I am no financial expert but I am a little budget obsessed. Sometimes I find our limited income and unlimited desires too much to take on but when I buckle down I’m a mission driven woman. September was our first month of complete success.
It was NOT an easy accomplishment. Danny and I have very different ideas about money and it’s taken me years to push him closer to my way of thinking. Since he brought lots of debt to our relationship and I had none, it was a challenge to reconcile the repayment plan. After much discussion we decided that paying it off and proceeding with a clean slate was best for our finances and our relationship. We’ve tried a variety of personal finance methods (Joint v. separate accounts. Budget v. no budget. Credit v. Debit v. Cash.) to find something that would work and I think I found a winner.
I set out a budget in March and at the end of the month I assessed our accomplishments. I made adjustments where necessary and did the same thing in April. I’ve continued to do this every month and where there use to be a lot of red there is finally GREEN!
My method is pretty simple. I divided our expenses into four categories:
- Household: All expenses related to our living arrangement that are essential (rent, utilities and insurance)
- Transportation: Everything related to our cars (car payment, car savings, gas and insurance)
- Miscellaneous: Bills that we choose to have but that need to be paid each month (phone, cable and gym)
- Discretionary: Everything that won’t send us to collections (groceries, gifts, household, allowance and date).
- Insurance: We were paying month to month but when I looked for ways to increase our savings I realized that automatic payments and paying in full SIGNIFICANTLY decreased our insurance costs. I also have to say that Progressive has great prices.
- Car Savings: Car repairs depress me. I hate paying to fix my car because it is never expected and always ruins a budget. To avoid this pitfall I have a special savings dedicated to all things car related: oil changes, car repairs, car insurance and the down payment for a future car.
- Gifts: We have a large family and quite a few friends so we generally have gifts to buy every month. I try to adjust this amount per month based on events I know we have coming. For instance, I know we won’t get away with $100 for gifts in December.
- Household: This is a little of a catch-all category. Cleaning supplies, necessities, new socks when needed, a picture for the wall in the hallway – whatever we need for basic living that isn’t food.
- Allowance: This was a true marriage saver. Danny is a spender. He use to not even think about where he spent his money but he’s getting better at it. I like to buy things but I’d rather save my pennies then spend them. So when it was a free for all Danny got plenty and I felt cheated. Now we each get $100 every month to spend or save. Danny ALWAYS spends his (and sometimes more) and I always have left over. This slightly complicates the spending analysis since my leftover is just floating but it works out.
- Date: Since Danny never has enough money to meet his needs. I would never get to go on a date without a date fund. This allows us to have a good time without worrying about what’s left in our allowance.
|Monthly Assessment Example|
We use Mint to help us track our spending. It’s a wonderful, FREE program that I highly recommend. It really helps simplify the month’s end assessment. Mint categorizes our spending so I can put those numbers in sheet and see how we did. I also like to analyze each category to see what we did well and what needs work. As I mentioned we finally had green in September but often there is Deficit Red. Sometimes we luck out and one category balances out another but other times it’s ugly.
In a final analysis I look at the big picture: what money we had coming in and what we spent (I include outstanding checks or unpaid credit balances in this number). I reflect on what went on in the month and note any potential challenges in the month(s) ahead.
My other assessment category is our savings. Generally, this is a sorry situation and over spending leaves us with no progress or worse behind; however, as I said this month we did well. We have three savings accounts: General, Car and House.
The General savings is our must hit target: $300 every month at least and it comes off the top. The car savings is added on the spending list because car expenses can come up and the amount saved can vary. Previously we had only a general and a car savings but it’s really important to Danny that we actively work towards buying a house so we established a special savings. When that account has sufficient funds to buy a house that is when we’ll move. Sadly, if we go over budget it’s this fund that pays the price.
There it is, my financial “wisdom”. If you’re interested, I created a monthly assessment template you should be able to download and adjust to your liking.