) and you can find almost anything you want- especially if you are close to an urban area!

Jewels said...

I know it's embarrassing - no matter what your budget is.
I've been there (and know I’m not immune to falling back into those habits – shopping is fun) and still see it all the time, I see people bragging on how "It's the American Way".
I think it's awesome your doing something about it - that is not something I see every day. I've watched my friends rack up their credit cards for Christmas this year and just plan to pay it off throughout the next 12 months – on of my friends is over 14 grand in debit and only getting deeper – and she doesn’t think twice about it, they get second jobs if they need too but don’t ever ~think~ to do something about their debit.
I'm all about saving’s – couponing - and “If you don’t have it - don’t spend it” so of course you got my kudos.

Jen said...

Maybe you are in debt but you are smart enough to recognize it and figure out how to remedy the situation. Plus when you put it out there publicly you really commit yourself to follow-through because you strike me as a person who doesn't like to fail. I see way too many people who dig themselves deeper and deeper and never even think to write out a budget. Paying down your debt in one year is impressive and it will feel great!

I am with you though on the belt tightening. It isn't clear how much Jeramy will be working this next year. We have seen this coming and paid off our credit cards and can live (barely) off one of our incomes. We're in a similar situation in that we both bring in about the same amount annually but mine is more reliable. Jeramy tends to be a big spender whereas I'm a pessimist and keep tighter reins on the cash flow. So luckily we seem to balance each other out.

Sarah R said...

I am proud of you for taking the time to sit down and figure out your budget.

I am a budgeting queen. Our only debt is our mortgage, which I don't consider too bad; it's either renting or owning, and I prefer to own. Most of one of my paychecks goes to the mortgage, then I pay the energy bill, and the other paycheck (if there are 2 in a month; there are 2 months out of the year where there are 3) gets saved. Whatever I have charged for the month gets paid in full every single month.

Working with one income (mine), we have to budget. I'm not making huge bucks either--$30,000 a year.

For us it means no cable t.v., not eating out a lot, and not buying things we don't have the money for.

:) We still have a very good life, frivolous as we are.

JamieD said...

You're inspiring me . . .

Hubby and I may be a couple of DINKs but we have GOT to stop living (and spending) that way. Right after we get back from Florida . . . and Denver . . .

chicklet said...

We both have budgets that are per paycheck - this bill comes out of this check, that bill comes out of that check. Then whatever's left over is what we're allowed to spend on whatever we want. You know, like Home Depot splurges!

Kaci said...

Good job getting the budget done! Hubby & I are both pretty frugal (although he did spend a big chunk on an old bronco last year...that thing will be our money pit) so we've been lucky to never be in debt, aside from our mortgages. I actually keep saying we need to make a budget - maybe you'll inspire me!

Krista said...

DH and I overspent too, and have spent the last 18 months really getting back on track. I'm glad we've done it, now that the efforts are really paying off. Unfortunately, it has also resulted in us back-sliding and overspending for the last month (vacation, christmas and birthdays) because we knew we were so much better off than we were two years ago. Back on the wagon this week!