The other day, I was looking at my cash flow so far for the year. I’ve had a fairly great run so far this year, but it does not seem like I’ve got much to show for it other than a new truck and a place to stay every month. Then I looked at the difference between what I’ve earned and spent so far (a positive number) and looked at my handy debt payment chart on the right side of my blog. ”Oh”, I defeatedly said to myself. That’s where all that money I’ve been earning went.
I just updated the sidebars (I didn’t realize it’s been so long!) and noticed I’ve put more than $14,000 to my debt this year. That’s almost enough money to buy a new or new (to me) car! Instead, that money has gone to paying for things I’ve already used like my student loans, or things that I am currently using, like my car. To me, that’s a lot of money, so recently I decided that I would take a number similar to my monthly budget that included debt payments that I’ve got (student loans) and that I used to have (credit cards).
You can find the spreadsheet here, and I’ll explain it below.
I took most peoples normal budget categories (except for food/dining out) and made a budget out of them. I took my student loan minimums for the student loan, estimated based on my memory for the minimum credit card payments I used to have, guesstimated a yearly average for energy and water bills and took the trash from my payment. You can easily change this sheet and add/remove budget categories and change the amounts to better reflect your situation if you choose.
First, I’d like to note it was surprising how much money went to debt, and how much could be considered budgetary “fat”. On the left hand side is the current budget, with amounts. In that budget, $788 (almost 50%) was going to nothing but debt. The rest was for necessary bills and utilities, such as water, electricity, trash and cell phone (although some don’t consider a cell phone necessary, I do because I don’t have a phone at my house and am rarely home anyway). I made a category called “Unavoidable Spending” because there are certain things that you are essentially required to pay for, like city water/sewer and electricity. (Keep in mind this is not the case for everyone but it is true for most people. Typically with these expenses, you can only take them so low. For example, you could use less electricity than what you’re using now, but you’d have to sit in the dark and cook dinner over the fire pit in the back yard. Not all that great, eh?
Next to that I made my “dream” budget. Notice that the monthly expenses are the same, but the income is going to completely different places. My old car payment has been diverted into a new car fund, my student loan payments have created and are funding a vacation fund, my rent/mortgage payment has created and is funding a home improvement fund, my credit card debts are being donated to charity, etc. One thing I did lower is the light bill, because I would like to have passive and active solar on my residence eventually, which would lower my electricity bill substantially (although require a large initial investment). Savings from not having to have max car insurance, and cutting of cable tv left room to contribute to an account I called “general savings”. With this second budget, over 80% of my earnings will go to savings instead of debt. That’s a much higher percentage than originally, and it sounds much better too.
Do you have a dream budget? If so, what are you saving for?
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My dream budget would include saving 1 year of expenses in an emergency fund, increased giving to church, a savings account dedicated to helping others, saving for vacations and dining out.
Khaleef @ KNS Financial recently blogged about Do You Really Need An Emergency Fund
Thanks for stopping by khaleef. That looks like a good dream budget to me. Are you on your way there?
We are still in the very early stages (paying off debt), but that is the goal!
What a wonderful post! You show the abundance that is a consequence of being debt-free. Once we paid off our mortgage, we saved a lot more–then when we want something, we get it. No big changes, but it’s nice to know we can get what we want (within reason, of course).
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