Did Your Spending Surprise You?

[mb]

Confession: I've never tracked expenses or had a family budget.

DW and I have always been pretty good savers, typically maxing out the before tax investment options as well as saving and investing a fair amount after taxes so I figured as long as the savings side of the equation is ok then I'm not going to worry about the spending part.

Besides in our house the division of resposibilities is that she pays the bills and I do the investments. I think that I have by far the better job and didn't want to risk altering the status quo.

Well partly because of this forum as of January 1, I started to track and to some extent categorize monthly spending.

First having once been an engineer I did a "$ Balance" and decided that spending is equal to gross income minus taxes minus net investments all of which I know and estimated expenses from that equation for a couple of previous year.

So anyway now that we are 8 months into 2006, I find that we are spending about $15k more per year that the estimate and I'm not sure why :P (Part of it maybe things like tax deferred medical spending accounts that I'm not properly accounting for. Have to look into that.)

I am also having a lot of converations along the lines of the following:

HOLY CRAP honey have you seen the Visa bill!?

Yes.

How come it's so much? Is it wrong?

Well the Tahoe trip is on it and DDs horse camp and DSs B-ball camp. You did know about them? Right?

Well, umm, yes, umm, I guess, umm . . . . . . .

(thinking)

So but this is an anamoly? These are one time things right?

Well, the anamolous, one time things that will be on next months bill are . . . .

Oh

DD just got her braces off. DS now has them. They aren't cheap! We recently had a conversation about even more braces!

Honey I talked to the orthodontist and my teeth are crooked and I think I'm going to get braces.

I thought that only kids got braces?

No, a lot of adults are getting them.

Um, ok . . . . . . .

(thinking)

How much is this going to cost?

$$$

(thinking, another negative hit to the expense estimate, thinking, thinking)

Honey your're 48 (negative points for that, didn't think enough), we've been married 26 years (dang, more negative points, the way it came out the implication is that her looks no longer matter) AND YOU LOOK GREAT (a few points for that but I'm still way negative) do you really need braces?



(With a hint of frost in her voice)

I scheduled an appointment and I think I'm going to get them.

(Realizing the battle is lost and it is best to retreat and fight another day)

OK

I have always thought that I had a pretty good "intuitive" feel for the expenses but since January I have been a bit surprised by our expenses and where the money is going. It makes it easy to understand how some get into money problems and why money causes so many marital problems. (We have been lucky in that for the most part we have had two fairly good incomes, have natural saving tendencies and have never had a major finanical set back from a layoff, illness, etc.)

My excuse for the long post is that I was wondering if many of you were surprised when you first starting looking at expenses and did you choose to do anything about the surprises and did you benefit from it? (Although maybe I just wanted to vent on my "blown budget.")

MB

[mathjak107]

i dont have to look at our budget to be surprised.there is always to much month left at the end of the money lately.

[shorttimer]

Yes, it is rare that someone tracks expenses and doesn't get surprised. We found all kinds of things to cut down on, but then again we had two motivated people who wanted more options than to work until we were 80.
Most of the time, it is things like food out, clothes or just plain old junk. If you stroll in the mall you can spend a ton of money on things you don't need or really want. They are just there.

Tracking helped us define a budget. About ten years ago we started out with seven motorcycles, two boats (sail and motor) and four cars. What were we thinking.Our lives were so complicated back then and all the repairs, insurance, slip fees, registration fees were ridiculous. No wonder why we didn't have any money. At least we knew enough to save in the 401 every year which saved us.

Anyway we greatly simplified, got the kids lauched from the house and saved like crazy people. DH is only working to 55 for the benefits and these extra few years will make a huge difference in travel and other luxuries. He could have been out at about 52 if not for that.

[audreyh1]

I generate a monthly expenses report in Quicken - a couple of mouse clicks and instant report! So it's really easy to see where all the money is going by category. I've been doing this since almost forever, so no, there are no surprises.

I can imagine that if you're not the one paying the bills, the monthly expenses can be a huge surprise at first.

Audrey

[donheff]

Quote:

Originally Posted by mb Confession: I've never tracked expenses or had a family budget. My excuse for the long post is that I was wondering if many of you were surprised when you first starting looking at expenses and did you choose to do anything about the surprises and did you benefit from it? (Although maybe I just wanted to vent on my "blown budget.") MB

We were pretty much the same - no budget, but sufficient income to save a lot and not pay close attention to spending. I paid the bills on-line but DW verified all the items on the CCs. As ER approached I started tracking expenses and was horrified a bit surprised by how much we spend and on what. A fair amount goes away shortly (DDs expenses at NYU and a bunch of orthodontic and related medical expenses). Eating out covers a large portion of controllable discretionary expenses we can cut if we ever need to -- and a weekend house is a similar opportunity.

