Last Sunday morning, I received an email from a lovely lady asking if I might want to share some of our tips for budgeting, since I've talked about it on here a few times and she was interested in budgeting for family. I got so excited as I read the email on my Blackberry as we were pulling out of the driveway -- a post JUST for Bubby! He's told me time and time again that if he could go back to school, he'd become a financial planner and help people get their lives in order.
I finished putting on my makeup and then directed my attention to reading him the email. His face lit up a little and then he tried to suppress it, but I could see the smile that was tugging at the corner of his lip. Gosh, I LOVE that secret little smile.
(I swear, his face lights up when we sit down every two weeks and plan out our spending. See the secret smile on the right? )
Without further adeu, Bubby:
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Introduction!
I’m driving down our hill, taking my wife to get a burger from In-N-Out before grocery shopping, off in my own world plotting our gaming session for that night. Laying out the time it will take us to get the food stuffs necessary for the afternoon get-together, wondering if I should draw out a few more villains before we start. (We have friends over most Sundays to play a Dungeons & Dragons type game. Don't hate, you know you sometimes wish you could be a a stealthy, kick-ass thief, complete with blow-dart gun and a cape full of secrets.)
“Will you write a blog post on how we budget?”
“Sure…someone asked for that?”
Budgeting excites me. It’s like a video game to me, a challenge that I know I can overcome. I want a big family, the ability to give, have get-togethers and barbeques and that feeling of sanctuary in my own home. I am a money nerd.
I must warn you, I am not a professional or licensed to give money advice. What is laid out below is how we handle our finances. There are two sections to this long-winded post: Guidelines, and Budgeting.
Guidelines!
Wifey has always told me I think too far ahead. I am concerned about having enough for retirement. I want to find our house, purchase it, then pay it off as quickly as possible. It simply needs to happen to build wealth. If I budget now, there’ll be no budgeting later. To make this happen, we live by some guidelines.
1. Money Must Be Spent Intentionally. The lattes will kill your income. The spontaneous handbag or eye shadows add up. Wealth is not acquired through chunks of thousands of dollars. It is the five and ten dollar contributions over the years that create an atmosphere that is not paycheck to paycheck.
Fact: Saving 100 dollars a month from age 25 to 65 will give you a return of 350,000 dollars, at an average 8% interest.
2. Live Within Your Means. Rent or Mortgage should be 25% of your take-home pay. The average house size is a bit over 2,300 square feet now. It was half that in 1950. We are still renters, and commonly look at houses built in the 40s and 50s.
Vehicles are best as used, two-year old models if you’re looking for something snazzy. Older cars work fine. Eliminating car payments allows you more saving power. Cut where you can. We use Hulu and Netflix for our cheap entertainment. Look at everything and ask if you’re getting your money’s worth.
3. List Your Wants And Needs. A newer car. That 55” HDTV. The Roomba to alleviate your cleaning duties. Kid’s college fund. Write it all down, everything you want to do and should do. It helps get a grasp of the bigger picture.
Now, writing these things out hardly helps me use them. For that, we turn to the Budget!
Budgeting!
We have always been a reactionary couple. If a bill comes in, we scramble to pay it. Friday usually meant going out for dinner and possibly a movie. Weekends meant consumption of some sort. They still do, but now we know our used book purchases aren’t cutting into our PG&E bill. Here is how we do it.
1. We Write A Paycheck-To-Paycheck Budget. I get paid every two weeks. So from the Friday I’m paid and for the next two weeks, we list all our expenses for that time. We then number the expenses in order of most important to least important.
There are four basic necessities that get funded before anything else: food, lights and water, transportation, then rent. You need all this to fight another day. Again, you are intentionally spending all your money on this budget. Every dollar is assigned to something. Our budget for the next two weeks looks like this:
(He made a chart! I Swoon!)
|
1 |
Food |
250 |
|
2 |
PG&E |
140 |
|
3 |
Rent |
1500 |
|
4 |
Car Insurance |
98.66 |
|
5 |
Netflix |
16.45 |
|
6 |
Blog |
13.45 |
|
7 |
Work Dues |
62 |
|
8 |
Gas (Car) |
80 |
|
9 |
Old Navy |
30 |
|
10 |
Target Misc. |
51 |
|
11 |
Fun Stuff - Nails |
40 |
|
12 |
Fun Stuff - Outings |
130 |
|
13 |
Left Over |
440 |
We write this out on lined paper, and it hangs on our fridge. Every time a bill is taken out/ paid, we place an ‘X’ in the margin to indicate the funds are gone.
