Finance Fail: Increased Income, Increased Spending

I realized something kind of depressing today. I'm spending 30% more now than two years ago and the extra 30% isn't being spent on new shoes. I was reviewing my budget earlier and it occurred to me that it’s taking a lot more money to pay for living expenses than it used to. I’m going over the numbers thinking there should be more leftover, but there's not. So I checked the earliest budget in my spreadsheet - February 2009 - and I was a little shocked to see that I’m spending 30% more now than I was then. Funny, I’m also making about 30% more than I was back then.

This is something I didn’t want to happen. I wanted to increase my income, but I want to save it, invest it, and use it to pay off student loans, not spend it on stuff. So I look at where the increase came from and it all seems legitimate.

  • Student loan payments– I’m on a graduated repayment plan where the payments were low in the first four years and then increased.
  • Rent – I had to move after a tornado damaged my last home which was a steal.
  • Cell phone service – I got a smartphone with a “required” $30 per month internet package, not a lot but it adds up. With taxes and insurance, my bill is actually $40 more than two years ago.
  • Internet service – not only did I have to change service providers after I moved, the new company charges a higher rate for cable and internet. It’s impossible to negotiate with them because no other company provides service where I live. I could drop the cable.
  • Preschool/daycare – this is the biggest change and actually counts for 50% of the increase. While it’s definitely an option, I can’t see taking my daughter out of preschool. I’ll just tough it out for two more years.

In college, we were always warned about watching for scope creep in the projects we managed. Clearly, we have to watch out for budget creep with our personal finances as has been evidenced in my own budget. It happens slowly and easily. As I scroll through each month’s budget, I only notice subtle changes and even now I think, “That’s not so bad. It’s just an extra $100.” Say it enough times throughout the year and your spending increases by 30% or more.

The bigger finance fail on my part isn't necessarily that I increased my expenses, but that it happened without me really realizing that it was happening. So, I'm changing a couple of things about the way I budget. I’m going to start putting a monthly spending number for the past two years in my budget. For example, each budget will have a 2009 and 2010 budget number  and maybe an automatic calculation to show how much more I’m spending compared those years. Another practice I’ll become more serious about is adding a potential expense to my budget before I commit to it. It's the only way to truly know if you can afford something. I'm glad I caught it now. I can only imagine if I'd notice this two years from now.

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LaToya Irby is a full-time freelance writer and a graduate of the University of Alabama. She primarily writes about personal finance, freelancing, and other self-employment topics.

2 thoughts on “Finance Fail: Increased Income, Increased Spending”

  1. We’ve reached a similar point and I just finished my post for Thursday about simplifying – that includes our finances. We just combined and scaled back some cell phone plans to cut out about $70 per month. We got rid of cable and cut out another $120 per month. I’ve got one finishing preschool this year and we’ll get about $600 back per month on his tuition and childcare costs after May – only nine more months! No cable is working out really well, too. All of my shows stream online the day after they come out. Since I would record them anyway and watch them later, we’ve just hooked the laptop to the TV and stream shows through Netflix or the website for the show (ABC, NBC, etc) and I get to watch everything I really did before. Not being able to just flip through the channels also encourages my boys to do more away from the TV, which is nice, too.

    I’ve noticed the budget creep for years and this is my year to get things back on a reasonable track – we’ve been working on it for a while. Good luck with your plan!

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  2. I look over my figures every month to see what I’m earning, but I don’t look over the output as frequently. Great reminder.

    I’m with you – if it were going toward shoes, that’s something I can amend. Bills? Not much you can do there.

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