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Rx for a Bloated Budget
By Kenia Perez Monday June 21, 2010
Kenia Perez works in the aerospace industry in California.Time and money
Give yourself a week to do a task, it will take a week—but give yourself two days, and it will take two days.
This phenomenon is known as Parkinson’s Law, which states: “Work expands so as to fill the time available for its completion.”
The same is true of spending and money.
When budgets expand
The minute you get a raise or even some birthday money, enter Parkinson’s Law: Your spending expands to consume the additional cash.
Here are three ways to regain control over your cashflow:
- Shrink your numbers: If you give yourself $500 to spend on groceries each month, you will. Lower that limit and you'll surprise yourself by spending less.
- Be skeptical about “needs”: If you get a $200 raise, don't justify spending it because you "neeeeed" a bigger car, new dishwasher.
- Keep percentages steady. I strive toward the 50/30/20 Budget (you may prefer the Save-to-Spend Budget plan). Because these budgets rely on percentages, as my earnings go up, my savings and spending also increase—but they remain in balance.
Don't guess: Read one month's bank statement and report back.
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Kenia Perez works in the aerospace industry in California. |
Poll
Please pick the statement that best reflects your views. (You can only pick one.)
Do you rely on a budget?
Yes, I live by it. - 30.5%
I've created one, but don't find it useful. - 7.1%
I have a mental budget - it's working. - 20.3%
I have a mental budget - it's not working. - 23.7%
What budget? - 18.4%
Total votes: 777
The voting for this poll has ended on: 21 Jul 2010 - 00:00
This post was also featured on Amy Applebaum.
Comments
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Written by Jaime B, June 21, 2010
lol, I need another poll category. I setup budgets periodically and kinda sorta follow them. Mostly I've been using them as a mental guide of my savings goals and how little I need to spend to reach them, rather than ironclad spending contracts. I've been working on building realistic budgets and holding myself to them, but I'm lazy about doing the daily/weekly tracking to really make them work.
Written by Sunny, June 21, 2010
I MUST earn more to meet my budget!
With all that I save, I'm still spending.
With all that I save, I'm still spending.
Written by Alison Armstrong, June 21, 2010
Target is my downfall! I swear I'm there at least once a week, and even if I go with a list in hand, I always find another $25+ of items that I totally "need." Going with my husband just makes it worse because he's the same way. I just looked at last month's bank statement, and I there is no way I could name everything that I bought there. UGH!
Written by Tracey, June 21, 2010
as a single mom with three teenage sons, I HAVE to budget or I'll drown in past due notices. That being said, "Food" money often is spent at a drive through on the way to (insert any sport here) practice, and I had NO idea it was so expensive to insure a 16 year old to drive the family clunker, which is also MY car. sometimes I think it'd just be easier to pay ALL bills at the beginning of each month and make do on what's left for gas and groceries. and Saving? on a single mom's budget? let's just say I'm trying really hard!
Written by Sarah, June 21, 2010
I have a lot of money going towards my credit card every month (about 30%). I have student loans coming due in about a year, and about 20% of my paycheck will be going towards that. My goal is to get rid of my credit card debt before then so I wont be stressed about having too much to pay back every month. Another problem is the grocery bill. I used to live on $40 a week, but since I moved to the city I seem to be spending about twice as much! I can't figure it out! That is something I really need to work on.
Written by Single Mom Rich Mom, June 21, 2010
I started doing this method of budgeting 9 years ago after failing miserably at every other method. And I'm an accountant by trade for heaven's sake.
Here's my post from a few days ago on how my budget broke down to 56/24/20 back then:
http://www.singlemomrichmom.com/2010/06/how-to-get-out-of-debt-part-3-ditch.html
And this last year when I started tracking I was at 17/17/66:
http://www.singlemomrichmom.com/2010/06/ratio-nal-way-to-retire-early.html
This next year in retirement, I hope to be at 50/50/0. Having a decent amount of variable expenses has made the journey from out of debt to retirement so much less painful.
Here's my post from a few days ago on how my budget broke down to 56/24/20 back then:
http://www.singlemomrichmom.com/2010/06/how-to-get-out-of-debt-part-3-ditch.html
And this last year when I started tracking I was at 17/17/66:
http://www.singlemomrichmom.com/2010/06/ratio-nal-way-to-retire-early.html
This next year in retirement, I hope to be at 50/50/0. Having a decent amount of variable expenses has made the journey from out of debt to retirement so much less painful.
