Tuesday, March 13, 2012

My Budget Exposed

Here is a look at our first year.  I was SOOOOO prepared. I spent hours, days, weeks working on this (6 years ago). You see as soon as we found out where we were matching I hit the numbers hard. I came up with a budget that I thought would work, based of course on how we had been living that year, payroll calculators, tax estimators and then tweaked a little to make it work (e.g., forced it to work). I was congratulating myself for my responsible approach and wise calculations.

What you will see next is really three budgets. The first is the one we were living with during medical school. The second I projected while planning for internship/residency. And the third was reality in internship/residency (an average of the months July-Dec). 

As medical students we were poor, or I thought we were poor. We were living in my DrH parent's second home so we had no rent, we did pay utilities, but even then our income was gone. Granted it was a large metropolitan city in the west and just insuring our cars was expensive, not to mention cooling a house in the summer. But we didn't do anything! We did have a baby and one on the way ($$). But I am not kidding when I say we didn't do anything.

I was foolish to believe that we could continue living like we were then long-term, and even more foolish to believe that the only thing that would change in our budget equation was a mortgage payment. That I could somehow keep everything else constant. Life was going to teach me a lesson the hard way. No matter how much you plan and prepare, if you don't plan for the "what if" you aren't prepared.

I am going to admit right now that I am embarrassed when I look at this budget. Another benefit of anonymity. Even with all my knowledge about budgeting, even though I had been successful at it, I still fell into traps. The same traps that are waiting for you. Even with all my best laid plans my budget didn't have any room to breathe. In my calculations, nothing could go wrong 6 years. That just isn't likely. By Christmas we had used up all our savings and were financially suffocating.

I am feeling the need to defend my spending to you. When I look at it I am appalled that I was so "off" when I made my estimated budget and what actually happened. The only pleasant surprise in the whole thing was that is cost less to insure our cars in our new state so we saved a little money there. But just a little. Everything else was more than I expected. We just bought a house! I was pregnant! We were having a new baby! We had the baby! Our toddler grew!

This wouldn't just be a one time deal either. How were we supposed to survive the next 5 1/2 years? How did this happen to me, I thought I was prepared? This wasn't supposed to happen.

I also want to point out that I had a line item on our budget for credit card payments. I previously said that from the day we married we committed to never put anything on a credit card that we couldn't pay off that next month and we have lived that way ever since. Unfortunately, before we were married we weren't so disciplined and had one credit card with a balance of $4,000 that we made monthly payments on until the day it was paid off nearly two years ago. That was $115 dollars a month out of our budget for those years that we were spending on something(s) we purchased and consumed in the past when we probably didn't need it. Using credit is robbing your future at precisely the same time your future needs it! I am unaware of a credit card that will allow you to charge without making payments. They have to be paid, and your budget cannot afford it.

So, go ahead and say that this won't happen to you. You will be better prepared, you will make better decisions, you will be different. But what if you aren't? What will you do?

Next: The Mistake My Budget Couldn't Recover From

1 comment:

  1. I did the same thing with credit cards in my early years. We do use them now, but we pay off the entire balance every week. We charge everything! We would charge our mortgages if they would allow it. We use our points for airline tickets. I haven't paid a minimum payment or interest charge in over 12 years. It took so long to dig myself out of that hole!
    I hope people are reading and taking note of your worthy advice! :)


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