Today marks the day of a new small series I am starting about budgeting.
As with many things, I am not an expert; however, I have tried many different approaches to budgeting and have found what works best for us right now. We used to have two full incomes, making our budget requirements A LOT simpler. And honestly, we probably could continue to live a lifestyle like we used to, but I think it may involve having no savings and relying on credit cards quite a bit which is not recommended.
TIP #1: Live within your means
When I decided to go back to school and we were thinking of purchasing our first home, I spent a lot of time crunching numbers. I looked at our salary at the time, as well as our future salaries as I continued to cut back on work to focus more on school. I wanted to make sure we could still afford our house, even if I had to stop working. Fortunately, Lance has a good enough job that this would be be possible for us. However, it meant that we had to buy a slightly older and smaller starter home, and had to be patient for the right deal to present itself.
To put this into perspective, at the time of our marriage we were residing in Lance’s parents current home. At the time, they hadn’t really been living in it, so it wasn’t too bad. However, a few weeks before the wedding, they decided to move in to their home (makes sense), giving us roommates that were my in-laws. They are lovely people, but for any of you who are married, you understand how important it is to have your own space, especially at the start of a marriage. We had motivation to move out AND we knew are budget constraints. So, as much as I wanted to leave, I still had to be patient.
TIP #2: Allocate all of your money every month.
Lance’s paycheck is exactly the same every two weeks. Mine can vary if I pick up extra shifts, but I base our budget on my BASE salary. That way, anything extra is a bonus. Our bills are the same every month, and after a few years of monitoring our budget, I have a pretty good idea what we need to spend where and could develop a budget that saved us money, but wasn’t super constraining either.
I created an excel spreadsheet that I will share with you. I use this sheet at the beginning of every month to decide which paychecks are paying what bills, making sure that we have enough each week for what we need. For example, it is nearly impossible for a single check to cover our mortgage payment, so I divide it up among several paychecks and put that money aside until the payment is due. We know where every dollar is going before it even hits our bank account.
TIP #3: Have a few savings accounts.
This is to alleviate the unexpected spending that comes with life. For example, for that new furnace, car repairs, vet bills, etc. We don’t pay these things every month, but they do come up. We figured up about how much we need every year for these items, divided it up into 12 months and put that much money into this account every month. Right now, we are able to put away a little more than what is requried every month, giving us some wiggle room for future home projects too.
We have several others that I will discuss in more details in the future.
TIP #4: Hold each other accountable and stop using your credit card.
I know, I know. I have made the same argument you are thinking. We are spending the money either way, so why don’t we use it, pay it off every month, and get the points/rebates/rewards, etc. If you can stick to your budget doing this, that is awesome and I applaud you. I am not one of those people. I become of the mindset– “we spent $120 instead of the budgeted $100? That’s okay, put it on the card. We’ll pay if off”. Not okay! If you designated $100 because that is what you can afford, that extra $20 snowballs quickly and suddenly you are more in debt.
For me, it is just easier to have the cash. Once the cash is gone, its gone.
I will be breaking these ideas down more and probably sharing a few more tips along the way in the coming weeks. I have been wanting to share my thoughts in some manner, so I am very excited to have it on my blogging calendar!