How to handle "big" overspends?

Hi folks,

I have set hard budgets for 2024 - but the majority of them have been completely blown away. In full transparency, I set a budget for home improvements of 400 bucks a month. Which of course is $2,800 here in July. The reality, however, was much more. Due to owning a very old home and finding several skeletons in the closet - we’ve put in about 56K over the last seven months.

A lot of this has come from emergency funds, but now reflecting on the budget savings tracker - we’re in the hole over 50 grand for the foreseeable future.

If you were in this situation: what would you do? Do you scrap the budget entirely? Do you stop spending in that category… forever (and let the house fall the ground)?

Any advice would be appreciated!

Thanks,
Matt

I think the answer to this depends on what you’re hoping to get out of maintaining a budget. Some people want budgets to keep them to hard spending targets, which becomes a challenge when emergencies inevitably arise. Other people use budgets as more of a retrospective way of understanding how they’ve spent their money. That approach alleviates some of the pressure created by particular targets, but depending on your situation, that could be a good thing or a bad thing. Either way, it doesn’t seem like allowing your house to collapse is a good option, so worth keeping in mind that budgets are notional, not reality.

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*The year I bought furniture I moved it outside my regular budget into a category I created called “large expenses” and made a separate budget for that so I could get a sense of how I was doing otherwise.
*But overall, I’ve had to re-evaluate my budgets for big expenses. When I started with budgets I quickly got good at more regular expenses like phone, groceries, etc. but I was always short on repairs and replacements for big ticket items. You basically have to allocate more to these budget categories until they start to balance. Whenever the word “old” appears in front of “vehicle”, “home” or some other expensive item, be ready for some big expenses coming up.

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I’m in a similar situation, and I’m glad you’ve started this thread.

In the last two years we’ve paid off each of our cars with a lump sum on a whim, so an extra 3k in June 2023 and 2.5k in May 2024. Between that and now no longer having payments but also big “maintenance” packages/bills every other year… I don’t have a clear “auto” budget at all, so I’ve scrapped it and we’ll try again next year.

For travel my budget is also super lumpy, and we pay for everything out of a bucket that was already saved for anything “excess.” I’m, like you, trying to find a graceful way to account for expenses that are not part of my usual cash flow, but still need to be noted as an “expense” instead of just a transfer from x to y. This one I take a look at the Yearly Budget sheet to get an idea of the average as the year goes on, and try to ignore all of the red negative signs telling me I’m over “budget”

I like the “big expenses” idea!

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I create an “infrequent” category for irregular expenses. If I know a large expense is coming up that can be saved for, I will create a special category for that.

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I’m with you on looking at the yearly budget and ignoring the red overspend in the month - this happens with much of my discretionary spending, as I may go months in between buying new stuff, then buy big at discounted times. As long as the yearly budget is on track, that’s okay with me!

For travel, I found using specific travel Categories combined with the Travel Planner sheet helps me deparate travel spending from my usual spending. And I can allocate a budget for my travel spending and even tag different trips. I whittled travel expenses down to 4 categories, which I called Food, Fun, Move, Sleep. Super easy to keep track of things this way.

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Since your big overspend was largely paid for by emergency funds, a good option could be in how you tracked withdrawals from the emergency fund (assuming that was a savings account). See this suggestion from the community on how to track savings contributions and withdrawals.

In short:

  1. Categorize the deduction from savings as “Transfer”
  2. Categorize the deposit into checking as “Emergency Savings”
  3. In the Savings Budget sheet, use the adjust± column to transfer from the “Emergency Savings” category to “Home Improvement”

The other part of that community topic could also help in how you plan and account for future savings contributions to make your emergency fund whole again.

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I use the Savings Budget. For longer term/larger expenses, I have a bucket called “House Fund” for home repairs, furniture purchases, etc. that gets a set amount added to it every month for when the odd large expense comes along. But like you, I had an unexpectedly large home expense last year that resulted in a loan to cover what I didn’t have in cash. It didn’t make sense to have the balance of the loan hit my budget and put me in the red for years to come, so I did two things: (1) I added the loan balance as a liability to be tracked in the Balances sheet, and (2) added a budget category for the loan payment so I can track the payment monthly as a fixed expense. To my budget, it looks like I have just reallocated a portion of my monthly expenses to the loan budget category.

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