Do you ever get the feeling that you're the only one skipping dessert or passing on that extra cocktail to save a few bucks? How about opting for a night in rather than splurging on a pair of tickets to a hot show? Or starting a new season without any new clothes?
Does it feel worthwhile when you run the numbers at the end of the week, month, or quarter? Does your progress help keep you motivated?
As painstakingly arduous as it may feel to relentlessly stay on top of a your budget for any significant length of time, there are some important pieces of information that can be gathered in the process.
Over the past ten months I've been able answer some questions about my finances that may have been nearly impossible without that data I've collected.
Here are some of the reasons that I chose to obsessively budget for an entire year:
Determine Your Average Monthly Budget
First and foremost, many of us want to know exactly how much money we need to survive. The answer to this question gives us the ability to make decisions about our career, lifestyle, and future retirement.
Can we afford to take a lower paying job? Is there room in the budget for a real vacation? How much will we need to retire?
For the first ten months of 2014, my average monthly budget was $2,295.19* or the equivalent of approximately $27,500.00.
This is significantly less than my earnings for the past several years and revealed that I could afford a pay cut or a break from the workforce. It's part of what gave me the confidence to drop down to part-time for a few months.
*Note: This takes into account the outliners of the past two months – $1,952.90 and $2,714.27. In a normal month, I won't be working off my bare bones budget, nor will I be splurge on three major expenses while simultaneously blowing my food & drink budget, as seen in my October budget review.
Build Larger Expenses Into Your Budget Throughout The Year
I would prefer to never be hit with an unexpected expense over $50, however, larger expenses occur and are difficult to avoid.
Within the first few months of detailed budgeting, I was able to find several recurring expenses that could be proactively dealt with.
Instead of dropping $663 + $100 for my annual car insurance premium and registration, I've built these expenses into my budget in monthly manageable chunks ($55 + $10).
I've done the same thing with my annual expenses for the dentist ($328), Christmas ($500), haircuts ($200), hosting ($123.36), and my alarm system ($239.40).
I've noticed that gifts have eaten a solid chunk of my budget every month. With three known weddings next year, it wouldn't hurt to start saving monthly for gifts ($300) and travel (estimated at $500-$1,000).
Look For Additional Ways To Save
What monthly expenses could be reduced or eliminated completely? Are there creative workarounds that could be applied?
Every expense is worth a second look and even small changes can add up over the course of the year.
Here are a few expenses that I'm in the process of examining:
– Adobe Photoshop subscription ($21.84)
Are there free or lower cost options for creating blog images?
– Health insurance ($195.02)
Can an employer cover this expense? It will free up an additional $2,340.24 per year.
– Dentist fund ($27.33)
Can an employer cover this expense? It will free up an additional $327.96 per year.
– Hosting ($10.28)
Can I generate at least $123.36 from Google Adsense to cover this expense?
A monthly budget a constantly evolving tool that will continue to shift and change through different phases of your life. Budgeting closely for a year will give you a solid foundation to work from and navigate with confidence going forward.
Readers: Have you obsessively budgeted for at least a year? How have your finances benefitted?