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Overspent?

by Judy Hoctor

Oh, no, the dreaded red exclamation mark signaling that you have overspent one of your buckets! No one likes to see this alert, but it happens to the best of us. The trick is knowing what to do when that warning appears.

Summer heat in Houston means high electric bills. Say we budgeted $300 for electricity, but the bill came and it was $350. Since I’m fond of air conditioning and lights, I’ll pay the $350. However, when I enter the transaction, my Electricity bucket shows that it is $50 overspent. Immediately, I need to look through my other buckets for extra cash to make up the deficit. Although I have plenty of money in my Taxes bucket (for our escrow payment and various other taxes), it wouldn’t be prudent for me to take money out of there except as a very last resort, since I will need that money come tax time. It could come out of my Dry Cleaning bucket if I wash some of that laundry at home, or I could take it out of my Household bucket, which covers expenses for new drinking glasses, cleaning supplies, etc. Taking the money out of this bucket makes sense to cover the $50 shortage.

My objective is to spend less than I earn, so I don’t allow an overspent bucket to roll over from one month to the next. In some months, it may mean that our family eats a few more inexpensive spaghetti dinners at home. It’s a dangerous practice to live today on tomorrow’s money, and you should avoid this at all cost.

Here’s another scenario for couples. Say there’s only $20 left in the Automobile bucket and there are still several days to payday. Before indiscriminately spending that cash to top off my gas tank, I need to check in with my husband to see what his tank looks like. If his tank is fine, we’re in the clear; however, if his is low, we have some decisions to make. Since my car is a hybrid and gets better gas mileage, we may decide to fill up my car—or as full as you can get on $20 these days—and use it exclusively until we get paid. However, if we both have places to be at the same time, we may need to take money from a bucket with extra cash so we both can put in gas. It takes good communication skills to keep a balanced spending plan, but the benefits are immense.

It’s also a good idea to take a look at your historical information on a regular basis. You may notice that every month you overspend your Dining bucket. So long as you are making up the money from another bucket, it’s fine, but you may want to look at your spending plan to see if it makes sense to raise your spending in that category or make adjustments in how you’re using your money, especially if you’re covering the money from someplace like your Vacation bucket. Perhaps you will decide to plan your time better so you can take your lunch to work more frequently. Your Vacation bucket won’t have to take the hit and your waistline will thank you, too. It may be worth it to you to eat more homemade lunches in order to enjoy some serious beach time in February when everybody has cabin fever.

It’s unreasonable to have a “perfect” budget, and you should expect to have to rework your buckets occasionally. After all, in the real world, it’s impossible to anticipate every contingency. Your spending plan should serve you (not the other way around) by helping you to be intentional and aware of your spending habits so that your money can go towards what you truly value.