Money

36-year-old retiree: 'I did budgeting wrong' and it cost 'thousands of dollars a month'

Steve Adcock, 36, and his wife Courtney, 32, doubled down on their savings in order to quit their jobs and travel full-time. And while the early retirees are huge advocates of budgeting — they meticulously track their expenses — they admit that sometimes it doesn't work.

In fact, before Adcock got serious about retiring early, "I did budgeting wrong," he tells CNBC Make It. You could be doing it wrong too.

The basic idea of budgeting is that you divide your income into certain spending categories, and then you can spend based on how much money is available in each of those categories.

What most of us are not taught is that just because the money in each category can be spent doesn't necessarily mean it should be spent.

Steve and Courtney Adcock hiking the Valley of Fire State Park
Courtesy of Steve Adcock
Steve and Courtney Adcock hiking the Valley of Fire State Park

The problem with Adcock's early budget was, he says, that "even though I was spending based on what my budget would have me spend, I pretty much assumed everything that wasn't going to rent or investments needed to be spent."

As he writes on his blog, ThinkSaveRetire, "I felt entitled to spend that money. … I saved. I spent. Isn't that the American way?"

That mindset was costly and, ultimately, it backfired.

"I ended up spending thousands of dollars a month to include a ton of restaurants simply because I massaged my budget in a way that enabled that kind of spending," says Adcock.

"In the end, my budget didn't really do anything for me because I purposely cheated it. I designed it so I was spending money on the things that I wanted to spend on, so effectively, I wasn't really abiding by the budget concept," he says. "And, man, I spent a lot of money because of it."

It wasn't until the couple redesigned their budget to cut out "wants" — including dining out — when the concept of budgeting really started working in their favor. It allowed them to bank more than half their incomeand live on a modest $30,000 a year.

"Today, our budget no longer drains money out of my pocket," writes Adcock. "The difference between looking at each category as money that can be spent rather than money that should be spent is as fundamental as the difference between black and white."

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