Written by kateh, June 21, 2010
I LOVE the 50/30/20 budget. I immediately changed my personal budget sheet after that article came out!!
Written by Laura P., June 21, 2010
My gym membership is my biggest budget buster. I swear it's the only way I'll commit to fitness, even though there are much cheaper alternatives.
Laura P.
@fatwallet
Laura P.
@fatwallet
Written by Stephanie, June 21, 2010
Thanks for sharing the 50/30/20 budget - it's a great tool to see where all of my money is really going.
Written by Daisy A., June 21, 2010
I started more cut backs on my already tight spending last week. I'm determined to payoff credit cards that's what's eating up what should be extra money to save or use for cash payments. If this don't work I don't know what else to cut back on. Everything else is chopped back as far as I can chop them. I even cut back 10.00 a week on my savings to help pay off the cards.
Written by Naomi, June 21, 2010
Thank you for sharing the 50-30-20 budget. I'm a long way off the ideal and it will not be an easy task. But I can try.
Written by Cate, June 21, 2010
This is the first time I've actually sat down to calculate my budget by those categories. My needs were 51 and my savings is 15, so I'm not doing too badly. However, in the fall I'm going to start school, and I have no clue how the thousands of dollars of tuition could possibly fit into this budget.
So this brings up a question about student budgets. The program I'm going into will at least triple my income (based on the absolute lowest starting pay for my new career), so I know it's worth it, and it will only last one year, but I just don't know how I'll be able to continue saving without accruing massive student loans, which seems counterintuitive to me. Does anyone have any advice for working folks trying to put themselves through school and still keep their saving goals in place?
I'd also like to share a new budgeting method that's worked really well for my household. My boyfriend and I tend to go a little overboard on grocery spending (we're both very picky foodies). To keep this in check, we started a joint checking account (which is free at our local credit union) to be used only for groceries. We have an automatic transfer of a limited amount of money go into that account each week, and we have to stay within those boundaries. This has really helped rein in our spending, and I would imagine it could work for other people's problem areas as well.
Whew, that was long-winded...
So this brings up a question about student budgets. The program I'm going into will at least triple my income (based on the absolute lowest starting pay for my new career), so I know it's worth it, and it will only last one year, but I just don't know how I'll be able to continue saving without accruing massive student loans, which seems counterintuitive to me. Does anyone have any advice for working folks trying to put themselves through school and still keep their saving goals in place?
I'd also like to share a new budgeting method that's worked really well for my household. My boyfriend and I tend to go a little overboard on grocery spending (we're both very picky foodies). To keep this in check, we started a joint checking account (which is free at our local credit union) to be used only for groceries. We have an automatic transfer of a limited amount of money go into that account each week, and we have to stay within those boundaries. This has really helped rein in our spending, and I would imagine it could work for other people's problem areas as well.
Whew, that was long-winded...
Written by Kenia, June 21, 2010
@Single Mom Rich Mom - Sounds like you've made incredible progress over time!! A 17/17/66 budget sounds absolutely amazing - definitely above and beyond most! Congrats on that achievement!
@Laura P. - I hear ya about going to the gym. I believe one's health is EXTREMELY important, and if having a gym membership is the only thing that will get you to exercise, then so be it. What gym do you go to? Have you considered cheaper alternatives? I go to 24hr fitness and pay $35/mo.
@Cate - Working to put yourself through school is definitely tough. At the very least, if I were you, I would try to put at least a small amount into an IRA or 401K, and also build up at least $500 for an emergency curveball fund (if you don't already have one). I have no idea what your situation is like, but even if you can only put aside $10/mo, I would recommend doing it to at least develop a HABIT of saving. I think that would be a better guarantee that you will save more, for when you do have more money to save in the future.
As for student loans, I highly recommend working with the financial aid office to develop a possible repayment scenario for after graduation. Take the borrowing amount (estimate the grand total for ALL years you'll be borrowing), and couple it with possible interest rates (they might be variable, but while talking to a financial aid counselor you might be able to determine a likely interest rate estimate) to figure out what your monthly payments will look like. Also do research to find out what type of income you can expect during your loan repayment period. In everything, be conservative. Doing this you'll A) make sure you don't borrow more than you can afford to pay monthly on your estimated income, and B) have a better idea of what your cashflow situation will look like in the future.
