Eye-opening look at my budget on YNAB

[elaine amj]

I've read MMM on and off for quite a while now and like it because I generally agree with the philosophies. Also, DH and I have always considered ourselves very frugal and that we save a lot. We tried a couple of times over the past couple of years to set up a budget but always fell off the wagon because it was so cumbersome. We figured we were doing great so the extra effort wasn't "worth it". We always patted ourselves on our back for having such good control on our finances. I have just realized that our realities are NOT matching my fantasy ideals of our finances.

This past weekend, after a lot of hemming and hawing, I set us up on YNAB for a 34 day trial. So far, I really like it. After I finished my first attempt at a budget, I was thrilled. It showed an extra $1000 available to budget and so this means I was right - we do have the ability to save more. Unfortunately, the next day, I realized I didn't account for paying off an $800 outstanding balance on our CC. So there goes that money this month. Still, I told myself we are just fine since we will be caught up next month and we are still putting away a lot into savings.

I then ran my net worth numbers....and we are well on track to reaching $750k in savings (my FIRE number) in 5 years. Awesome - I projected this 2 years ago and we are still on track. I went to bed feeling very pleased.

Today, I was reading some MMM posts and take a look at our current spending (since YNAB gives me the ability now). I just about fell out my chair! My YNAB budget has us spending about $4500 a month (not including mortgage/savings)! A FAR cry from my ideal of $2500 a month post-retirement. No wonder our CC bills have been ridiculous lately.

Obviously, I know all our numbers are just estimates and it will take some time to get a more realistic picture of our finances. But it's really hitting home how much we have been succumbing to lifestyle inflation (DH got a new job last year with a nice jump in pay). We have been becoming spenders without realizing it. I debated the value of YNAB for quite a while....but the ability to make conscious decisions on our current spending and KNOWING its impact on my FIRE goal will be worth its weight in gold.

I've been living under a rock thinking we're doing awesome for far too long. I need to flex some Mustachian muscle and get our pre-FIRE spending to about $3500/month (I think that will be still realistic for my $2500 post-FIRE budget since post-FIRE my 2 kids will be in college and we can downsize to 1 car and drop the work expenses).

[frompa]

elaine amj - it's true that solid facts can be real eye openers.  Good for you for pursuing the real picture.   

[humbleMouse]

Spending $4500/month not including mortgage/savings?  That sounds insane to me. 

[Bracken_Joy]

Tracking is so, so important for good financial health. My big 'a-ha' moment was realizing there are ALWAYS 'unusual' costs, every single month. I kept making excuses, and that next month would be different.. and it was, it was a different excuse!

But now we have a 56.8% savings rate, so it isn't all bad =)

[DaveR]

Great job tracking your actual numbers. Now that you know what you are dealing with, you can make informed decisions.

I think people get put off by budgeting because it's viewed as limiting. They think, "I'm doing pretty good, I don't need a budget." But "pretty good" usually means money is leaking out in lots of little ways. The valuable part of budgeting is the tracking since it gives you a clear picture of your finances. Knowing the numbers is what matters, not the arbitrary limits.

Anyway, great job! Now you are on track to manage your spending and hit your goals.

[elaine amj]

Spending $4500/month not including mortgage/savings?  That sounds insane to me.

I agree - it's absolutely insane. And we need to buckle down and do something about it!

It helps to see it laid out in dollars and cents. Not all that long ago, we survived on 1 income of $60k a year gross and felt comfortable with plenty of buffer. But between my going back to work and DH's new job, we have gradually succumbed to lifestyle inflation while still patting ourselves on the back saying how frugal we still are. Our bank balances have been dropping a little lately and DH has been saying for months now that we need to watch our spending. I admit I totally brushed him off, telling myself we were fine especially since his hefty raise was a nice buffer. We have frittered away so much money, particularly in this past year.

So many justifications...my newly single friend needed someone to hang out with (justified meals out, concert tickets, drinks, desserts, shopping), the new grocery store offers cheap take outs (weekly takeouts costing us 30% more than something I can fix at home), scored a great deal on a weekend trip (justified a LOT of eating out), the list goes on and on.

But that said, I am serious about FIRE. And if I can keep it a concrete, manageable goal and KNOW what we need to do to get there, WE CAN DO IT. I'm not looking for a deprived lifestyle. We are well aware that our current lives are just as important to us as our future lives. We want to have fun, make amazing memories with our kids, and not feel like we have to constantly pinch pennies. We just don't need to spend $54,000 a year to do that.

It's going to be interesting trying to buckle down with the Christmas season coming up. We like being generous and we have 3 big birthdays, an anniversary, a vacation PLUS Christmas all coming up in the next 3 months. But I know if we just whittle away at these numbers and realize that our choices NOW are not compatible with what we want our future to look like...we'll get there.