I am now set for the next two weeks. The next budget will have our other utilities, such as Comcast and Verizon, but won't include PG&E, rent, blog fees, car insurance, Netflix, work dues or Old Navy because those ar eonce-a-month bills and were paid this month by this budget above. Food, "fun stuff" and gas will show up again. Even rent will come up again, as I split it up over the month so no one paycheck takes a heavy hit.
I have a second page of the budget that details all bills for each month, and which day they are due. I keep this and put it behind every new budget. It saves us time for the next budget.
2. Track All Your Spending. Budgets do not work if you don’t stick to them. Wifey and I save each receipt and write each expense below our budget table, much like you would a check book. At any given time, we can check the sheet and know how much we have in each category. (For example, if we plan on going to the movies and haven't spent anything from our current budget's "fun stuff" fund, we know we can splurge and get popcorn and candy, too. Or, if it's at the end of that particular budget and we have just enough for the movie, we know not to go over and spend money that's already called for somewhere else in our budget. We never over-spend because we know what we CAN spend.)
This is by far one of the most important steps. Slipping up here results in budget reconfigurations. Which leads us to my next point...
3. If Something Comes Up, Re-Write It. Treat the budget as a binding contract. A constitution. If a new expense comes up, drag everyone involved back to the table and discuss where the money is going to come from. For us, the Left Over category serves as our overage or savings. Our "Target Misc." category on the above budget table was written into the budget a day after it was made because we needed Glad bags, Kleenex, and a few other "Target" things.
4. Be a Team. If my wife didn’t subscribe to this method, it wouldn’t work. I bring this up as another important detail: budgets must be made with everyone included. Everyone needs a say in it. Our Fun Stuff – Nails category is my wife’s vote to have her nails and toes done. It’s her one splurge. And if I wanted my own stock of cash, my adult allowance if you will, then we'd discuss it and I’d write that in. Consistency is the key to a successful budget.
5. Left-overs go into savings. Going into the next paycheck-to-paycheck budget, the "Left Overs" and any money that we planned on spending but didn't, goes into our savings account.
Happy Budgeting!
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Violet here!
Isn't that simple and totally do-able?
I wanted to share what I've learned from our budgeting experience so far:
- If you want something, don't feel like sticking to a budget means that you can't have it. it means that once you've been responsible and paid for the IMPORTANT things that keep your family going, you can get what you want. Even if you have to wait a month longer than *rightthissecond* you will go to bed at night knowing that your cupboards are full, your bills are paid and you don't need to stress. There is nothing like finally getting that something that you've been working towards and NOT having the "I shouldn't have bought this" guilt.
- Believe it or not, we sometimes don't spend all of the money that we've budgeted. Some weeks the grocery total is LESS than what we planned for or we just don't feel the need to blow the last $40 in our "Fun Stuff" fund. These left-overs go into our savings and we know that one day we'll get to spend it on something even bigger and better than some random B-movie. Vacation, anyone? Down payment for our dream house? New (to us!) car? SO worth not mindlessly spending on something that we didn't really want!
- You have to be truthful. No going behind anyone's back and blowing $50 at Forever21. Now, If you really want the money for clothes, discuss it together and budget for it. For the budgeting to work, there must be no sneaking. If you get a Starbucks, mention it and then subtract it from the "Fun Stuff" total.
- Don't lie to yourself - if you can't afford it now, you can't afford it now and that's okay. If it's important enough to you, you will plan for it and get it eventually.
- Be accountable and reap the benefits of your hard together!
- Knowing that you don't have to worry about money (because it's all laid out, clear as crystal) can do magical, happy wonders for your relationship!
XO,
Violet and Bubby
