Look at your past budgets. You may be amazed

Illustration of Information Search Metaphor
KJ: We just went through this exercise, and it was quite interesting. I have used Quicken since the beginning of (my) time with an income, so I have quite a few years of history to be able to reference. I can slice and dice the data lots of different ways if I want to hone in on certain categories or just look at the high level information. What we did was look back to year-by-year spending since 2010 (the year we got married). With a good four-year history of LOTS of changes with moving homes, buying two cars, taking several (great!) trips, and adding in some home renovation costs in recent years, there was a lot to look at! Talk about a lot of one-off items that have come up over this (relatively) short time period! Amazing to look at the total figures that include the items that aren’t really part of a standard budget (well at least not what I would consider a standard budget). I like to call many of these items rotating, non-recurring budget categories. You never really know what will fit into this bucket – sometimes it may be a fun expense like a trip, but other times it may be a not-so-fun expense like a roof repair. Either way, you need to be sure you’re building some extra fluff into your savings to allow for these items that invariably come up.

AJ: Ideally, this is a once-a-month exercise unless you’re experiencing months of rapid change. I love to see the trends in our spending by category and trying to identify what it was that caused significant variances. This year, we’ve exceeded our budget pretty significantly in order to put down roots in a new-to-us home that we plan to enjoy for many, many years. Some years we’ve taken more frequent vacations. Regardless, it’s powerful to be able to look back and track where we’ve been and where we’ve seen the greatest shifts in our spending.

As we look forward towards a more lean, less project-driven year of budgeting, we’ll look to reset specific budget areas to help compensate for our heavy year of spending. Reassessing the budget based on our historical trends helps give us a place to start from and get back to knowing that we’ve been able to work within those budgets previously.

Understand why you save
At times, you’re saving for a very specific purpose, like retirement, children’s education, a planned trip, a car, etc. Other times, you’re simply saving for those unknowns. It’s good to build up some extra buffer as you don’t always know the timing of some expenses. You (generally) have control over some of those larger purchases like a home renovation, but a broken faucet or malfunctioning product may push forward the timeline from what you had imagined.

Our primary budgeting plan for when we have those rotating, non-recurring expenses is to try as best we can to shuffle our month’s budget around to absorb as much of the cost. Then, for whatever we can’t make work in the existing month, we add it as a “recoup” for what our goal is for subsequent months. While it seems like there isn’t an end in sight sometimes, our goal is to really hunker down and chip away at some of this in 2015 now that we’re past a lot of our home renovation projects.

AJ: The hunkering down and chipping away piece is where my monthly tracking notebook becomes especially crucial. Meals are planned more meticulously, excess spending is trimmed and wants are considered more thoughtfully. We know that we all have our tipping points though, so using our past years’ histories helps our expectations stay more realistic which is completely necessary. When I’m on a mission to cut spending things have a tendency to get a bit extreme! 🙂

    When was the last time you examined your past spending?
    Did you learn anything eye-opening about your habits?
    Share with us what changes you had to make.

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