Yet Another Budget Update

Image courtesy Emily Henderson's blog

The financial discussions (and--let's be honest--occasional shouting matches) continue around these parts. To catch up those of you who have joined us recently, Matt and I have a lot going on right now that impacts our finances (fortunately, it's all by choice):

• I took a year off to stay home with Henry after his birth from 2011-12. I continued with side projects that brought in additional income (I published a book, did a couple consulting jobs for schools, sold our house for a profit without using a realtor, and ran several Purposeful Conception courses), but I still brought in considerably less than when I was working full-time.
• For the past year, I've only been working part-time, so that I can volunteer the rest of my time to pursue my passion of starting Austin's first public Montessori school (and support our family by picking up Henry every day from school at 2:45pm).
• We choose to send Henry to an expensive Montessori daycare because the philosophy resonates with Matt and me, and we both believe that the early years are critical for laying the foundation of Henry's brain development and future personality.
• We're preparing to have another baby at the end of June.
• On top of all this, we are building a house. Although our monthly mortgage payments will be less than what we currently pay for rent, we've had to save up a significant amount in order to buy the land, close on the construction loan, and gear up to close on the permanent loan. 

I know; it's crazy. 

But, honestly, for the most part, it feels really, really good to be putting all of this in place right now. 

The times when it feels the worst are when we have to sacrifice things that we want right now for all the things that we want in the future. We have seriously cut back our spending (for the past seven months--it feels like so much longer!) to live within Matt's income in order to bank my entire part-time income. We've cut way back on eating out, going on vacation, spending money on hobbies, going on date nights, purchasing clothes, etc. 

(As a side note, I know our story doesn't sound like much of a sacrifice for anyone who has been laid off or is searching for a job or can't work due to health concerns, etc. It's just felt like a sacrifice to us compared to how much financial freedom we had when we were both working full-time without paying for daycare and without saving for a house.)

The shouting matches usually come when Matt wants to spend money on something, and I remind him that x, y, or z is not in our current budget. He gets mad and then I get mad because it makes me feel like I'm the bad guy, even though I'm just reminding him of the budget we worked to set for ourselves. I get mad that I have to be the enforcer all the time, and I say things like, "We can't spend money on x, y, and z and build a house, so if you really wanted x, y, and z, then you never should have agreed to building the house." 

Really, he's mad at the fact that we can't have x, y, and z in the immediate and the house in the future.

Anyway, it's definitely been a hard process for our family. I try to stay focused on the end result. Even though it's a bad time for our family to be moving forward with this kind of financial investment, it makes a ton of sense from the perspective of what's going on in the U.S. economy, especially in Austin. We bought our land right before the market really took off again (we bought it for more than $30,000 less than the current market value). Construction prices have started to steeply increase, and they're definitely only going to get worse from here. The housing market in Austin is booming; and supply is scarce. Meanwhile, interest rates are amazingly low, which will allow us to lock in a surprisingly low monthly payment for the next 30 years.

We managed to clear the major hurdle of saving up for the downpayment and closing costs on our permanent loan. We had also started building up other savings accounts, such as the one set aside for appliances and furniture. Unfortunately, our tax bill just wiped out about half of that particular savings account. I'm trying to stay focused on the fact that half of it is still there...

Now is the time to whip out the detailed Excel sheets. I started one to predict our expenses for my 3-month maternity leave (particularly Henry's daycare for the summer, any gear we might need for the new baby, Henry's tuition payments once school starts in August, and any babysitting we'll need to cover professional obligations that pop up). 

I started another tab to predict our expenditures for the things we need/want to get right away: refrigerator, washer/dryer, stove, dishwasher, bed, couch, living room rug, bar stools, and dining room table. The total costs gets summed at the bottom, and then I subtract the amount of predicted revenue we'll be able to generate between now and then. 

As we buy things on the list, I change the predicted price to the actual price and watch the difference between our expenditures and revenues change. For example, I had budgeted $500 for dining room chairs but ended up spending $400 for eight of these. When I changed the amount from $500 to $400, I watched the difference between predicted revenues and expenditures change for the better. I look forward to waiting for appliance sales and reading about how to save even more money on big purchases. This kind of system makes the relationship between splurging and saving very clear. For example, if we save money by going with mid-range kitchen appliances, then we will be more able to splurge on a larger washing machine (which will increase our quality of life by reducing the amount of time we spend doing laundry). If we save money on inexpensive furniture (e.g., a couch, bed, and mattress from IKEA), then we might be able to splurge on a hand-crafted dining room table from a local artisan (maybe?). 

If we're going to pull off our crazy financial goals, we're going to have to stick to the rigidity of the Excel sheets until the end of October (when I--fingers crossed--start part-time work again, hopefully at a higher rate than I earn now).

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