“Budget” vs Budget: Why You’re Not Saving $1,000 Each Month

Hello friends! It’s been awhile! It’s been a busy, happy fall and posting just hasn’t happened. But today? Today it is happening. Assuming I keep typing. That would be really lame if I started and stopped 3 sentences in, huh?

So, I experienced something while working with a client recently, that reminded me of my former approach to budgeting. We were setting up a real-life, nitty-gritty, realistic and fun budget and were looking a piece of paper that had amounts on it for each (nearly – this becomes important) category. One of the categories was a savings goal of $1,000/month. The amount has been changed to protect the identity of innocent parties.

Anyway, another line on the paper “budget” was “Miscellaneous,” to the tune of, say, $500. As Client and I went thru and discussed the realities of each category in her real budget (using the best tool ever—You Need A Budget also known as “YNAB”), we discovered that the $1,000 that was supposed to be left over was not left over at all. ALL of it was being used to cover hidden miscellany. (Don’t you just love that word?)

Here’s a little graphical representation for the difference between “budgeting” and budgeting. I spent way too long “budgeting” so I know it well.  The below numbers use the median U.S. 2016 salary (according to this site) and are rough estimates of expenses for 1-2 adults.

Here’s “budgeting” (the quotes are to indicate that it is budgeting in name only):

housing (rent/mortgage) - $1,000

utilities - $200

credit card #1 - $100

credit card #2 - $200

car insurance - $100

food - $200

gas - $100

household - $50

student loan - $200

car payment - $450

net income - $3,650

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left after expenses - $1,050    

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Woohoo! $1,050 to save! Every month!

Well, now, just slow down a minute, Tiger. Not so fast. Check out what is not being included in the above “budget” (this is where a “budget” becomes a budget):

eating out, entertainment - $250

cleaning supplies, house cleaning - $100

gifts (wedding, birthdays, Christmas, baby) - $150

non-gift generosity - $100

clothes - $100

car repairs, registration - $100

vacation - $200

memberships (gym, Amazon) - $100

pest control, lawn care - $50

total of “miscellaneous” - $1,100

The miscellaneous expenses, which are actually reality—denial doesn’t change their existence—are totally eating up your buffer and then some! And for people with less income, or more debt, higher loans, a family, expensive healthcare, etc., the gap of $1,050 is less. Sometimes way less or non-existent.

It’s only in getting what you really spend down on paper and identifying your real buffer or deficit that you can make headway. Otherwise, you will do what I do for years: lament that the “budget” isn’t working and that you just cannot seem to save anything. But here’s the thing: it is really, really hard to exert discipline when you don’t even have an accurate picture of WHAT IS HAPPENING. Put another way, it’s hard to stay on track when you haven’t defined what the “track” looks like.

So, know what’s happening by getting everything-and-I-do-mean-everything on paper. Then you can make your savings or debt-payoff goals more real and attainable and start making adjustments and decisions to reach them. It makes me smile just thinking about what this will do for your finances and your life

I’d love to know what categories are your “gotcha” categories? Where do you spend more than you once thought?

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