Blessed by the Potato

Sandi asked me for some thoughts on budgeting and methods to control or track spending for a recent Because Money episode, and right now I’m staring at over a year’s worth of receipts that I just can’t seem to find the time to go through, so it’s probably a good time to talk about the history and evolution of my budgeting process.

When I was a grad student things were tight and budgeting and frugality really mattered. My entertainment budget was often around $30/mo, which is really easy to blow through if you forgot about the movie you went to see three weeks ago or go out with friends a lot. But I’m really bad at the forward-planning money-in-jars kind of restrictive budgeting — I’m much better about adapting to fit the total budget than hitting it on every category. Though that said, I was just bouncing back a few years in my calendar for something else, and saw where I had mapped out which days I could treat myself to pizza so I was paying some attention to my category limits.

So my method was to gather up all my receipts¹ and bills every month and lay them all out on a piece of paper (and eventually, a spreadsheet). I’d group them: food, rent, eating out, entertainment, car, utilities, other. Then all the receipts would be stapled to a piece of paper and filed away (in case I needed more detail than the summary). I started by just tracking things — I came in fairly frugal even from living with my parents — which also helped give me an idea of the irregular expenses that I had to try to amortize. After a while I saw where I needed to put in some more effort, and just made a vague effort to do better. I know, this is the dieting version of “I just eat whatever I want and never feel hungry and end up naturally thin” but there you have it. It didn’t take too long before I came in on-budget most of the time. I never stressed too much about big expenses in one month or another, like car repairs or blowing entertainment out of the water in October and December, or having the categories come out different than I planned: as long as it all averaged out over the year.

Once I had those unconscious frugality muscles built up and a fairly natural sense of my set-point, I started to slack off on the budgeting process. It went from being a monthly ritual done as soon as possible after the month end, looking at each line item on each receipt, to a quarterly and then semi-annual check-up and review process. I found that the medium-length time periods were better for smoothing out the month-to-month noise, but it was still a task I could do in a reasonable amount of time. Pushing out to semi-annual just encouraged more and more procrastination.

After Blueberry was born I only did two more budgets, and now find myself with this massive pile of receipts and notes to go through. And it’s really hard to find the time. I thought I’d get around to it over Potatomas break, with two full weeks off and no natural disasters forcing an evacuation this year. But I didn’t — I just have so much to do now, and it’s really hard to prioritize a budget review because I know that I’m doing more-or-less all right: I’m sending the right amount of money from my chequing account to my investment accounts and Blueberry’s RESP to hit my savings goals, so however it’s happening, it’s all working out.

I know that my savings rate gives me a bit of a cushion to be sloppy with my budgeting — if I slip I might miss out on a year of savings, which would suck, but if something unexpected comes up or I spend over budget I’m not going to be instantly facing credit card debt or the poor house. But I’d still like to know how I’m spending my money, and going through my budgets does give me a nice picture of my personal inflation rate. So I’m thinking I’ll toss most of those old receipts and instead sample my budget for just a month or two to double-check that I’m on track, then go back into unconscious frugality mode again.

In terms of this kind of review-and-try-harder process, I should note that I was naturally frugal before starting my budgeting adventure, and just needed to tweak things a bit. Then once I found my stride, it’s been fairly effortless to stick to it. For many people out there a more rigid budget (with jars or the digital equivalent) might work better, as might be paying yourself first on every paycheque to save (I do not save evenly through the year — most of my contributions to long-term investments are in the front half, and Oct/Nov/Dec are usually negative, drawing down a chequing/savings account balance built up a bit in Jul/Aug/Sep).

So to try to sum up: what works for me is to not stress about it, and just try to be generally balanced and frugal, without focusing on any particular expense. Though my income is now pretty smooth (depending on freelance and consulting jobs), my spending is not, so I look out at the annual averages. If I ever get too sloppy though, that’s going to take a long time to spot and correct the problem.

1. I make notes for some purchases without receipts, and estimate others like “~$20 at Tim Horton’s over the last month.”