Is Your Budget OverExtended?

balanced budget pie chart

A typically balanced budget.

I make no secret about the fact that I live well below my means. In fact, on any given month, I only need about 45% of my income to pay my bills. The rest of my money goes to whatever I want, which right now is to debt repayment.

My OverExtended Budget

I wasn’t always like this. When I first graduated from university, I had a very overextended budget.

  • I wasn’t making very much right out of school.
  • I was living in an expensive one bedroom apartment in a big city
  • I’d just bought a new-to-me car after totalling my old one.
  • I had a large student loan payment
  • I liked to eat well
  • I wanted to build an emergency fund

All of these expenses resulted in a budget that just barely balanced. I could just barely afford to have all of this stuff on my entry level salary.

It wasn’t fun. My husband and I realized, at that time, that we just couldn’t afford to keep living in that city if we were going to achieve some of the goals we had in mind for our life, so we moved back to our rural home town where the cost of living is a lot less.

Your OverExtended Budget

Chances are, if you are a typical 20 something with a university level education, your expenses look something like this:

  • A mortgage on a condo or house, or high rent.
  • Student loan payments
  • A financed car
  • A second financed car

These things aren’t crazy, they aren’t extravagant, they are what a typical young couple is expected to have. Unfortunately these things, for the average couple, would probably eat up the majority of your income, leaving you with little and less to spend on achieving goals, participating in memory building experiences, and generally allowing you to sleep at night.

If you are anything like me, this will leave you stressed, frustrated, and anxious. When my budget was overextended, I worried all the time! I worried about not being able to pay my bills. I worried about not being able to build an adequate emergency fund. I was frustrated because with those high expenses, it was going to take me a decade to pay off my student loans. Saving for retirement or to buy property weren’t even in the realm of possibility.

It wasn’t worth it. The expensive apartment, the awesome city, the higher expenses, it wasn’t worth the stress and anxiety that my overextended budget was causing me.

Living with an Under Extended Budget

Today, I live well below my budget. 55% of my income can be used for whatever I want. I love living like this for the following reasons:

  • It gives me the means to eliminate my biggest fixed expenses (my debt) forever
  • It allows me to achieve big goals, like building an emergency fund, and saving for a house
  • I don’t have to worry about losing my job as much, because my expenses are lower than what my employment insurance income would be.
  • I  can save for travel, and big purchases very quickly

My Balanced Budget

Of course, I don’t plan on living like this forever. Eventually I’d like to move back to the city, at which point my expenses will go back up. But in the mean time, I plan on ridding myself of as many fixed expenses as possible, including my debts, so that I can keep some flexibility in my budget.

I don’t plan on having super low expenses forever, but I never want to go back to having every single dollar of my income claimed by my bills.

Living with an overextended budget is not worth it.

Do you live with an overextended budget? Is it causing you stress?

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  • Holly Johnson

    We used to have an overextended budget but now we spend a lot less than we earn. It definitely makes life easier!

    • Jordann

      Especially with you rocking the self employment income!

  • Michelle

    We definitely used to have an overextended budget. Back in college it was not a good time for our budget at all!

    • Jordann

      I think it’s impossible to NOT have an overextended budget in college, money was really tight for me too.

  • Girl Meets Debt

    I think that’s awesome that you and your hubby moved back to your small hometown to save money and pay off debt first. The city will always be there and it’s definitely more fun when you aren’t stressed about money :)

    • Jordann

      Definitely! When we do go back, we won’t have a car payment or my student loan payments to worry about, which were taking up over 25% of my net income each month that I was living there.

  • Whitney

    My budget is absolutely over extended. To the point that I do the ‘ostrich burying my head in the sand’ thing. I’m recently divorced and a single parent so I’m not even sure how to fix it at this point. I’ve been enjoying reading your blog though. Its given me hope/ideas.

    • Jordann

      I’m glad that you’ve found my blog to be helpful! Starting from scratch like that can be really tough, if you’d like to chat, just send me an email!

  • E.M.

    Thankfully I’ve never found myself in this situation. Before taking on any purchases I always research what the outcome will be on my expenses. I never financed a car because I knew it was way out of my reach, and buying a house is in the very far future for us. I think it’s a great idea to move to a lower cost of living area, pay off debt while keeping other expenses low, and then moving on to doing what you want where you want to. That’s my plan!

    • Jordann

      That’s my plan too and I must say, it’s worked very well.

  • anexactinglife

    Jordann, did you leave your job when you moved out of the city, or somehow take it with you? Did you have a gap between jobs?

    • Jordann

      I started my job working remotely in the city. The company itself is based out of my home town, so when I moved home, I started working from their head office. My husband, unfortunately, had to leave his job behind. :(

  • Catherine

    Our budget used to be overextended but it’s much better now ans we have options. If we really needed money I could work one extra day per week and put the kid in daycare more but having that day home with her is more important to me than money.

    • Jordann

      I’m glad you’ve gotten your budget under control. I think that you are an excellent example of how someone can take charge of their finances. I totally understand having that extra day. That’s how I feel about extra work in general, I could, but relaxation time is very important to me too.

  • Daniel

    We live with an under-extended budget like you. We live on about 50-55% of our after-tax income, which leaves a lot for saving. I really like being able to save significant amounts so that in a few years, we’ll be set up really well for retirement and not have to raid all our accounts for a down payment on a house. If we can keep up our current lifestyle for a few more years, when we have kids and a mortgage payment, we’ll be able to afford them while still being able to save and max out our IRA and 401k accounts.

    • Jordann

      It sounds like you definitely have the right idea, good job!

  • Budget & the Beach

    It’s not too bad anymore, but I do wish rent was cheaper around here. Unfortunately it’s comes with the territory in that you get the lifestyle and good weather that comes with it. It’s a good trade off for me because I think I would be unhappy if I just moved to a place I didn’t like but could afford. I’d rather have a bit of daily happiness if that makes sense?

    • Jordann

      I definitely understand that and that’s definitely a trade off I’m making now so that I might live somewhere more central later.

  • From Shopping to Saving

    I had an awesome budget before I had debt (student loans). Now I try to throw any income at my loans, but I also balance it out and try to have some fun to keep sane.

    • Jordann

      Student loans definitely muddy the waters and make it hard to live with an under extended budget. No doubt!

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