Is your budget really as smart as you think it is? One of the first things many people do when they are trying to get their financial fitness on is to create a budget. Undeniably, there is a requisite amount of trial and error involved in the first few passes. A budget should meet everyone’s needs, be grounded in reality, and align with your goals, values, and charitable priorities. Flexibility is key. For a long time, I was pretty pleased with our budget. After all, it allows us to save 42% of our after-tax income without factoring in any side hustle money. And that doesn’t even include the 10% of our pre-tax income that we each pay towards our respective pension plans every year. Clap louder. I can’t hear you this far away.
While it seems like we’re sitting pretty with our line items each month, it turns out that the true test of a budget involves the magic number twelve. That’s right. Yearly budgets lend an equally powerful perspective. Even if you already have your budget broken into percentages, the yearly totals either get a little harder to swallow when you think of what else you could be doing with some of that money, or the numbers will inspire you to take a victory lap around the kitchen table. I put our budget up to the test and multiplied every line item by 12. Below, I share just a snapshot of the good, the pricey, and the ridiculous:
The Good
Groceries – $200 or $2400/year
Yes, this includes alcohol. No, I don’t drink nearly as much as my Twitter account might lead you to believe. There’s something about a glass of Aldi Riesling that just needs to be tweeted! This amount also includes paper goods, like facial tissue (no moist Kleenex in this house!) and paper towels. Because we’re trying hard to be a bit more eco-friendly and because the couponer in me still hasn’t totally disappeared, I’m pretty good at stockpiling toilet paper and using paper towels sparingly. As for groceries, we’re still eating healthfully. Having an Aldi and several ethnic grocers nearby is a huge help. I’m totally proud to say I can feed two people on less than $2500 a year, especially given the fact that Mr. P has six stomachs AND a hollow leg.
Cable & Internet – $106 or $1272/year
Alright, I’ll hand over my personal finance blogging card now. I put cable in the good column! While it would be even better if it was nonexistent, this amount is the bundled cost of our cable and Internet since I whittled away the channels when Mr. P wasn’t looking Comcast raised the rates. It could be better, but it was also significantly worse. Plus, the internet keeps me connected to the personal finance blogosphere and all of your brilliance. So it’s a small price to pay, really.
The Pricey
Mortage – $960 or $11520/year
Most days, I hate our mortgage. I started hating it a lot more when I realized it was debt. But there are other times when I think about how close my home gets me to both sets of parents, our jobs, and nature. Then, I think it’s not so bad. In fact, because we deliberately chose to purchase a lot less of a house than what we were approved for and encouraged to buy, this number could be a whole lot worse. Still, I hope to slay the beast sooner rather than later. Who wouldn’t want almost an extra $12000 a year?
Property Taxes – $650 or $7800/year
This is a wild guess that has been surprisingly accurate aside from one heart-stopper of a bill. Our first full year as homeowners led to us getting absolutely hammered with a property tax increase. What I thought was going to be a huge battle was actually resolved with two phone calls and a copy of our house’s listing sheet and contract. Since then, the home values in our neighborhood have continued to rise, so I’m sure we’ll get hit again soon. Until then, I simply add an extra $50 a month to last year’s bill and hope to come in close.
The Ridiculous
Cell Phones – $80 each or $1920/year
If Bell* only knew what he started. We have unlimited talk, text, and data, but that is only because we’ve re-upped our contract so many times that they essentially grandfathered in a now-extinct plan. We are both currently locked into two-year contracts (thanks, Sprint!) that have about ten months to go. I have no idea what we will do after that. Part of me is really interested in investigating options like Republic Wireless, Google Fi, or even Cricket. But part of me also knows that we use a lot of our data on weekends when we visit my parents at their cottage up North. Sometimes, I even blog from my phone! Maybe I do need the newer iPhone with the bigger screen. I kid, I kid. All I know is that the only way I can really make this present number palatable is to list each phone separately on our budget as two different $80 line items. $160 a month seems like too much. $1920 a year is mind-numbingly absurd.
*Or Meucci or any of the other people who may have invented my iPhone’s ancestor.
So Tell Me…How do your expenses look when you consider the scope of the year? What should we do with our phones?
I am fairly happy with our expenses if we look at them this way. I am spending more like $600 per month on food, so $7,200, but there are four of us and some of us are vegetarian. Everything else is legit.
Your family is awesome when it comes to budgeting, Holly. I learned so much from you guys when I was too chicken to actually comment. Your blog was the first place I learned about zero-sum budgeting!
I’d love to trade grocery budgets with you but not property taxes – YIKES! We pay about half of that! My husband is the king of using paper towels…really. (He is sitting next to me and I’m glad he isn’t watching me type) OK – he likes to clean though, so I’ll keep him 🙂 I am working on a post in the next few weeks about phones. We use 4 different plans and we have a hot spot because we have different needs. We re-evaluate that one each year, but try not to spend forever on it either! I’m eyeing Google Fi right now myself, but have used Republic Wireless and Airvoice too! Loved them all. One kid uses Straight Talk and the other uses Virgin Mobile. I’ve read a ton (more than I could have ever dreamed of) about plans but I still use a crappy windows phone that cost $35… 🙂
It sounds like I need to pick your brain, Vicki! Do you all have Androids? I am hoping Tip Yourself will be available on Androids by the time my contract is up!
My kids have Iphones, hubby has a Nexus 4 and I have a Noika windows phone of all things… I am looking at Google Fi and Nexus 5X for $199. Nice to have gmail, google docs etc. all seamless with the Nexus phones. I hope Tip Yourself is on Android soon too! The windows store is just silly.
$208/month for groceries is amazing!
