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When we introduced ourselves and the start of this blog we mentioned that we would document our mistakes… well here is our first one. And it was a rather big one.
At the end of 2017, we started our FI journey and went through our budget and thought we can easily cut back and increase our savings rate from about 15% to over 40% in year 1.
My husband and I wanted to save as close to 50% of our income as we could. When we decided on FI, our projections are for what one would consider “fat FI.” We live in a high cost of living area and although we don’t indulge in many material things we want to make sure we have a cushion.
Back to our savings…
Our year 1 savings goal was 40%…we got to about 28%. 12% doesn’t sound like too much but when you put it on paper it really hurts.
How did this happen to us and what can you do to avoid this?
We had major life events this year… yes, plural! We set our budget and just pretended it was just a regular year. It wasn’t.
Our son’s 1st birthday, my 30th birthday, my mother’s 50th birthday, my father in-law’s 60th birthday AND a destination wedding. We knew these events were coming up but we didn’t fully account for them in our budget. Call it wishful thinking or maybe we didn’t think it would add up to THAT much?
- Now we never wanted our path to affect those around us so when it came to our parents’ birthdays there were fairly large plans in place… 2 different vacations. We travel hacked as much as we could but those 2 vacations cost us a good chunk of change considering we were paying for our parents to go on vacation in addition to our small family.
- Our son’s first birthday. We saved some money by having it in our backyard and making a lot of food ourselves. But we still had about 85 people over (we both have large families) and we needed to do some serious yard repair. It was definitely more than we wanted to spend but we looked at it as we were also investing in our home. So hopefully next year his party will be much cheaper!
- My wonderful husband hosted a backyard party for me! It was a surprise and a good one at that. I loved every second of it! We definitely saved some money with a backyard party but after food, decorations and some backyard purchases it definitely added up.
- We were invited to a wedding in Mexico and of course we were going! It was for a close friend and who doesn’t enjoy a nice trip to Mexico from time to time. We only went for 4 days & used points for our airfare but we couldn’t for the resort. This was definitely a large line item.
All of these expenses easily cost us over $10,000! Of course we didn’t hit our goal! Its embarrassing to think we created a “detailed” budget yet left all of this out.
Fully assess your past spend and use it as a realistic guideline-
When creating our budget we looked at our 2017 spend and just assumed that we could cut it substantially and we did! For example, our food shopping and eating out bill went from over $1,000 every month to about $500! And cord cutting saved us over $100/month; we went from $220 a month down to $100. But we weren’t successful with all expenses.
- We saw our $200/month spend in Costco and assumed we could cut that to $150 but what did we base that on? I honestly don’t have an answer. I think it stemmed from how we substantially cut our food shopping bill. Also, we go to Costco every 3 weeks not monthly like we originally budgeted for.
- Our clothing budget, we only gave ourselves $100 every 3 months. But that doesn’t get you much. I lost a lot of weight over the past year or so (I had a baby) and needed some new items. AND we didn’t only spend $400 in 2017, we spent closer to $1,000. We spent close to $600 on clothes this year. Not much of a difference but when you add up all of these small blunders it makes a hell of a difference in your bottom line.
Make sure you’re accounting for everything-
We have quite the extensive budget on Excel and you would think it has everything by looking at it but it doesn’t & we missed some high impacting items.
- We didn’t account for our dog! Sounds silly, right? I think we thought it was accounted for in food shopping but it doesn’t live there because we don’t buy it in our local supermarket. To worsen the blow, our fur baby has some medical issues which causes her to need special food and of course we give her monthly flea/tick treatment along with heartworm medication.
- I buy personal care products (makeup and skincare) that aren’t miscellaneous because they are normal expenses that are part of my routine. That wasn’t budgeted for either. Honestly, before now I never even knew how much my products cost! And after looking at how much I am spending, I am going to spend 2019 looking for some drugstore brand alternatives.
Leave room for discretionary spend-
We made a bunch of small purchases throughout the year that definitely added up but we never really thought to track them. A garlic mincer one month, a steam mop in another…all of that adds up! We have miscellaneous in our budget but we used that for when we go out not for house spending. Sticking to the 72-hour rule and asking ourselves is this really worth? Will it make a substantial difference? We are used to buying something because we want it and breaking that habit isn’t as easy as we originally thought.
For 2019 we are going through our 2018 expenses line by line and determining what can go away (realistically) and what’s here to stay. We need to do better, much better if we want to reach our goal!
Overall, we were idealistic rather than realistic. We made our budget on what looked good for us rather than what was actually right for us. We have some ways to go with breaking habits and making sure we keep our goal in mind.
I would lie if I said that looking at our shortcomings wasn’t a blow to my ego but we will use this as a learning opportunity. Every mistake is a lesson and we will take this as a lesson learned. 2018 is basically over at this point and 2019 will be a fresh start. We will hit our goal, I know it! I will celebrate saving 28%, an increase of 13% from the year prior. If we increased our savings in 2018 with all of these mistakes, 2019 will definitely be more successful.