Confession time, fam. I keep busting our budget. The whole thing doesn’t go up in flames, but category after category, month after month, I keep going over budget. So as I scrolled through the spreadsheet last month, I found myself wondering if this is lifestyle inflation at its undiagnosed finest…or do I need to adjust my budget?
$5 here, $20 here. It seems trivial, which is the bulk of the problem. Because the overage amount is something we can cover, it also seems like something we should be able to eliminate. So if you dream of playing Budget Doctor, here’s your chance. Do we need to be better about trimming costs or is it really time for a budget makeover?
Your Budget Should Fit Your Life
For the short term, budgets can be restricting. They might actually have to be, or they might be restricting by design. If you’re trying to move a huge mountain, you can’t fritter away money.
I lived in Budget Jail for a long time. I never froze my credit cards (in ice a la Confessions of a Shopaholic or digitally with the help of credit companies), but I spent a long time not using them. We tried to buy as little as possible.
Not only was I trying to correct for an out-of-control spending habit, but I had just bought a house and my husband and I were both paying off car loans. We had to tighten our budgeting belts then. Initially, our budget did restrict our spending simply because it had to. That was its job, its purpose.
This is not uncommon or unusual.
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But after I got my mindless spending under control and after we paid off our cars, we found some budget wiggle room. We took the money we normally put toward our car payments and made sure to max out our Roth IRAs. When we found additional income, we saved some, we paid some, we gave some, and we spent some.
Our budget fit our lives comfortably. In fact, our budget was so comfortable that for the past four years, I’ve been mostly just copying and pasting our budget from month to month.
Let Your Budget Change with You
The problem is that our lives are not copy-and-paste identical from month to month. The biggest hiccup I’ve never bothered to address (until now…that’s where you come in!) is the fact that our family grew and our budget never did.
When I was pregnant, I was like a squirrel stockpiling for winter. No, I’m not actually talking about eating. I was too busy enjoying morning-noon-and-night sickness for 30 weeks straight to do much of that. But I squirreled away as much money as I could since I knew I was taking an unpaid leave.
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As much as it would have been nice to relax our budget on our leave, the simple fact was that my husband’s income alone didn’t cover all of our expenses. Sure, we save 50% of our money each month, but I’m the breadwinner, not him. Back then, that meant there wasn’t enough bread to go around while I wasn’t working.
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And as for the two years since I’ve gone back to work, I can’t explain except to say I really thought we could make our existing budget work. I was so busy trying to not inflate our lifestyle that I forgot to make room for the additional life that needs thrive within our budget.
Do I Need to Adjust My Budget?
Rather than give us a blanket answer of yes or no to the budget adjustment, I thought it might be helpful to explore the areas that we specifically go over in on a fairly regular basis.
Our Water Bill
We’ve done quite a bit of work to address water use in our house. Low-flow shower heads, new toilets, a rain barrel, and generally being too stingy very eco-friendly by not watering the grass ever. In general, our water bill has always been high because of where we live and how we get our water, not necessarily because of how much water we use.
I’ve noticed over the past year, though, that our water bill is generally $10 to $15 more than what it used to be. Sometimes, it’s only $5 over. And once, we hit the budgeted amount on the nose. But it’s been kind of a bummer.
Part of me thinks we should work harder to curb our water use. But perhaps the more rational part of me now realizes there’s a toddler living in our home. Not only is he generally a mess-maker (how do their hands find Unidentifiable Sticky Mess wherever they go?!), but he’s also just taken a toe dip into potty training. There are extra showers, and there are extra loads of laundry. Should I adjust my budget or battle the water bill?
Our Grocery Budget
We never spent gobs on our grocery bill. But I battled it down from around $350 to $200 for two people.
And I was so proud of me. Rightly so! A $200 grocery budget for two adults is no small task. Especially considering that allowed for some organic options (thanks, Aldi!) and neither of us walked around hungry ever.
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To give ourselves a little bit of wiggle room, our grocery budget is set at $235 for the month. This allows for little splurges and also takes into account times when we don’t have our garden to rely on. Consistently, we busting through at $250 or even $275 (although I got a little lazy and counted the pumpkins and mums I bought at Aldi as groceries). Now that we have a third mouth to feed, do I adjust my budget? Perhaps comparing our spending the the USDA food plan charts for the past few months would help. OK, fine, I include it simply because it’s fascinating to me.
Our Spending Money
If I ever create a course, it’s going to be called The Lazy Budget for People Who are Kind of Meh on Spreadsheets and Tracking. (I know. Who do I think I am just giving away brilliant ideas like this?!) I like the idea of spreadsheets and tracking. But I also don’t really care to know how much I spent on dental floss each year. We don’t need to be that granular.
