Today is January 1, 2022.
New year, new me—right?
Today is the first of 13 articles featuring my real-time budget for 2022. The goal is to show that budgeting is hard—even if you’re a pro. I’ll for sure get it wrong sometimes, and I know unexpected expenses will pop up to throw my whole budget out of whack.
Budgeting is a fluid process, and the MOST important aspect of budgeting is to be cognizant of your money and where it’s going on a daily or weekly basis. For me, daily works best. I’ll be keeping a real-time accounting of expenses through my favorite mobile app for budgeting, The Waffles on Wednesday Mobile Spending Tracker.
My goal—and my FI number—are based on spending approximately $3,000 per month. In 2021, life was super hectic, and we were spending more like $5,000. I paid absolutely no attention to the spending—and it showed. While I have been fortunate to have my investments grow after my husband left his job—and I still work with no anticipation of leaving—I want to be mindful of my spending because when I’m not, it creeps up.
Every month, around the first of the month, I’ll share a recap of what went right the previous month—and focus in particular on what went wrong. That includes where we went over budget and where we came in under. And, most importantly, I’ll share WHY.
Here’s a link to my 2022 projected budget overview. I haven’t tracked my spending in about a year, so I am guessing at most of the categories. The months of February to December will be a better estimate because those months will be based on the previous month’s spending. (As I said, budgeting is fluid.) Feel free to copy and customize based on your personal situation.
This is the first time in a long time that I have created a budget and tracked my spending strictly, so I’m jumping in with both feet and being as meticulous as I can be. I’ve broken out as many categories as I can think of because it’s the little things that eat away at your budget.
Category review
Mortgage: This is the principle and interest only. I have a ridiculously low fixed interest rate, and my lender allowed me to do my own escrow at no additional fee.
Homeowner’s insurance: This is paid annually, but I will break it out monthly to account for it. If your mortgage payment includes PITI, then you don’t need this separate line item.
Property taxes: These are paid in April and June, but again, I’m breaking the costs out monthly to account for them. (This is the T in PITI, so you may not need to account for these.)
Utilities: This cost has an asterisk next to it. We installed solar panels that produce approximately 1.5X the amount of electricity we currently need—but our electricity needs also fluctuate wildly. Our AC and pool filter run on electric and the furnace is currently gas—but we’ll install a heat pump when the furnace dies, a la Mr. Money Mustache.
Our city is a bit different in that they buy our excess electricity at retail rates and credit us for utilities during the next year, so we’ll have about two months of electricity surplus to credit for our utilities at the beginning of 2022. I’ll base my projected utilities on the 2021 charges and then use the surplus for the Solar Paydown, which cost us $12,000. (Carl did the install himself with some help from friends to bypass the $37,000 quote we got to have someone else to do the install.)
Groceries: This is self-explanatory.
Restaurants: These costs are separated out from groceries because it’s a place to cut if necessary—and it’s also a good idea to keep track of how frequently I’m going out and how much I’m spending. Restaurants are all encompassing: fast food, sit-down restaurants, takeout, etc.
Tap rooms: My city has about 13 microbreweries. I’m considering opening a similar-but-different space—and we enjoy going out to have a beer or two. I’m actually hoping we do this more frequently this year than in years past, simply because we’ve been so busy working on our live-in flip, which is now complete. It’s a nice date with my husband. But I separate the costs out because it’s an easy thing to cut if the budget gets too spendy.
Parties: We have a swimming pool and will frequently host pool parties in the summer. We’ll serve burgers and assorted toppings, and attendees will bring side dishes, snacks, and desserts. This expense is separated because it’s easy to cut back if the spending gets too high.
Gasoline: I drive into work once a week, which is 40 miles away, and also have other random trips to do around town.
Car repairs: We have three old cars (2001, 2003, and 2010). We keep up with routine maintenance, like oil changes and windshield washer fluid, which is not free. This can be a budget creep.
Clothes/Shoes – This cost is self-explanatory. I have two kids who will turn 13 and 15 this year, so they’re in that weird stage where they might not grow at all the whole year, or might bust through three different sizes of clothes in one year. Fingers crossed for a surplus in this category.
School: If you have kids, you know school costs money. There is always some random charge popping up.
Gifts: This is self-explanatory. This expense will be budgeted throughout the year and spent randomly—but mainly at the end of the year when all our birthdays and Christmas hit.
Household, entertainment, fitness, car insurance, travel, and medical expenses: This expense is self-explanatory.
Slush fund: These are the unexpected expenses that life throws at you. It’s also where my “leftover” money will go, which will hopefully increase the slush fund every month—but the slush fund will, of course, be depleted over the course of the year.
Are you ready to invest?
One of the most frequently asked questions in the BiggerPockets forums is “How can I start investing in real estate with no money and bad credit?” The answer? You shouldn’t. You need to fix your situation and invest from a position of financial strength.
Why track spending and create a budget?
I had a friend over for dinner recently who asked me why I was doing this. Why track spending and make a budget?
If you listened to Episode 243 of the BiggerPockets Money Podcast with Ramit Sethi, you will remember that Ramit and I had a very emotional conversation about spending money. That for me, it’s difficult to get out of the “save, save, save” mindset and move into the “it’s OK to spend” mindset. I’ve also reached my FI number, so why am I still so concerned about my spending?
My FI number was based on spending approximately $3,000 per month after my mortgage is paid off. Not tracking my spending didn’t have much impact on my actual spending for a while after I stopped, but it has slowly ramped up, and then rapidly gained speed. I’m spending a lot more money on my everyday life than I had originally planned to when my husband retired.
I still have a job, though, so it isn’t a big deal right now. Our investments have grown, and our original nest egg has increased, meaning our increased spending isn’t actually harming us right now. But I’m also spending money on frivolous things that don’t matter and don’t improve my life.
I need to get that under control, and for me, the easiest way to do that is to track my spending.