Welcome to part 3 of the most amazing side hustle yet – Budgeting. If you haven’t already read my previous blogs, please take a look at them here. I believe that in order to have a successful acquisition of wealth you need to be able to budget. I call it a side hustle because it sometimes feels like a job and if you don’t budget, then you may have more money that you think.
To recap, in part 1 we discussed how I determined what my expenses were based on my Income, Fixed costs, and Variable costs. From that, I was able to get a decent idea of where I stood on my spending and how much money I had to build wealth. I was also able to identify all of my debt. That’s the scary part. Just a friendly reminder, I am not an accountant or financial advisor. I just wanted to share what I did to be successful with money.
My second blog covered how to track your expenses. I did this by listing my expenses in descending order, determined how much money I can put towards my debt, and then started paying down debt. In that blog, I spent very little time on the complexities of the variable costs section. That is what I will be focusing on in this blog.
What is Variable costs and why do I care?
Variable costs are costs that can change from month to month. That’s pretty straight forward right. For myself, I track 4 categories. They are Gas, Restaurants (eating out), Groceries, and Miscellaneous. I am going to go into detail on each of these categories below.
Gas Expenses
There are various ways you can approach your gas costs. When it was just me, I knew every week how much I drove and expected to drive the following week. I used to actually have this as a fixed cost because what I used to do was only allow me to spend $20 per week. Those days are long gone for many reasons. Some of the reasons are obvious, gas prices are all over the place, but the bigger one is I now have a family and who knows if we are going to go visit my parents, my wife’s family, or forget my computer at work and have to travel the 20 miles and there and back.
What I do for gas now is take an average for the year and use that for my variable cost in my budget. It is not perfect but it does at the very least give me a number to shoot for. That number is $460 per month. Yikes!
Restaurant (eating out)
This is the area that most people cut back first when they are trying to save money. Here is what I know about eating out for my family. I know every week, my wife and I will eat out on a lunch date and I know once a month we go on a bigger “real date”. I know it will cost between $25 and $35 dollars for lunch and about $100 for the “real date”. So I know at a minimum that I will spend $240 on eating out with my wife.
What I don’t know is how many times my wife will eat out. I estimate that she eats out 2 to 3 additional times more than what is already planned. Her lunches run about $15 – $20 depending upon on how much she tips. Because of the this, I always assume her weekly meals come to $60 for her lunches. That is a combined total of around $240 per month.
Then, there are some times I want to eat out rather than spend the time cooking and cleaning, etc. I tack on another $150 for that. Now that I put this on paper, its crazy high how much we spend on food monthly. That number is $620 per month. Yep, we spend that much a month.
Groceries
Groceries, to me, is the easiest category to discuss. The is the food we purchase for the family and typically, we try buy groceries 1 to 2 times a week. We spend about $160 a week, which is pretty good in my opinion. That totals about $600 per month. That’s all I have for groceries. And yes, you are correct, our eating out budget is higher than our groceries budget.
Miscellaneous
On the surface miscellaneous seems the easiest. Really it is because its the catch all. If it doesn’t belong with food, eating out and gas, it goes here. The problem comes when you don’t identify how much you are allowed to spend in this category. For example, on a monthly basis, this can be used for buying something you like for yourself, it can be for minor repairs to your car or house, it can be for oil changes, it can be for gifts to your family. This really can get out of hand easy.
This has evolved over the years for me. Some of the stuff that I place in here used to be a fixed cost. For example, my wife and I used to have an allowance. However, the allowances kept getting blown threw within a week of starting a new budget cycle. This was because my wife and I disagreed on what an allowance can be used for and ultimately we quit separating allowances out for the sanity of our marriage.
With that said, I haven’t spoken about it but will talk in a later blog on how important it is to get on the same page with your significant other. I say this because my wife and I are not on the same page. We may never be on the same page but with that said, it’s still possible to get out of debt and make money. It WILL be a much slower process.
Now What?
The next blog I will talk about what I do monthly, annually and how to project out costs for 30 years. That’s how long I go out with my budget. Until next time, I hope you have enjoyed my take on budgeting and why I think it is a side hustle.
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