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budget, budget, budget

March 9, 2010

It’s really appropriate for me to be discussing our family budget today, since I just bought a sink that was 3 times what I budgeted for our lovely 1/2 bath.  {end sarcasm}  Sigh.

But I’ve had a few people ask how we keep it all together, so I thought I’d share.

Being the super-uptight frugal CFO of our little family, I like to budget for and track EVERYTHING.  I’ve found that this google docs worksheet from Get Rich Slowly has been particularly helpful.  (Note that the numbers in the spreadsheet are not my own, and that an Excel version of the spreadsheet is here).  I like that the spreadsheet divides expenses into those that stay constant month-to-month (i.e., mortgage, phone, internet) and those that vary slightly month-to-month (i.e., electric, groceries, etc).

We use our credit card to pay for almost everything.  I know that might be shocking to those of you who are super-thrifty budgeting gurus, since consumers who exclusively use credit cards end up spending more than if they had cash (here is a story about that from NPR).  For us, though, the ease of being able to grab whatever groceries we need on the way home from work is crucial – heading all the way home, just to grab cash and head back into the city would be a pretty big waste of time and gas.  And, we track our expenses throughout the month – once we hit the budgeted amount, we stop spending.  (Gas expenses are the one exception to this rule – without gas, we can’t get to work, which is a whole ‘nother financial problem.  So gas is purchased no matter what.)  We have a cash back credit card, too, so I figure we might as well reap the benefits of that — especially since we pay off the balance in full each month.  (The whole paying-off-the-balance-in-full is sort of crucial to the credit card being a successful payment method for us.  I mean, who wants to pay for those icky late fees and interest?)

Having said that, I do appreciate the usefulness of the envelope system created by Dave Ramsey.  In the envelope system, you budget out what cash you’ll use for each expense category (i.e., gas, groceries, etc) and throw that amount of cash into an envelope.  When the money in the envelope is gone, you’re done spending in that category for that month.

We have recently added a little twist to our budget that seems to be working wonders: we each get a monthly allowance.  I always thought these monthly allowances were sort of silly – like, really?  I’m an adult… do I need an allowance? The answer appears to be yes, though.  I do.

At the beginning of the month, I pull out cash for our allowances, and that’s what we spend on meals out, haircuts, clothes, etc.  We’ve found that, for us, it’s crucial that this is the one budget category that we pay for with cash, mostly because this is the category that we’ve typically overspent in.  Sure, it’s pretty easy for me to assume that grocery expenses don’t change too much from month-to-month and I can fairly easily estimate what we’ll spend.  But on all of life’s extras?  It’s super-easy to get carried away… like, when I “need” those new pants, but they would look super-great with that new shirt, and how about a pair of earrings, and by the time I’m done, I’ve put more things on the old credit card than I originally intended to.  Cash stops that – if I’ve got $20 in my pocket, that’s all I’ve got.

And, as an added bonus, I no longer have to nag Jason about how much he’s spending on whatever he spends money on.  He’s got his cash and he knows when it’s gone (as opposed to before our little envelope allowances, when, as super-anal thrifty CFO, I would check the credit card statements and nag him to stop! with the spending).

So, that is super-rad.  We have a budget!  And we (usually) stick to it!  Yay!  That’s not to say it didn’t take months of tracking our spending and compromising.  I tend to be super-ridiculously-thrifty-cheap and Jason tends to be on the opposite end of the spectrum.  It’s good because we can balance each other out – he’s reduced his spending on lots of stuff, and I’m more able to enjoy a night out without calculating what each drink is costing us.  That’s not to say that being financial opposites has been without it’s challenges, though.  What’s worked for us, though, is to identify our long-term and short-term financial goals (like retirement! and wood flooring!), and work together to make a plan so that we can achieve those goals.

And, that concludes my super-long and not very entertaining or pictureful rant on budgets.  Perhaps tomorrow will feature more photography or projects, that is, if we finish any tonight (fingers crossed!).  If anyone is still reading (hello!?), feel free to drop a comment or two about your budgeting style… are you a credit card user or cash only?  Any other fun budgeting tools I should be using?

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13 Comments leave one →
  1. March 9, 2010 11:25 am

    After 29 years of marriage we are finally debt free. Unfortunately this came as a result of two inheritances so good on you for budgeting early!

  2. March 9, 2010 11:34 am

    Great Ideas to share.
    My husband & I do the same exact thing as you do. We have one credit card {also a cashback-rewards card} and we put all purchases on it – at the end of the month we pay the entire bill.
    If there is a big purchase we want to make we wait until we have saved up for it to get it.
    That might mean less trips to target for that month.

    When we purchase a new car we pay it off as soon as possible and drive it for several years till we get a new one -which leads to = no car payments for a while.
    It’s a great system and it works – people just need to be committed.

  3. March 9, 2010 11:35 am

    Like you, my husband and I are very frugal. We pay EVERYTHING with our credit card (which we only use one) and pay it off every month. We looked into the cash back programs and the frequent flier programs, but have settled on the free gas program. During the really bad year, where gas was $4+ per gallon, we earned over $1000 of free gas. In the past year, we’ve earned 1/2 that for two reasons; gas is cheaper, so earning potential is lower and second, the amount of points required to earn $100 or $200 free gas has changed (raised) and now it takes longer to earn.

