Wednesday, January 20, 2016

Our Finances: Budgeting

I had planned this time last year to do a few focused posts on budgets and how we handle our finances, but I never actually posted any of them. So I figured I could try again starting with the big one: budgets. We are by no means perfect when it comes to budgeting. In fact, we rarely stick to our budgets. We use it more as a guide and a target to aim for. Some months we go over and some months we are under. But having a sense of how much we spend in each area is the way we like it.

I know budgets sound scary and most people think the idea of having one would be annoying and not fun, but I disagree. Just knowing where you are spending your money and being able to target specific places where you may spend too much is our main reason for tracking our spending. I like to know where my money is spent and how I can change things to save more. I really feel like if you do not look at how much you are spending on things, then you spend way more than you realize. To make our budget easier to stick to, we have fun money built in to it so that we know in advance how much we can spend on "fun" stuff.

Richard and I recently had to re-work our budget. When he got a new job and we moved into our house, we had to make a lot of guesses as to how much everything was going to cost us simply because we really had no idea how much it would cost to cool our house or how much we would spend on our water bills. Now that we have lived here a few months, we were able to remake our budget to fit our needs more. So since we recently put in all the work, I figured I could share a little bit about our process.

The first and most important thing to know about our budget, is that we track it all online using a website called Mint. With Mint, you can add all of your credit cards, bank accounts, investments, loans, property and more. Then, you can set up your different budgets and it will track and organize all of your spending for you. We have been using this free website for years and we love it so much. It really gives you an overall picture of your financial situation. This works well for us because we rarely use cash for purchases so we can track everything digitally. If you are more of a cash person, this could still work since you can add transactions, but it would be a lot more work.

The hardest part about coming up with a budget is figuring out what types of categories you need. Once you make your first budget though, it is easy to tweak it to continue to fit your needs as the years go on. I am a huge fan of Dave Ramsey and his thoughts on budgeting. While we do not follow all of his advice (like using cash) we do follow his principals and we used his forms to create our budget initially. Here are some of the categories that we have set up. Every family is different, but this is what works for us.

Auto Insurance: We set aside money every month for our car insurance since it is non-monthly. More on that in a different post.
Cell Phone
Security Monitoring
Home Mortgage
Homeowner's Association Fee
Life Insurance
Gift: Money set aside for gifts to be made in the future. More in a different post.
Car Payment: We are trying to pay off our car sooner by paying far more than the minimum required for the monthly payment.
Gas & Fuel: Gas for our vehicles plus we add tolls to this since we have toll roads in Texas.
Pet Food
Gym Membership

Fun Money
Entertainment/ Dates: This is money set aside specifically for us to either have a date night together (dinner does not count) or if we have fun with friends instead of a date night. We used to have different categories for this, but since we spend less money hanging out with friends these days we decided to combine these together.
Restaurants: We have a pretty sizable restaurant budget because we enjoy eating out and we may as well budget for it. We used to have a much smaller budget, but we would constantly go over it so we learned that we should just give ourselves a budget and then stick to it.
Guilt Free: Both Richard and I have a set amount that we can individually spend "guilt free". Meaning, if I want to go shopping, I can spend my money on whatever I want and Richard has no say and vice versa. So if Richard wants to spend all his money on cigars (which he usually does) I have no say as long as he stays within his budget. This was something recommended to us in our pre-marital counseling because it really does prevent arguments about spending too much money.
Blow Money: A little cushion in our budget because even with all the careful planning, things come up and you will therefore blow your budget. If you plan on it happening, then it will not surprise you.
For the Home: We have this as a budget for buying things for around the house, such as toiletries, paper towels, toilet paper and so on. Sometimes we use this as a budget to buy decorating things for the house as well.

These are the different things we save for every month, but I will discuss these further in a different post.
Emergency Fund
Short Term Savings
Vacation Fund

We operate on a zero-based budget, meaning that every dollar of income is included in our budget. Income minus category totals should be zero. That way we are only spending what we are making in any given month. Well that is a lot of information about our budget, but I have more to share about how we save and more. Stay tuned!

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1 comment:

  1. Good read. Ramsey has good advice, but as you's good to put your own flavor in your budget plans. The cash thing...i disagree with it too. Anyway,say hello to Chambers.


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