So we aren’t.
And here’s the category where that’s reflected most.
My husband and I used to split $300 a month for spending. What does that mean? Good question. The $300 meant that if we wanted to eat out or buy a new pair of shoes, it came out of this category. We also used it to cover prescription co-pays and postage stamps. Little odds and ends that didn’t really fit anywhere ended up here.
When our son was first born, it seemed logical enough to split the money in thirds. But now that HP is old enough to actually want to do certain activities and even–gasp!–buy toys and treats, I don’t know if it would make more sense to beef this up a bit. Or maybe this is just lifestyle inflation in disguise.
The One Budget Category I Keep Growing
There is one category of our budget that I’m happy to keep growing. No, I’m not talking about investing (though we do try to increase that as well). We’ve actually made a dedicated effort to boost our giving fund. We still aren’t going to break any records or win any awards for the amount of giving that we do, but it does make me really happy to make this a point of consideration when we look at our budget.
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Do I Have The Money to Adjust My Budget?
Now, I’ve given you a peek at the budget categories that might be suffering from a case of lifestyle inflation or might actually need to be increased, you probably need one additional piece of information to help you diagnose our budget dilemma. The money has to come from somewhere, right?
We’re fortunate enough to be in a situation where we could increase our budget categories by $50 or $100 collectively and not really feel it at all. Basically, our regular income can absorb it because we round down with what we expect to earn each month. That means that we built our original budget with some wiggle room. Right now, that wiggle room eventually makes its way to savings or investing after sitting as a buffer in our checking account.
(Don’t panic! We have a dedicated portion of our budget for short-term savings, extra mortgage payoffs, 529 investing, and Roths. It’s not all loosey goosey up in these spreadsheets.)
So we have the money to cover the adjusted budget. The question remains if we should do it, though. Once it’s set in spreadsheet stone, will this lead to a state of financial zen or are we going to face small lifestyle creep for the rest of our lives? Because I can see it from both sides, it seems wise to ask someone else. Is this a case of lifestyle inflation or do I need to adjust my budget for real?
So Tell Me…What would should I do? Do you think making budget adjustments post-kid is a good idea?
I think you need to expect spending to go to up when you have a kid. If you’d gotten a cat, you’d have new lines of vet bills / pet food / insurance and it would be really obvious the cost of the cat. Kids stuff is harder as it’s extra people food and, as you’ve mentioned more laundry.
So I would look at what you have to give up to get back into budget (I wouldn’t want to wash my kids clothes less in the winter as it’s mud and food everyday, but I don’t bath them every day eg)
Same for the fun money particularly – if splitting it 3 ways means you’re all missing out on stuff that makes life worth living, that needs to change if you can, if it’s stuff you don’t value much, cut back.
There’s also actual inflation to consider, so costs will have gone up in 4 years and that may partly explain the water bill eg?
Just my 2c 🙂 All the best!
Oh, the laundry! LOL
You’re right, though. I think I will pay close attention to this month if we go over and *why*. You’re right that we don’t want to miss out!
How are you dealing with inflation or cost increases due to trade wars?
In a month or so we have a related post on If one should lifestyle inflate just because one can. I still don’t know the answer. I do know these past couple years have been full of delayed spending (cars, renovation, appliances) happening all at once.
I’m not 😉
But that’s a really good point. That could also account for some our grocery issue!
I vote for adjusting your budget! What you spend on groceries is incredibly low so bumping it up a bit seems reasonable now that you have a whole extra person. Same for the spending category. I have a separate kiddo spending category from our own. It’s for toys, treats, school stuff, teacher gifts, etc. Sounds like you’re doing great in all the areas of saving and investing. I think giving yourself a little extra room in your budget will have a positive psychological effect since you won’t see it as “exceeding your budget” every month anymore.
It really is so psychological, isn’t it? That’s a good point!
It’s sooo hard to say because it’s a very personal decision. I think it does make sense that your budget would grow a little with a 3rd person, but I think it’s a trial and error, adjust month to month until you get to a point of where things are working for you all.
That’s a good idea! I suppose we could try it out for a month and see!
My two cents…increase the budget in the areas of true needs – water and food. It makes sense that 3 people are going to use more than 2, and your budget should reflect that. For the spending, might it be logical to set a separate category and budget for HP spending?