@Laura P. - I hear ya about going to the gym. I believe one's health is EXTREMELY important, and if having a gym membership is the only thing that will get you to exercise, then so be it. What gym do you go to? Have you considered cheaper alternatives? I go to 24hr fitness and pay $35/mo.
@Cate - Working to put yourself through school is definitely tough. At the very least, if I were you, I would try to put at least a small amount into an IRA or 401K, and also build up at least $500 for an emergency curveball fund (if you don't already have one). I have no idea what your situation is like, but even if you can only put aside $10/mo, I would recommend doing it to at least develop a HABIT of saving. I think that would be a better guarantee that you will save more, for when you do have more money to save in the future.
As for student loans, I highly recommend working with the financial aid office to develop a possible repayment scenario for after graduation. Take the borrowing amount (estimate the grand total for ALL years you'll be borrowing), and couple it with possible interest rates (they might be variable, but while talking to a financial aid counselor you might be able to determine a likely interest rate estimate) to figure out what your monthly payments will look like. Also do research to find out what type of income you can expect during your loan repayment period. In everything, be conservative. Doing this you'll A) make sure you don't borrow more than you can afford to pay monthly on your estimated income, and B) have a better idea of what your cashflow situation will look like in the future.
Written by Kenia, June 21, 2010
@Cate - I also wanted to point out that by establishing a set dollar amount in a seperate account for groceries, you are perfectly illustrating how to fight Parkinson's Law! :-D Awesome!
Written by Steph, June 22, 2010
Wow, I just ran the numbers and my typical monthly budget comes out to 51/19/30. Not too shabby. Although really, part of that 19% actually goes toward small incidental expenses like oil changes, doctor copays, etc. that aren't part of the regular monthly budget. Fortunately I designed the budget to have a decent amount of wiggle room for things like that.
My recent budget buster has been entertainment, too many dinners out lately. My husband and I are a tiny bit behind on our savings budget because of that (I'd say our actual, as opposed to our budget is closer to 50/30/20 at the moment), but the plan is to make up for it next month since it's a 3-paycheck month for me. Most of my first paycheck of the month will likely go toward catching us up on our IRA contributions for the year. And fortunately my weekends in July are packed with activities that don't require me to spend money, so I likely won't even have *time* to overspend on wants!
My recent budget buster has been entertainment, too many dinners out lately. My husband and I are a tiny bit behind on our savings budget because of that (I'd say our actual, as opposed to our budget is closer to 50/30/20 at the moment), but the plan is to make up for it next month since it's a 3-paycheck month for me. Most of my first paycheck of the month will likely go toward catching us up on our IRA contributions for the year. And fortunately my weekends in July are packed with activities that don't require me to spend money, so I likely won't even have *time* to overspend on wants!
Written by Sarah, June 22, 2010
Laura P, I understand your gym woes. I quit paying for the gym, and although I walk, I find it hard to get the weight training in at home. I would like to get another membership, but it just doesn't fit right now.
Written by Cate, June 22, 2010
@ Kenia-Thanks so much for your advice! I love the idea of just putting a small amount into an IRA a month. I can always scrape together a few bucks, and I think you're right that keeping in the habit of saving is the way to go.
Written by Jenna, June 23, 2010
Just a quick look at my statements for last month shows that I am spending about 40% and saving about 60% of my take home pay. This includes ALL spending (needs and wants) and ALL savings (savings account, Roth IRA). I don't have a written budget but I think I do pretty well for myself because I am disciplined about what I spend.
Written by Yazmin @ A Pretty Rock, June 30, 2010
Groceries & blow money. I'm pregnant, so the urge to eat a balanced normal amount of calories (I was on a diet before I got pregnant) and the 300 extra calories recommended for the baby is very much present. That's how I keep breaking the budget on my Groceries category. Throw in some tiredness or busy-ness since my schedule is not the same and the Blow category gets blown as well - eating out becomes easier.
I recognized the issue and reigned it in for about a month, but I'm back at the overspending. Not sure how I'm going to get back on track for those two categories.
I recognized the issue and reigned it in for about a month, but I'm back at the overspending. Not sure how I'm going to get back on track for those two categories.
Written by Bill Harvey, July 12, 2010
I am a small b'nessman whose income varies too much for a budget to be meaningful. But I have to salute anyone who includes both Pareto and Parkinson in her writing. And she'z real pretty too!
Bill Harvey
Bill Harvey
