Posted by Thirtysomething Finance on November 30, 2009
Hi, everybody! I hope you all had a great Thanksgiving! Mine was very relaxing, and I got to spend some great QT with my family, including my brother, who lives on the west coast and isn’t in town all that often. It was great!
So last Wednesday was my favorite day of the month: PAYDAY! I get paid once a month and have a payday ritual that involves Quicken and 30-60 minutes. In a nutshell, this is the day my budget goes into action. So my paycheck goes in, and here’s what comes out (after Roth 401(k), cell phone (which is ~$60), FSA (flex spending account) ($125 per month), and a small charitable contribution to United Way (though I’m planning to make my larger contributions next year to United Way because I can direct these contributions right to my desired nonprofits, but I do right by my firm because United Way is our pet charity — FTW — sorry for that tangent):
1st – $1,746.84 (30-year fixed mortgage)
1st – ~$185 (HELOC — changes slightly each month)
1st – $244.53 (condo fees)
1st – $139.47 (college loan)
1st – $119 (electric bill)
9th – ~$250 (0% credit card balance — I’ll explain that one in a later post — must pay 2% of balance each month in order to keep my interest rate at 0%, so the actual amount decreases by about $6 each month)
15th – $804 (law school loans – federal consolidated and private)
Before the end of the month: $9.53 (Netflix) + cable and internet (~$93) + water bill (~$28) + $100 (housekeeper)
Total “fixed” costs (sidestepping whether I can or should reduce or eliminate certain aspects of this (i.e., Netflix, housekeeper, cable and internet, electric bill, water bill): $3,719.37
Since I finished paying Social Security tax for the year (as I’ve discussed before), my paycheck each month usually comes to about $7,800 (again, after Roth 401(k), cell phone, FSA, and United Way). I normally aim to leave myself about $1,000 for the month to spend on food, entertainment, cabs, etc., which should leave me with $3,080.63 that I can use to put towards outstanding debt, savings, etc.
For purposes of background (and I swear I’m going to do a post on this in more detail in the future, I already have an emergency fund in the amount of $15,000, along with student loans (some that I’m in a rush to pay off, and some that I’m not), my HELOC, and my 30 year fixed mortgage. So at this rate, I should be able to put about $3,000 towards reducing debt each month, right?
Wow, this is depressing. This month, I’ll be lucky to put $1,500 towards debt reduction!
Overspending on my credit card! One month it’s a gym membership. Another month, it’s certain medical stuff (long story — will tell you another day). This month it’s holiday bonuses to my assistant and doormen, a variety of charitable contributions, and my girlfriend’s birthday, which is dangerously close to the holidays!
While I can “afford” to make these payments each month (and I pay off my balance each month), I often find myself paying a good $1,000-$1,500 a month in credit card expenses. The other issue is timing — I make purchases from, say, the 28th of one month but then don’t pay the bill until the 26th of the next month. But when it comes to payday of the next month, I find myself skimping on my payments to debt reduction, which is a high priority of mine (how else am I going to get to sleep at night?) — so this is a big problem!
I think there are a few ways I can approach this problem:
1. Do I need to cut some discretionary spending?
2. Am I just not budgeting properly?
This is a topic I plan to address more in the future, but for now, I’m interested in knowing what you all think about these two questions. To answer my own questions, I think my problem is that (a) I’m not budgeting in enough detail and (b) I’m <b?not being realistic about some things. But another part of me thinks it’s good to set ambitious savings goals, even if they’re unrealistic, so that even if I don’t get all the way there, I’ll be pushing myself further than I might have otherwise.
Another question is how much you all spend each month on, say, food, entertainment, taxis (if you live in a city and don’t own a car…like me!), and miscellaneous other things that come up (like charitable contributions, holiday gifts, and other random things). And how do you budget for these sorts of things?
I’m really just interested in opinions here!