I can certainly see the possibility of conflict if spouses don't have compatible philosophies about spending and saving.

[LOL!]

Hey mb, I really enjoyed your post maybe because could've been written by me with a little variation.* We're about the same age, son and daughter go to basketball camps,* DD has braces, and we don't have a budget anymore.

Each year I figure out how much we spent by adding up salaries and subtracting taxes paid and money put into savings&investments.* We must have spent the missing money.

I use MSMoney to track things, but in a coarse way.* For example, we try to put all expenses on a credit card, but I have category called "CreditCard" which is not broken down any further because I just don't care to know how much we spend eating out (right, donheff?).

My spouse used to pay the bills before online banking.* Now I pay the bills.* My spouse used to be interested in investing, but her investment club has turned into a social club.* Thus we can talk pleasantly about expenses and investments without mis-understandings because we've both been there, done that.

We do have the same conversation as you do, "Hey, what's this $159 charge to DAL BUR?"* "Oh, those are the tickets to the soccer game."* "??@#$?"

So while I am occassionally surprised by an individual expense, I am not surprised by overall expenses.* The exercise of figuring out how much we spend each year does help me in determining our "number".* It also shows that if we had to, we could probably live more frugally.

[TromboneAl]

When I got to your fifth paragraph, I scrolled back up to see if this was a post that I had made a few years ago. IOW, yes, I went through exactly the same process that you did, and I think I made a similar post. Then I see that LOL had a similar experience. Funny.

For me:

I estimated that we were spending 45K per year.
I found that we were actually spending about 65K per year.
We are now spending 30K per year.

[d]

many years ago i tracked every dollar spent -- did this monthly for several years. i was absolutely amazed at how much was being wasted. doing this premanently changed my spending habits, and as a result, my retirement portfolio. it was clearly the single best financial move i ever made.

Quote:

Originally Posted by d many years ago i tracked every dollar spent -- did this monthly for several years. i was absolutely amazed at how much was being wasted. doing this premanently changed my spending habits, and as a result, my retirement portfolio. it was clearly the single best financial move i ever made.

I did this as well about 25 years ago. It was my first step in getting out of debt and then building savings from there on out. I learned that Monthly Bills are the 'real enemy' -

[wabmester]

I'm afraid to track expenses because I know we're spending a lot.* *But as long as our net worth is growing faster than inflation,* I don't care.* *In fact, it comforts me to know that we have a ton of discretionary expenses we can trim if we need to.

[d]

Quote:

I learned that Monthly Bills are the 'real enemy'

while the big items clearly have a big impact, i found the petty cash slipping through my fingers that added up to a not inconsequential total

[BarbaraAnne]

I have tracked family finances since the 1980's as we were determined to be financially independent.* Before Quicken there was Managing Your Money and before that a program called Financier that came our in the mid-80's, when the first PC's came out.*

Every year I come up with the budgets for the year, but they are subject to change.* We just make sure we are aware of what we are spending and that it's worth it.* Our philosophy is that we can have anything we want but not everything we want.* It is truly about choices.*

Having children at home (and college) does change things.* Those with young children may not yet comprehend how expensive kids are with all of their activities (athletics, school functions, college expenses, etc), especially as they get older.* Once a kid is a teen it can be thousands for one sport alone or for music lessons, band trips, etc.*

It is all worth it, however, because vacations, good times and watching your kids grow up are among *the joys of life.* By tracking the outgo however, we are make sure we are always aware of the financial side...

[LRS]

We've got the monthly bills pared down, it's the petty cash that we need to tame. I have a kid in high school and one in middle school. That's where a good deal of it goes: "Mom, I need $$ for ... " It used to be: "I need three empty juice cans and some paper clips", now it's just cash.

[LOL!]

Quote:

Originally Posted by Tawny Dangle .... That's where a good deal of it goes: "Mom, I need $$ for ... " It used to be: "I need three empty juice cans and some paper clips", now it's just cash.

In our family, the response is "You have your own money. If you need more, I'll give you $5 for washing the car, $5 for ...."

