The evolution of Pudgy the budget

Our budget, codename Pudgy, has been evolving since its pre-wedding creation, but I think it's in really good shape nows. The lesson that I've learned over the past few months is that creating a budget is much easier than sticking to the budget. Here's a rundown of how we created our budget and are attempting to follow and maintain it.

Expenses.
This is the depressing section. It's hard to list all of your expenses, especially if you have a lot. But acknowledging the damage that you've done while shopping with wild abandon is the best way to prevent it from happening again.

In this section, we list our expenses/bills, the costs, and the due date (where applicable). We have three categories of expenses: Fixed bills, variable bills, and variable expenses.

• Fixed bills cost the same every month and include our mortgage, student loans, insurance, cable/internet/phone, and cell phones.
• Variable bills are due monthly but vary in cost and include electric, gas (for heating our house), water, and sewer.
• Variable expenses are a bit of a gray area. This category includes groceries, gas (for our cars), entertainment (for movies and the like), dining out, our allowances, and household.

Our theory is that the individual variable bills and expenses will change from month to month, but the sum of the money spent should never exceed the money budgeted for all variable costs. Last month, we failed at this task miserably. More on that later.

The variable expenses are hard to figure out if you don't have hard data, and examining your bank statements and categorizing your expenses can be, well, depressing. We skipped this step and based our numbers on what we thought was reasonable. Naturally, our estimates were low. We're still trying to figure out the balance between idealistic and realistic numbers.

Savings.
This is the uplifting section. Saving money makes you feel good, and it's addictive. The more you have, the less you want to spend it because you want to see it grow even more. We've set up auto-deductions to guarantee that we save something every month. We have long-term (our next house), short-term (vacations, furniture, house and car repairs, and other unexpected expenses), and emergency ("you never know") savings. We track our auto-deductions (and their effect on our budget) in the spreadsheet--because while saving is actually a way of paying yourself, a savings debit is still a negative entry on the old blotter.

Month-by-month analysis.
If you thought the expenses were sad, you ain't see nothin' yet. Just wait till you spend all of this time figuring out the numbers--and then you don't follow them. I hung my head in shame, metaphorically (I thought it might be uncomfortable to actually do it), after we compared our April budget to our actual spending in April.

B computed the over/under for each category, and April was not a good month for sticking to the budget. For future months, we will do interim analyses throughout the month to see how we're doing. If, after months of over- or underspending in one category, we can decide if we need to modify the number (or maybe just our spending).