I made a pretty rookie budgeting mistake this month.
I spent my money before I had it. Terrible plan. Counting chickens before they hatch and all. And I overspent.
Let’s go back. A few weeks ago, my boss told me I was receiving a small monetary award for a project I had managed over the past two years. It was a resounding success, and that was reward enough, so I was surprised and delighted to find out that I would be receiving a small bonus on top of that. I wasn’t sure when it was coming, but I knew it was coming. Mentally, I figured out how much taxes would take off of the top and started thinking about all the things I could spend it on.
The problem is, I didn’t deal in fact, only in dreams. So while spending money this month, I thought to myself “Well, yes, this isn’t in the budget, but I have that bonus coming, so it will all even out. I’ll probably even have leftover money to spend on things.” I wasn’t doing the math though. I was paying attention only to this magical money that was coming.
Last week, I sat down and updated my budget. And there was no way that my bonus was going to cover my budget overages. I had made a huge rookie mistake. I had thought about the money that was coming and used that thought to justify my spending.
Now, it would have been okay if I had sat down and said “Okay, I have $100 coming to me this month, and I really want to buy those $100 shoes that are on sale. I don’t have the money yet, but it will deposit, so I can spend it now.” Not the ideal way to spend, but at least it would have been a rational way to go about it.
Instead, I just spent as if I had a small fortune coming to me. And surprise, surprise. When the money hit my bank account this weekend, it didn’t cover all of the budget overages. It helped, for sure, but I definitely overspent this month.
Lesson learned. I need to go back to my plan of only spending what I have and not deal with “When this money comes to me.” I need to deal in hard numbers and not in wishful thinking.
I’ll admit – being responsible with money isn’t always fun. But managing to budget so that I have reserved money for all the fun things I want to do? Totally worth it.
Megan is a 30-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.