Where does the money go? - Part I

I haven't really done a budget in about 10 years. Back then, I was 24, single, living in an expensive place (NYC), making no money (in the $30K range), and being crushed by student loans and massive CC debt. I owed more on credit cards than I made in a year, and would lie awake at night, worrying. I finally went to a Credit Counseling service, who helped me consolidate bills, put me on a plan to pay them down, and create a real live budget. It did actually help me, but I soon realized that they did nothing I couldn't have done myself, and working with them actually HURT my credit score. I was able to pay off my debts and get off the program pretty quickly (within a few years), mainly because I changed jobs (um, a few times) and started making a lot more money. Which I think is the easiest answer for a lot of young people, btw. You just need to ask for a raise or find a new job. But I digress ...

DH and I have been married 3 years. We have done fine because we (1) paid ourselves first by saving, (2) both maxed out 401K contributions or close to it, and (3) both like have a cash cushion emergency fund. We aren't big spenders (by NYC standards, anyway) and we live below our means. So we both have made good money and been fairly smart and disciplined about our finances, but also lucky.

Fast forward to the present. We're having a baby! Suddenly I find myself worrying about money incessantly. How much is daycare going to cost? Can I even get baby into one of the good ones? Should I get a nanny instead? Doesn't that cost, like, a million dollars? I can't see myself becoming a SAHM (and believe me, DH REALLY can't see it), but what if, what if, what if?

Although we've been doing ok, even well, have we missed out but simply not really paying attention? If 2008 turns out to be a good time to buy a place in Brooklyn, will we be ready financially? There are many questions.

So I started trying to find answers. I pulled my annual statements (green card and blue) from Amex. I was shocked to see that my interest charges on the blue card were nearly $900. Yeah, I don't look at my monthly statements very closely. Then I pulled our joint card activity. And all our banking bill pay activity. And so on. I am a spreadsheet master, so pulling everything together takes a little time, but is pretty efficient and seems easier than trying to load everything into Quicken or similar.

My plan is to figure out what we spent in 2007 and divide that by 12 to get some semblance of a monthly budget. Then I'll track our actual spending on a monthly basis to see what we actually do. It's crazy, but it just might work!

2007 was kind of a strange year - I changed jobs and had some time off in between. We spent a lot of money on new things - a house, home improvements, moving, new clothes (new job is all about suits and last was business casual) and maternity clothes (which are frustratingly expensive yet at the same time, cheaply made). But of course 2008 will look very different too - new baby and medical expenses which I really don't know how to account for yet. So it will be interesting.

To start the New Year off right, I paid off most off our (and my) credit card debt. I took this money from savings, but did not wipe it out, so I think this was the right thing to do. January cash flow will look strange, though, because of the extra thousands that went out.

Finally, I have some observations on 2007:
- I spent a ton of money on clothes. A new job, and a conveniently located Ann Taylor, Banana Republic and Motherhood Maternity were my downfall. Must ... stop ... Seriously, I have enough maternity clothes to get by now. I'm in the 7th month, so it's not worth buying more. Hopefully the other stuff will fit when I go back to work! 2008 should see a significant reduction here, although DH bought virtually nothing in 2007, and probably needs some things. Good men's stuff is actually more expensive, but at least it lasts longer.
- Our "back of the napkin" estimates on how much we spend every month have been low. Around 50% low. Especially when it comes to restaurants, alcohol, groceries, drugstore items, clothing, etc. Basically all your variable expenses. A common mistake, I know. I guess this is why maybe we need a budget. Sigh.

That's it for now, but I think I am off to a good start. Will report back when January is totally accounted for.