I’ve been with Selectel Wireless for app a year now. My phone runs on Verizon and I pay a flat $30/month. Data limit is 1G which I only reached once while traveling and using maps often. Mr G has StraightTalk for $40/month, which is closer to $45 with taxes and fees. His phone also runs on Verizon and he has more data. If you want to do some research check out the techmeshugana.com – Daley’s guides.
I will look into them for sure! My guess is you have Androids?
Yes, we do have androids but the iPhone works with many of these.
Great article! Looking at budget items from a yearly perspective can really make you think twice about some of your spending. This past year I cut my cable/internet bill from $120 to $40/month with SlingTV. That’s $960/year saved from the cable crooks! Not sure what you and Mr. P watch on TV but it may be something to look into.
That’s incredible! I cut back some of our channels, but he’s still holding on dearly to Discovery, Animal Planet, and the History Channel. I would love to find a better option!
Nothing like some Aldi Riesling to sooth the nerves. The food bill is fantastic. I think Mrs. G. and I are in the $350-$380/month range. And I don’t have a hollow leg! The mortgage and the property expenses seem about right for your neck of the woods. Cable bill is pretty good too. We currently pay $88/month (internet, land-line, and Netflix). The cell phone bill does appear high. I think we’re paying about half that. All in all, I say you and Mr. P. are entitled to a victory lap around the kitchen table. Nice job.
The cell phone bill drives me up the wall. What really makes me nervous is that Sprint is moving to leasing phones, not buying them outright. Which seems even more absurd!
$200 per month on groceries?! You’re my hero! I’ll follow your labels for some of my expenses.
The Good: cell phones $37.31 each or $985/year
The Pricey: car insurance on two vehicles $66.50 or $800/year. Not sure how this compares to the PF community, but with my friends I’m paying way more than I should.
The Ridiculous: Christmas $80+ or $1000+/year. This is actually pretty normal for a family of five, but to me it’s absolutely ridiculous. Looked at alternatives last season, and maybe I’ll actually change my ways this coming season.
As for your cell phones, maybe check out Virgin Mobile since you’re already on the Sprint network. I like them because I don’t mind having a crappy smart phone, and I don’t use a lot of data. They have other options that still might save you money.
I lump insurance and registration together, and ours is high. Because my husband drives a TSX…and we got in a hit-and-run last year. Since we claimed it, our rates went up. We pay $110 a month for two cars. Sigh.
Your food bill is great! (Confession – I use the select a size paper towels and tear them in half, just can’t help myself).
We are pretty good with the food and utility expenses, plus we have 4 1/2 years left on a property tax abatement, so $0 there for now! 🙂
We are bad on the cell phones, but that should drop soon with two of the phones being paid off. I would consider other plans, but we have 8 lines on our family plan, so this would affect everyone else and I’d hate to make our parents switch.
That’s definitely more complicated when there are many lines involved. Good for you for getting creative with paper towels. My husband comes from a family where they used a roll a day. Getting him to switch to rags has been a challenge!
When I actually looked back on our yearly spending closely over the past three years, I was surprised by a few things (who knew we actually spent MORE on electric than gas!). Some months, if I multiplied by 12, it would be sad and scary (since we pay car insurance semi-annually, etc.) 🙂
Ha! Yes. That would be scary. We pay our car insurance semi-annually (I’m not paying a convenience fee! No way! 🙂 ), but I budget $110 for it every month.
With you on those parasites who suck the blood from us on cable. If I could only find a way to watch football and my beloved British soccer, I would be golden.
Oh, and those real estate taxes in Taxachusetts. Aargh!!
If only the 12 could be a 1.2 but that would be cheating.
Our groceries including household items and beer/wine is closer to $1000 for a family of four. So yearly that is still an ouch.
You are killing it in the grocery department! I love ALDI and ethnic stores, too.
We really only budget on an annual basis, so I have to divide by 12 to figure out what I can spend. I think it’s a good way to do it because we factor in annual vacations, Christmas gifts, and other non-monthly things at the beginning of the year. It works for us.
I know I had to look at yearly and monthly because some things (like Prime, which we categorize as cable/internet) are annual expenses, and car insurance is semi-annual. So it was easier to just calculate both anyway.
So we’re good on cable/streaming (827 annual) and cell phone for 2 ($840 annual), but health insurance at 6720 annual is a big bite, and our groceries are almost the same.
When we consider our annual averages, I think our food budget looks out of control. We’re shopping around more, but it’s tough to crush this with so many dietary restrictions. :/
I get frustrated when I think about how much my phone costs me every year. Then I remember that half of it is a tax write-off now that I use it for business.
I also like thinking in yearly terms. Then I don’t miss renters insurance and my prime membership, which feels necessary when you don’t have a car.
Nice move with the tax write off, ZJ! Shifting back and forth between monthly and yearly perspectives suits me well.
NGL, I would pay $80 for unlimited data. My previous carrier charged that much for 300 local minutes and only 2GB data.
Your method of looking at the costs yearly instead of monthly is actually what prompted me to look into a better plan when I was going over my budget some months ago.
That’s reassuring. I don’t think I actually need that much data, but it is nice to know we don’t have to watch it. Still, I’m going to keep researching before my contract is up. That’s awesome that a yearly perspective helped you!
Your property tax rate is so much higher than mine! I paid about $3600 in property taxes this year. They’re up about $1000 over the last four years.
I pay $35-40/month for my Cricket wireless plan and I have a ton of data. BF pays about $55/month for his, but his employer pays for some of it so his out of pocket cost is very low.
I will definitely look into Cricket. Do you have an Android? Our property taxes are high. That’s suburbia outside of Chicago.
I have an iPhone, so does BF. We buy them in full from the Apple Store directly.
I have an Android with Cricket. They have a decent selection of phones to choose from. That said, I should have spent a bit more and gotten a better phone but went with a cheap option.