If that’s what’s consistently causing you to go over the $300 bust it out and keep tabs on it separately. Or just keep it simplified and adjust the amount up, cause yes it makes sense you’ll have to modify your budget post kid. 🙂
I think it mostly is him that pushes us over in our general spending category. And it’s also me because he doesn’t actually ask to buy himself new pajamas, you know?! So you’re probably right that I should just keep an eye on that! 😀
I new to a more granular budget tracking and used to rely on the total I saw leave the bank each month. It’s been good for us to keep an eye on spending and we’re really upped our saving by doing it. However, I created our budget by tracking spending over 12 months then identifying if any of the categories were costing us more than the value we gained. Basically we cut back on personal spending, random household goods spending, grocery and eating out. But I recognize that these budget lines can’t stay static. There are costs that we can’t control like inflation and municipal fees. Our water/sewer/garbage bill has increased 60% over the last 10 years and 4.5% in the last year but our usage has remained the same. It’s an extreme example but all of those increases are due to price and fee increases by the city so we’ve had to adjust our budget. Same with our internet – a year ago it was $63 and now it’s $68/month. And with groceries I noticed that the milk that used to be 1.79 a gallon is now 2.39. Seeing these set costs increase helps me recognize that some of our flexible costs are probably increasing too. And we don’t even have a new kid in the house to account for. (We do have a dog that cost an extra $4k in medical last year so that was our budget buster).
On my master budget spreadsheet page (separate from the monthly tracking budget page of course) I’ve started including the federal COLA for each year. I know that inflation doesn’t increase evening across all categories but it helps give me a benchmark for my total annual spending increases to see if it looks like lifestyle inflation or just regular inflation.
And that grocery spending? Man, I don’t know if it’s regional differences, or that I just eat too much cheese but we’re having a good month if we keep groceries under $400/month for 2 people (which does include $40 for dog food – maybe I should get smaller dogs…)
Oooooh, cheese! It’s probably regional. We are lucky that we live close to an Aldi and a local grocer that sells “seconds”. Lots of discounted produce! I love the idea of looking at the federal COLA from year to year. Thanks for that idea 😀
You can use the bls calculator to get the inflation numbers. https://data.bls.gov/cgi-bin/cpicalc.pl
You will have no choice but to adjust your budget every year. There are things you can’t control with children. Wait until he gets invited to birthday parties…
Ha! 😀 That’s a good point, Sonia!
You seem to be consistently meeting your spending goals, so I would vote for increasing your budget. You’re talking about a very small amount that you can afford in response to a totally reasonable extra expense (a whole other person with needs and wants!). You’ve internalized the value of saving, and you’ve been very deliberate with your spending for a long time, so I can’t imagine that adding $50-100 to your budget will be the start of a habit of increasingly reckless spending.
Definitely increase the water budget. It sounds like you’re doing what you can, and still coming in over budget which is a sign that your number isn’t realistic.
Like the others, I’d vote that the grocery bill needs to be upped too. As for the rest, that’s a judgement call. It makes sense that you might need to spend a little more now that HP is cognizant of his wants and needs a little more often. But it could definitely lead to lifestyle inflation if you’re not careful. Then again, you’re a careful gal so maybe you should just trust in your frugal instincts.
Giiiiirl. Bump up your budget categories! Especially on water (and other utilities). The cost is the cost. You can try to reduce use as much as you want, but budgeting is just projected spending. Planned spending. If you KNOW your bill has increased over the years (which is completely 100% normal and to be expected), then put that S**t in the budget and move on! This goes for any utility or basic necessity – medicine, electricity, health insurance, home insurance, gas, garbage, phone, et al. The cost is what it is, to a large degree.
Grocery budget – boom – make it $300. That’s right. Push it even HIGHER. Give yourselves a little treat (fresh flowers, dessert, organic stuff you used to buy conventional, more premade or frozen options, designer cheese for a little date night cheese board) and pat yourself on the back for a relatively low cost but lifestyle enhancing budget addition. $300 for 3 humans per month – assuming you aren’t in consumer debt or negative cash flow each month – is completely fine and normal if you are meeting your other savings goals.
Change your budgeting mindset. There is a difference between budgeting and tracking spending. I track my spending meticulously – in hindsight – and I “budget” in the sense that I project my expected spending each year (not month) and set up those categories in Mint. But if I get off base, I don’t worry one bit or change course or stop myself from spending more in that category. So I can’t say I ‘budget’ in a restrictive sense of giving myself $X and stopping cold turkey when the money runs out. But I don’t have to – we save 40-50% of our income. And it sound like you don’t have to either (though I don’t know all your details).
When I exceeded my dining out budget for 2 years in a row by exactly the same margin, I simply increased my budget category for that for the next year. If I’m not going to make myself change my behavior, I may as wall make sure my budget projections are honest.
Oh, about that fun money. You and your spouse probably need more spending money over time, not less. You don’t need to share that with a baby/toddler/kiddo. That new person may eventually need their own category for fun money. But y’all do not need to be lumping all that in together and splitting a couple or three hundred bucks a month. Kids come with new budget categories! Add them as you will, but leave room for yourself in there too.