[AltaRed]

In the early years, it was mostly a matter of making sure the income met expenses and to cut back on a monthly basis if we had to. Once we had the mortgage paid off and were into investing, we didn't pay much attention to expenses.*

It was only about 6 years ago when I decided I really wanted to ER, that I started to watch where expenses were going, by quarter, in Quicken. DW and I looked over the data and decided where and how we were spending our money so that we knew what we needed in ER.... not as a means to necessarily cut back on living expsenses at the time... but what we needed in cash flow in our retirement years. Ran some calculators at the time and finally came across FIRECALC which confirmed we could..and we did.

Edit: It did surprise us to some degree when we looked at what we were spending and where it was going. But having been frugal anyway, we decided we really didn't need to cut back, except potentially in how often we ate out.

[Billy]

LOL!

Quote:

In our family, the response is "You have your own money. If you need more, I'll give you $5 for washing the car, $5 for ...."

Perfect! You are teaching them such valuable and practical fundamentals. It will bring them rewards for the rest of their lives. Good job!

Shortimer

Quote:

About ten years ago we started out with seven motorcycles, two boats (sail and motor) and four cars. What were we thinking.Our lives were so complicated back then and all the repairs, insurance, slip fees, registration fees were ridiculous. Anyway we greatly simplified…

Wow.. Good for you! From Retire to Simplicity: http://www.retireearlylifestyle.com/...simplicity.htm

The Department of Labor's Bureau of Labor Statistics calculates that car-ownership costs are the second-largest household expense in the United States. In fact, people in the average household spend almost as much on their cars as they do on food and health care combined for their entire family -- about $600 per month.

And from The Cost of Working:
http://www.retireearlylifestyle.com/cost_of_working.htm

Your second car costs you about $7,200 per year, and assuming state and federal taxes take 30% of your income, you'll need to earn $10,300 just to cover the costs of car ownership. *

Akaisha
Author, The Adventurer's Guide to Early Retirement

[REWahoo]

Probably because I had done some estimates and refined them over a couple of years, there were no real surprises when I stared capturing detailed expense information. Had I looked at our expenses prior to our two daughters graduating from school and getting off the payroll, I’m sure I would have been chanting the same mantra as mb: ‘HOLY CRAP honey have you seen the Visa bill!?

It has often been observed here that it is very important that both you and your spouse/SO be on the same page if you are going to be successful in achieving FIRE. Unless both of you are anal retentive bean counting penny pinchers have superior financial discipline, nothing illustrates this point more clearly than the exercise of tracking where your money goes.

Although I had a spreadsheet with a rough estimate of our annual expenses, we had never tracked our spending in detail. When DW retired in 2002 with the plan I follow her two years later, I knew we had to have a better understanding of our expenses before I put in my retirement papers and could sleep soundly at night. When I approached DW with the idea of keeping track of where we spent our money, she was less than enthusiastic…a lot less.

We’ve been married 38 years and DW’s taught me a lot about how to not piss her off seek alternative solutions if I wish to maintain domestic tranquility in the REW household. I took full responsibility for tracking everything except two line items in the budget: “food & household supplies” and “DW’s discretionary spending”. We agreed on an amount I would transfer to her checking account bi-weekly for those two spending categories, and she agreed to not spend beyond that amount. Knowing what those amounts were, all I had to do was track everything else.

[Nords]

Before I married, my spending didn't surprise me. I put aside 10% every paycheck, paid my rent, and bought enough gas & groceries to last the rest of the pay period. ("Emergency fund? Has the emergency stopped yet?!?") All remaining spending halted shortly afterward when my wallet emptied out. There's a reason that young adults derive so much apparent satisfaction from quiet beaches & free museums.

After we married, we kept a detailed budget. We kept paying ourselves that 10% first (plus the pay raises & promotions), paid the mortgage, and bought our gas & groceries. It was no surprise to learn that we were too busy working to spend much money.

To this day I can't remember ever turning to my spouse and saying "Honey, we're spending too much on ________ and we have to cut back."

[d]

Quote:

To this day I can't remember ever turning to my spouse and saying "Honey, we're spending too much on ________ and we have to cut back."

neither do i recall ever turning to my spouse and saying "honey, w're saving too much and we have to spend more."

[Nords]

Quote:

Originally Posted by d neither do i recall ever turning to my spouse and saying "honey, w're saving too much and we have to spend more."

I'm making more money in the stock market with my personal portfolio than I need to support my beach bum lifestyle.* Does that mean I should:
- give it all to charity,
- give it to my kid, who has a much longer "needs" list than I ever will,
- stop taking needless risks and put it all in CDs, or
- keep investing it to defray my putative long-term care expenses?

Or should I just stop repairing my longboard and go buy a new one?