[MEJG]

I hear you.  We were in (are in) a similar situation.  Made it for a couple of years on $60,000 gross, still paying down debt aggressively and saving some + an international adoption.  This will probably be one of our highest earning years in our lifetimes- DH doesn't enjoy the job he's in and that is where the increase in income came in.  He'll stick it out for a while but in the long run it will affect his health/wellbeing and will probably move to a less lucrative position.  All of the sudden we're averaging 4500/month and it seems hard to cut back.  In reality we've been making a lot of excuses, I've been sick, we're all tired so we 'deserve' that grocery store premade meal or take out- when two years ago it wouldn't have crossed our minds.

Ynab has been key, as has setting goals.  I just joined the saving 75% of your income gauntlet for 2016..... and I must be crazy to try!

Here is to tracking, getting back t our previous frugal habits, not making excuses and becoming more badass.

[FiguringItOut]

YNAB makes you hyper aware of your daily spending and monthly budget (ask me how I know LOL)

It's a good thing in the long run, but at times creates stress.  Then when you adjust the budget for the better, stress goes away.  Until next time you stress and make further adjustments.  :)

YNAB is the best financial tool for personal finances that I can think of.  May not be the case for FI peps, but for those of us still on the road to FI, especially in the beginning it is irreplaceable.

[elaine amj]

I hear you.  We were in (are in) a similar situation.  Made it for a couple of years on $60,000 gross, still paying down debt aggressively and saving some + an international adoption.  This will probably be one of our highest earning years in our lifetimes- DH doesn't enjoy the job he's in and that is where the increase in income came in.  He'll stick it out for a while but in the long run it will affect his health/wellbeing and will probably move to a less lucrative position.  All of the sudden we're averaging 4500/month and it seems hard to cut back.  In reality we've been making a lot of excuses, I've been sick, we're all tired so we 'deserve' that grocery store premade meal or take out- when two years ago it wouldn't have crossed our minds.

Ynab has been key, as has setting goals.  I just joined the saving 75% of your income gauntlet for 2016..... and I must be crazy to try!

Here is to tracking, getting back t our previous frugal habits, not making excuses and becoming more badass.

That's exactly what I mean. A few years ago, if I ate out for lunch at work, I refused to spend more than $6/meal. Now, it's more like $10-20/lunch on average. We had friends over frequently instead and prided ourselves on being able to prepare frugal meals (while never giving that impression to our guests). A concert or ticketed event was a rare indulgence. So many of the things we now consider "normal" was inconceivable back then. We need to create the "normal" that we want for our lives and looking at the black and white numbers is helping make it clear to me that what we're doing now is not aligned with our goals.

I will admit it's hard to look at this picture of myself. I'm not as frugal as I thought I was. Glad I'm doing it now when there's still plenty of time to take back control of our future!

[La Bibliotecaria Feroz]

I'm also trying out YNAB this week. We don't spend that much, but it really made me notice that we are living on NEXT month's money. Not even this month's. It shows up being like $1800 overbudget. Yikes.

[elaine amj]

I'm also trying out YNAB this week. We don't spend that much, but it really made me notice that we are living on NEXT month's money. Not even this month's. It shows up being like $1800 overbudget. Yikes.

Ouch!

I spent tonight recategorizing everything so that YNAB tells me what I want to know. At first my categories were everyday expenses, monthly bills, etc etc. Given what I discovered today, I switched it up to Living Expenses (bills, taxes, groceries, household, etc) and Fun Expenses (Restaurants, Entertainment+, Vacation, etc). I am hoping this will help me focus more on what I need vs what I want. Still having a very hard time cutting back unfortunately. Running into a mental block of "I don't want a deprived life! Gotta keep looking for cuts that don't hurt".

On top of that, I walked in the door today to discover our 3 yr old oven is busted. Turns out it is the control panel. DH called around and gets told it will be $100-$130 and take 3-4 months for the part to come in. What?! Why didn't we buy from Costco instead of Sears? Then I checked Costco and gulped when I saw ovens start at $1k and up. Eek. Thankfully, DH kept calling around and after a few calls, found a place that can get us the part for just $105 in 2-3 weeks. The internet company's main office turned out to be only a half hour's drive away. PLUS they have a 1 yr return policy in case it's the wrong part or the fix doesn't work. (Sears had a no refund policy for this part). My DH rocks :)

[GetItRight]

Using Mint religiously was a turning point for me. I was frugal prior to that, didn't have a shock of actually spending twice what I thought I did, but seeing every transaction and how it added up make me acutely aware of every minor purchase and the effect on my net worth.

I don't have a budget, and have no plan or desire to do so. I do watch spending and the trend of amounts in various categories. Trend after 2-3 months of changing nothing, then reacting, was a general decrease in spending. I prefer a general goal of minimizing spending, and maximizing debt repayment. Seeing the numbers in near real time allows me to actually act on that using previous months as a baseline. As others have said, recognizing that there will always be some random unexpected one time expense to blow each months budget is important. I just cash flow those things, but always look for the most cost effective way to deal with it... Minimize cash outlay to deal with it, maximize tax savings and CC rewards where applicable.