### Getting Real About Your Household Expenses
If you often find yourself short on cash every month or constantly dipping into your savings just to stay afloat, then something’s off. That harsh realization hit me recently. Despite all the budgets and spreadsheets I’d made, we were anticipating a huge deficit for the year. The solution? It was time to get real about our household expenses.
### The Past Can Help Reveal the Future
Being real about expenses means asking, “What will we realistically spend on household goods and other expenses this month?” Not what I wish we’d spend or the maximum we spent last month, but what’s truly realistic. This approach, though simple, is incredibly important.
My biggest budgeting failure was setting limits without a solid basis. While fixed costs like mortgages, car payments, and utilities are easy to track, the real problem often lies in variable expenses. For years, I set a $2,000 limit on our credit card expenses. But that figure was unrealistic because we never spent less than that in years. Raising the limit felt like a failure or an invitation for lifestyle creep, but sticking to an unrealistic limit wasn’t helping either.
The whole point of budgeting is to ensure we don’t have to dip into savings or struggle to make ends meet. By not being honest about our household expenses, I was doing a disservice to my family. It was time to face our financial issues realistically.
### Outliers
Using historical data should be the foundation of your budgeting. At the beginning of the month, you can probably guess your expenses within 10% of the actual amount. To start, I downloaded all our credit card transactions into Excel, categorized them, and identified spending trends.
I also looked for “outliers” – unusual expenses that are unlikely to happen again. For instance, mandatory bi-annual car insurance isn’t an outlier, but comparing rates annually can save money. An example of a true outlier was a one-time $2,000 auto repair for a major issue that hopefully won’t happen again.
### Talking About It – The Most Critical Element
The next step was crucial: talking about our finances openly. Many couples avoid discussing money, but if you don’t talk about it, how can you fix it? My wife and I sat down to discuss our spending without blaming each other. We both saw that we needed to adjust our expenses.
### Going Forward
We looked at the monthly average for each category, discussed outliers, and decided on realistic spending limits. This time, the numbers were agreed upon by both of us, ensuring we both had a vested interest in sticking to the budget.
The next six months will show if we can stick to our modified budget. But I feel much more confident about the joint figures we came up with. This could mean a better-prepared budget and less chance of financial troubles in the future.
If you haven’t already, take a deep dive into your monthly expenses. Knowing what they are is the first step to solving financial issues. Get your head out of the sand – you’ll feel better knowing you did.
### Related Posts
1. A Financial Plan Sample – How Should I Budget My Money?
2. Learn How to Manage Money Better – Like a Large Company CFO
3. How to Budget – Download My Excel Budget Template