    Anyway, I took a look at the sample excel spreadsheet and it mimics the one I created for myself years ago. I track everything in several excel spreadsheets, a notebook and we use the software Money and track everything except cash. You could say I’m very anal about money. Even when I was a single mother and very poor – I would still be obsessed with knowing how much money I had at all times.

    I guess I’m lucky because my husband and I are on the same page when it comes to money so there is very little tension about “oh my gosh, what is he spending!!!”.

    My husband would be the first to remind people that although we are frugal, we are also generous. He doesn’t like the words “cheap” or “tight”.

    We also mix our money – some people have separate accounts, but I find that a little strange. Our money is our money and we both NEED to know what we have total.

    We have spending cash (for when a child comes to the door selling something) in a safe at the house.

    • March 9, 2010 12:01 pm

      Love your point about frugality vs cheapness, Yvonne! “Cheap” has such bad connotations, doesn’t it? We always strive to be frugal, but also generous, too. Our frugality allows us to be more generous to the causes we want to support, and I think that’s really important.

      And I agree on the mixed money thing – we’re totally account sharers, although we do each maintain a separate account that we had before we were married. I’ve recently been contemplating getting rid of mine (I never use it), but Jason had his set up to autopay his student loans, so we’ll wait till those are gone before getting rid of his.

  4. March 9, 2010 1:10 pm

    I keep a spread sheet as well of our expenses! When I met my hubby, he had horrible management of his bills. I took over and in 2 years, I have paid off a little over $5,000 of his debt! Basically, we spend a set amount on our groceries, we share minutes for our cell phones, eat in 6 nights a week, and have friends over instead of going out! It’s been tough, but to be honest, we don’t need much! We are lucky to have what we have. Great tips, Jen!

  5. Mom permalink
    March 9, 2010 3:38 pm

    I am very impressed with the level-headedness of all these posts. Obviously these readers are NOT part of the national credit card debt problem! Maybe you should all start a campaign to promote frugality as the ideal lifestyle instead of the irresponsible, impatient, and “I want it now” way of life. A few tv commercials with friends having fun at home criticizing the lame idiots who overspend and pay so much in late fees and interest. You could all be sipping on Jason’s homebrew and laughing up a storm….I know just the producer…

    • March 9, 2010 4:15 pm

      Of course no one that is bad with their money is going to post about it on this blog entry. So you’re seeing the few that didn’t cause the debt problem.

      This reminded me of an NPR story my husband and I listened to yesterday morning. Here’s the link: http://www.npr.org/templates/story/story.php?storyId=123904860

      But what got to my husband and I was when (at the end of the interview) they went back to one of the ladies that had purchased their home for $80,000 in 1989, but now owes more than $300,000 (because of Home Equity Lines of Credit) and told her that one of her neighbors had actually paid off their mortgage, this was her response:

      When a reporter tells her about the Betts family down the street, she seems a little surprised that there’s anyone on the block who didn’t refinance.

      “So that’s good they didn’t have to,” Moore says. “But then, too, I look at it this way: You’re sitting on a bank, so if you can use it, use it because you can’t take it with you, so enjoy it while you can.”

      And that’s the problem with the way most American’s are thinking these days.

  6. March 9, 2010 7:07 pm

    Good for you, Jen! I think every senior should be required to take a personal finance class before graduation. I took one my senior year in college and it was life-changing. I had a plan to start off my little life with.

    We also pay off our credit card every month and earn frequent flier miles. We’ll be celebrating our 10th anniversary next June and enjoying it in the Mediterranean because we’ll use our miles to get free tickets. Another thing we do is pay an extra mortgage payment each year on our house (divided over 12 months it’s not a huge deal), and that will cut about 7 years (and lots of interest!) off of our 30-year loan. 🙂

    • March 11, 2010 10:10 am

      Ooh! That sounds awesome – you guys are going to have a great time (and hopefully you’ll blog about it- I want to go the the Mediterranean sometime!!).

      I think we’re on track to pay an extra mortgage payment each year, too. I love that it ends up cutting time (and $$) off of your mortgage!!

  7. Kelly permalink
    March 9, 2010 8:45 pm

    Hi – I’m a lurker from houseblogs.net :> It makes me so happy to hear about couples who are getting on the same page financially, having a written budget, planning… Keeping an eye on it is half the battle.

    We are on Dave Ramsey’s baby step 6 right now. We use our debit cards for almost everything. We cheat on the Ramsey plan because we still have credit cards – we use them to buy gifts for each other, or when we want a layer of security between the transaction and our checking account – and we pay off in full.

    We have a no-questions-asked rule on our monthly “allowances” – as long as we don’t go over budget, of course. We figured that when we were single, we had the freedom to blow a little money on dumb stuff once in a while without having to justify it. We have to enter the expense into the spreadsheet but don’t have to enter what or where. That way, if I want to spend my money on a kind of pricey skein of yarn or Rick Astley’s greatest hits, I don’t have to worry about whether or not my husband will think it is a good use of our money :>

    • March 11, 2010 10:14 am

      Hi Kelly – thanks for de-lurking! And congrats on your baby steps! 🙂

      The no-questions-asked thing is crucial, isn’t it? It’s so funny that for years I thought it would be dumb for us to each have an allowance, but now that we’ve tried it, I love it…

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