Budget Assessment 1

There have been a number of things that have occurred recently that have brought a budget re-assessment to the top of our financial to-do list. The biggies were deciding to enroll the boys in pre-school as early as possible, paying off our medical debt (again) only to have a medical emergency put us right back in debt (again), practically wiping out the e-fund to support S’ business, and the realization that we have been overspending on certain budgetary items for months which had been masked by the complicated system we created for ourselves with the credit card.

I’ve written more about each of these factors in other posts as they were occurring but as they say, hindsight is 20/20. Regarding the boys’ preschool and S’ business, I have no second thoughts that we made the right decision although how to pay for them is still up in the air. As for the medical debt and the credit card, they reveal a major flaw in our debt repayment plan and current budget: we just don’t have enough budgeted to cover our medical expenses and our household/ grocery expenses. Our mission to pay off our debt but having a limited income to do so was forcing us to cut budget items that, now obvious, couldn’t take any more cutting. What we ended up doing was “robbing Peter to pay Paul”.

Here’s the budget that we were trying to adhere to (and failing) by amount, percentage of after tax income, and category:

$1,215  30%      Rent & Utilities: gas, electric, sewer, water

   $580  15%      Insurance: Health, life, disability

   $270    7%     Cars: insurance and fuel

   $135    3%     Tech: phones, internet, Netflix

   $650  16%      Household: Groceries, diapers, toiletries, pets, etc

   $180    5%     Extraneous/ Fun: haircuts, clothing, dining out, projects

     $60    2%     Medical/ Savings

   $910  23%      Debt: minimum payments

$4,000              Total after tax income

The only income we can count on is my bi-monthly pay check so that is what our monthly budget was based on. Extra income from my etsy sites, selling stuff off, tax returns, etc. go towards saving for one-time items that we need, like new tires. Once there’s enough set aside for the item, we make the purchase. We did a fairly good job of estimating what one-time items we might need and what extra income we can expect so far this year except that our extra income is frequently needed to cover the overages in our budget and we added a biggie with the pre-school decision.

I’m pretty much maxed out on bringing more income to the table. S is currently not bringing any income as he continues to focus on building his business up. Given the pitfalls we’ve faced trying to get his business up and running, we expect that his business will not be a significant contributor to the budget this year as most income will be put back into the business. Hopefully, next year we will start to see some profit. Options here include S holding on the business so he can find evening and weekend work to bring in some income or finding full time work which means the boys would have to go into daycare. Currently, we plan on sticking with the original plan of S focusing primarily on our sons (especially in light of the delays one of the boys is experiencing) and part-time on his business.

This is turning into a lengthy post so I’m going to end here. I’ll follow-up later with an assessment of each of our budget categories and how we might make adjustments to get our spending and budget aligned.