I just spent a bit of time staring at my budget for August. It doesn’t look so bad on the surface. I just paid my insurance bill and had enough money in that budget category to cover the bill, thanks to planning ahead. I’ve started putting away a little bit of money every month to pay for my eye doctor appointment and new contacts in December. I’ve got a plan in place to save for the roadtrip I’m taking with friends in October. This is all very good.
One glaring problem, however. I have $100 in my “pet care” budget category. My cat is having surgery in a few weeks, and the estimate I was given was close to $400. Plus I will likely need to buy food and litter at some point this month.
The question now is how to deal with this. Admittedly, it’s a minor problem. I use YNAB, and for those of you not familiar with the system, one of the key points is to live off of last month’s income. What that means is that the money that I have available to spend this month is actually from the paychecks I earned in July. August’s paychecks will be used for next month’s budget. So even though there might not appear to be money in the budget to cover the vet bill, there is money in my bank account. Sure, it’s money that I’ll need for next month’s budget, but one of the great things about YNAB is that these unexpected expenses can happen, and you just tighten the budget each subsequent month until the problem is solved.
For example, let’s say I absolutely cannot tighten the budget at all this month and go over budget by $300 this month. So in September, I have $300 less to budget. But what if I need that money next month and can only cut $200 from my September budget? No worries. I can just keep things tight again in October, and suddenly, my budget is looking perfect again. Confusing? Kind of. That’s why I have a spreadsheet to keep me on track.
Of course, my plan is to not go over budget by $300 this month. But looking at my budget, there just isn’t room to tighten things by $300. Not unless I pull money from the savings categories, which I refuse to do, or take money that I have budgeted for my upcoming eye exam, which I could do, but I’d just have to re-budget it later, so it doesn’t actually change anything.
It’s not a huge problem, and part of the reason I used YNAB was so that if these large, unexpected expenses occurred, I wouldn’t have to touch my savings or my emergency fund. But even knowing that, it bothers me to look at my budget and know that I’m going to end the month in the red. Not much I can do about it, but I am going to really watch my spending this month so that I save where I can. I’d like to finish out the month less than $200 over budget.
It’s also incentive to finally deal with the box of stuff labeled “Things to sell on eBay” that has been sitting in a corner for a month.
I think once this is all said and done, I’m going to start setting a bit of extra money aside every month in my pet care fund, just to have a bit of padding in case of unexpected expenses. Even though I have an emergency fund, a little extra preparedness never hurts.
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.