Tuesday, July 24, 2012

Reworking the budget

So I severely undershot the budget in a few ways. Before Child 2, I was making 5.1K and we were paying about 4.6K in expenses. I imagined I would have enough money to just add Child2's daycare to take up the rest of that $500-600 and then add $300-400 on in new rent. I sat down and recrunched all the numbers - which I had been too busy to do for a few months. It was scary.

Instead of our $5,400 I imagined, we were spending $6,400!

Salary $9,500/month - $6,400/month expenses = $3,100 - $1,600 minimum loan payment - $1,300 savings = $200.***

At that rate it would take us 16 years to pay off the loans. (20 years without the extra $200 a month in payments) It would also cost another $150,000 in interest.

*** I ignore our FSA reimbursements in these calculations because we weren't filing them regularly and two months we spent over $7,000.

Where did the budget go so wrong? Even though we spent less than $30 a month eating out, we were still spending $920 on tolietries and food. I even estimated a little down on this number since alot of the moving expenses were included in this. Also, the personal expenses included clothes, hair, car, and dog expenses. We spent at good $100-200 dollars/month on the dogs alone between end of life care and dog sitting. I splurged right before Child2's birth and got my hair colored -$150. We spent alot on 'onetime' wedding expenses $450, which some people would put as part of 'entertainment.' We ended up on some charity mailing list and ended up giving away $450 in charity a month.

So I did some more number crunching. Our income went down from $10K because of our FSA's. We should get about $500 back per month. The dog expenses are gone which will decrease our personal expenses. While we aren't buying more apartment equipment anytime soon, I know something would certainly always come up and plan accordingly. (Look, our microwave just burned out, $50 at Walmart!) I recognized I needed to set aside money for holiday and birthday presents for the year - that is $900 of our monthly new onetime expense budget of $300/month.

Here's how things look now.

Actual Monthly expenses
New Monthly Budget (JaneMD salary 4.9k )
Rent + gym + housecleaning $1188
Cellphone + internet $160
Car lease $190
Home/car insurance $125
Daycare $670-770
Utilities $160
Car Gas $150
Groceries/Toiletries $800-1000
Personal expenses $500
Charities/religious $400
Onetime expenses $300
Bank autosave feature $42
Total budgeted monthly expenses $4685
Actual spending $6405
New budget $5680

Our new budget decreased by $750 from actual expenses. Little things have changed. I got an employer discount on our internet. Our phones will be someday paid off, dropping that expense by $25. I watch our grocery bill like a hawk and move things into appropriate categories, like the microwave. We have an upcoming vacation to see our families, which is already budgeted for ($500), but I'll be coloring my hair with my mother (savings of $140). I also made our FSA reimbursements a major part of our budget, thus making sure they always get filed.

Salary $9,500/month + FSA $500/month - $5,650/month expenses = $4,350 - $1,600 minimum loan payment - $1,300 savings = $1450. 

At that rate it would take us under 8 years to pay off the loans and save $60,000 in interest.

A message from HubbyJD: I appreciate my wife, JaneMD, and all of her hard work at our budget and finances, especially since she does my accounting for free. I want to be financial independent and get all our loans paid off. I do draw the line at the beer austerity measures that she has recently enacted. Someone please tell her I can buy 2 twelve packs a month of Guinness.

Thursday, July 5, 2012

Stopping the hemorrhage

Okay, so JaneMD has been a bad blogger. She also has been a bad part of the FI community/anti-consumerism because it has been a rough few months.

As a start, Child2 will not be needing a big surgery and he's 4 months old. Child1 got referred to physical therapy for failure to walk and then learned how to walk a week later. We lost both of our dogs in the past months - one died, the other was returned to a rescue organization because it stopped getting along with Child1.

Things spun a little out of control with a move, second kid in daycare, and three out of state trips.

The good financials Feb-May: We got our full safety deposit back on our old apartment - $1000. We found out we were overcharged by the electric company for a year - $303. We had a delayed flight and got two free round trip tickets to be used at some point in the next 12-18 months. HubbyJD finally submitted our FSA forms and we got $2000 back pre tax. I opened a new FSA and will get around $100 a month back pretax. We examined out internet bill and got an employer discount by $7. We used our tax refund to pay off the last higher interest loan on graduate school - about $6000 on a 7.9% loan. We have now paid about 40k of our loans off in 10 months.

The bad financials Feb-May: The move, the new rent, the car, Passover, the trips, the visitors, doubled daycare, and the pets. Daycare doubled - $675 extra a month. We spent $1000 on end of life/dog sitting charges. We needed car repairs, $450. We had to pay 'personal property tax,' $350. Rent with utilities went up by around $600 for an apartment more than twice the size. Passover is one week a year and has special food that costs 2-3x normal. I cringe in shame because our grocery bill in April was $1500. We also had three weeks work of visitors since April to feed and included all of our  apartment expenses in that grocery bill.

The new apartment: we had to come up with a $1500 security deposit, and our rents overlapped by one week $350. The only thing we outsourced was the movers ($700), but I moved the kitchen the night before. We also had some friends help us pack and unload to make the movers as efficient as possible. Other friends volunteered to watch Child1 and Child2 for free during the move.

The bigger issues involved furbishing the apartment. I don't mean buying new stuff - I mean there weren't curtains or curtain rods in the apartment. Of that $1500 grocery bill, $200 on curtains for the entire house, $40 on carpets, and $250 for a full bed. My dad paid for his visit by installing and hanging 20 curtains. We also craigslisted a desk, an entertainment armoire, a bunkbed with 2 mattresses, a night stand, and a toybox for a total of $230. Some of that we paid in cash by selling off our own stuff on craigslist; we probably got $100. So total moving and housing expenses = $1420 (700 moving, 720 furnishings)

The trips: Hubby JD and Child1 flew to a wedding alone - ticket $300, hotel $180, taxi ride $88. Yes, a family member picked them up from the airport, but made no arrangements to get him back. Since he didn't have a car, he had to stay at the wedding hotel, and then pay a taxi to get him to the airport. Then we took a family trip while I was on maternity leave in a minivan $550 for 7 days and gas $200 in 30 hours of driving. Second wedding next month was $650 for tickets, hotel $80, rental care $30, and gas $30. Hilariously, the first wedding for two people cost $618, but four of us on a similar trip cost $790. We easily could have saved $100 if I'd just had him rent a car and picked a different hotel.

Want to know the damage after all of that? It was bad - an extra $6000 more than planned spent over those 4 months . I was able to account for $5000 in the above expenses. We got about $3000 in deposits/reimbursements, but that was still nowhere close to where we wanted to be.

I know trips and weddings will come up, but this was ridiculous to have it all happen at the same time. It was awful to watch our money bleed out like that. These were cousins' weddings who had flown to our wedding so it would have been an awful slight to not attend because 'JaneMD and HubbyJD couldn't afford it.' That would not have gone over well. Hubby JD also claims he is never moving again.

While I understand it's the 'one time/emergency' expenses that got us, but things like that will always come up. Time to review the budget and try to adjust to what we actually spend. And then evaluate where to cut things out.