The first time my wife and I did a budget together we had no clue on where our money was being spent.
We had a good idea of what money was coming in, but when we first sat down together we kind of guessed what we were spending. I think our conversation that night went something a little like this:
Me: Hey babe, I think we should probably do a budget.
Wife: Ok, sounds good.
Me: I’ll create a list and then we’ll estimate how much we think we spend per month.
Me: What do you think we spend on groceries? $100 a week?
Wife: Not sure, maybe $200/week.
Me: Petrol? $30/week.
Wife: You’re the one who fills it up.
Me: Yeah, I think I’ll put in $40/week. I’m trying to be super-conservative.
And that was how we progressed through our first budget. No looking at our historical bank balances or transactions - it was all on pure feelings and gut instincts.
So what happened?
Well, we went about a normal spending habits thinking that because we had done the magic “budget thing” we were going to be millionaires next week!
Then the month finished and a few weeks passed by and then it hit me…
Me: Oh, wait! I just remembered we did a budget for last month and I totally forgot to check how we did.
Wife: How was it?
Me: (Looking more and more wide-eyed as I scanned my eyes down the spreadsheet comparing actual s with budget) Uhhhh…
Wife: You okay?
Me: Uhhh… no.
We got a big fat F on our budget - fail! Practically every category that wasn’t a fixed expense - like, council rates - we flunked.
Where I thought we only spent $100/week on groceries was more closer to $500/week! Petrol was close to $70/week and pretty much every discretionary category was higher than expected.
And this was an excellent reality check for us. Now we knew why we weren’t winning with our money because we weren’t keeping track of it.
So with our first budget down and our first comparison against our actual spend we finally were able to start cutting our bad habits.
How was your first budget to actuals comparison?