The Dollar Challenge

Corey at 20’s Finances proposed that PF bloggers fit a typical month’s budget into a general set of eight categories so that he could compile the data and compare across groups.  He asked us to normalize our spending to a single dollar to obscure income levels.  If you want to participate you can find his divided dollar and links to other people’s on his post.  It was very interesting to me even to see the categories that Corey chose.  It must have been a difficult balance between the desire for specificity and the desire for generalizability.

This challenge was actually quite challenging for me!  I had a few troubles and observations:

• It was very difficult for me to find a “typical” month!  Looking back over the past six months, in each month we’ve traveled or had a big expense come up.  I ended up just choosing October because it was the most recent and I could most easily remember the details.  As Corey suggested, I took our large one-time payment of a parking permit and divided it into the monthly installment due only for October.

• The eight delineations aren’t divided out the same way I keep track of them in our budget.  For example, I separate Housing into Rent and Utilities (I feel strange putting cell phones under housing).  I also place our two types of Insurance coverage under their respective objects – renter’s insurance under Utilities and car insurance under Transportation.  There’s no right or wrong here, it’s just interesting to see how someone else organizes those expenses.
• There are no categories for Giving or Travel, which are two of the major components of our dollar.
• Because of the complicated way I transfer money in and out of short-term savings accounts, we save a lot but we also spend out of our savings accounts.  To avoid double-counting money I saved but also intend to “spend” in a typical month, I recorded them as “spending” in one of the first six categories, if applicable, and subtracted the amounts from what we actually saved in October.  For example, we pay car insurance twice per year, but every month we save a bit of money toward that bill.  So I counted that monthly installment (to self) as spending under Insurance instead of under Savings.
• Our Savings rate looks huge, but much of it would be re-categorized as Other or in additional categories if they existed, because we intend to spend a large chunk of that savings in the next year, for instance on Travel.
• In October we “spent” more money than we took in as income (105.0%), at least according to my calculation here.  Since this calculation is neither the real month of October (because I split up the parking permit payment, for instance) nor our budget (since we went over in Groceries, for one) it’s a Frankenstein’s monster of two realities and isn’t fully accurate.  Because I zero out our checking account every month I can assure you we actually came in under budget in October.
• All of these are percentages of our take-home (after tax) pay.

Housing: $0.32

Our rent is 25% and our utilities are 7%.  Our utilities include electricity, water and sewer, cell phones, and internet.  We don’t have cable, just bunny ears.  These are pretty fixed expenses.

Food: $0.115

We spent about 35% more on groceries this month than in a typical month because we hosted a party (provided all the food) and brought a snack for about 75 people to a local ESL class.  (I estimated how much the class actually consumed and recategorized it under giving, but the leftovers still spiked our grocery bill.)  The groceries component is 9.5%, eating out is 1%, and saving for our yearly Community Supported Agriculture subscription is 1%

Transportation: $0.05 

3% went to gas, 1% went to an emissions check for renewing one car’s registration, and 1% went toward our parking permits.  The latter two came out of a savings account.  Our cars are fully paid for.

Insurance: $0.025

Just auto (2%) and renter’s/property (rounds to 0%) in this category.  We typically don’t have to pay anything related to health care or health insurance (just rare copays).  We don’t have dental coverage and only a small amount of vision reimbursement per year so we have a savings account for those expenses when they come up.

Personal Care: $0.005

The only expenditure in October that I could categorize as personal care was some dry-cleaning, which we do only a couple times per year (and I pulled this amount from a savings account).

Entertainment: $0.015

This month we went to the State Fair for an evening and got a video game from Redbox (both very atypical and accounting for 0.5%).  The bulk of our Entertainment spending (1%) is on season tickets to the Broadway musicals performed at our local theater and to splitting a season ticket to our university’s men’s basketball games.  All of these expenses come our of our Entertainment savings account.  We also have a Netflix subscription, but it is a gift.

Savings: 32.5%

There is an important distinction here!  I really only consider 17% of our take-home pay to be saved.  That is what we contribute to our Roth IRAs.  The other 15.5% goes to our short-term savings accounts and will eventually be spent.  For instance, we save about 12% of our take-home pay to our Travel account alone.  The other 1% is likely split between personal care and entertainment in a way I can’t delineate for October.

Other: $0.175 

We gave away 13.5% of our take-home pay in October, most of it to our church.  We spent another 2.5% on gifts (one wedding and one birthday) and 2.5% renewing my passport (both came out of savings accounts).  The remaining percent was a university activity fee and a VGA adaptor.

How do our budget categories compare to yours?  Are giving and travel single-category-worthy expenses to you?  Do your months easily converge to your budget or do you have a lot of “atypical” months?

photo by loleia