Tuesday, June 5, 2012

Running a household on a budget

Hubby and I just finished taking the Financial Peace University class by Dave Ramsey. I also just discovered the living on $28,000 series from the peaceful mom blog. Needless to say, I've been thinking a lot about money lately.

Now, I'm going to sound arrogant, but bear with me for just a sec. After going through both the class and the blog series, I was a little bitter because I didn't really learn anything new for my day to day budget. I did learn a lot from Ramsey about insurance and investing, but for my household budget it was all stuff I already did. But I didn't always do that, and I figure what if i knew then what I know now? Maybe we wouldn't have spent the last several years unburying ourselves from a mountain of debt.  And I do mean a mountain.  I guess I'm just the wrong audience for this stuff because I learned the hard way.  I did really enjoy both, don't get me wrong.  I just get disappointed when I think I will find some new exciting ways to save, and I come up empty.

So of course, I thought, well maybe I should give my own advice!  I love to save money and Hubby and I have made it a kind of hobby to uberbudget and see how much ahead of our schedule we can get.  I am a stay at home mom, so we are on one income, but thankfully its not too much of a hardship.  Hubby just happens to love a lucrative field, so we are not exactly living on ramen and pork and beans.  But as Dave Ramsey says, there is a difference between being broke and poor, and with all the credit card payments and student loan debt, we were pretty broke.  I don't want to give you the impression we are swimming in money now, because we are still on a very tight budget, but we do have a comfortable income for being a single income household.  That being said, I am still incredibly frugal. :-)

I don't exactly know where to start in sharing my experiences, so I figure I will just add posts as I go that share some of our money saving tips.  But for the first post, I think I will share HOW we started budgeting.

I hated my job when I lived apart from my now husband, then fiance.  When my lease for my apartment came up for renewal, I didn't think I could realistically stay there another year.  Yes, I hated it that much.  I was so depressed and so hopeless, it was all I could do to get out of bed each day.  Needless to say, it killed my husband to see me so upset.  So, we decided to look into moving in together.  Two people can live more cheaply together, and we were saving for a wedding so it seemed prudent.  I always intended to work, but the job market was just so bad, I went on interview after interview and came up with zip, despite always being in the top few candidates.  Now we really had to look at our money.  We had fallen in love with the idea of living together, but with only one income, how could we?  So we started tracking our spending very carefully, took a look at my husband's income, and categorized all of our spending.  We have many categories, such as mortgage, groceries, bad debt (credit cards), student loans, gifts, church (charity, really), and a category of "fun money" for each of us that we use to buy each other gifts, to buy things we want, and generally relieve that pressure from living on a budget.  It also includes a slush fund which we nicknamed the "ice cream cone" fund where extra, unbudgeted money goes (such as tax returns, bonuses, interest on savings accounts, gifts, etc) until we decide what to do with it, like pay off debt, donate something to charity, go out to dinner, take a trip, etc.  We often leave it there for a while until it accumulates enough to do what we want to.  Its also an additional buffer for emergencies or if a budgetary item goes off track because we didn't plan quite right.

Our real budget, minus the numbers
Hubby is a whiz with spreadsheets and we use Google docs so we can collaborate on it.  Each of the pages on the bottom link to our itemized spending for that month, which deducts from this first page automatically.  There are also "plan" spreadsheets for each month so we can account for things like insurance that are not paid monthly, and it also spells out how each paycheck is allocated.  For the most part it is the same each month, but for some things it changes, like around Christmas for the gifts budget we save a little extra.  The first column is the amount in the "bucket", the second is the "plan" amount, or how much we should have there at that point in time to stay on track to pay those irregular bills, especially key since bills are once a month and we are paid twice a month, and the third is the difference between the two - this tells us whether we are on track or not.  Green means we are ahead, light green means we are a little ahead, white is perfectly on track, yellow is a little behind schedule, and red is critically behind.  This first sheet is the snapshot of how we are doing at that exact moment.  It ROCKS.  We can see if we have money to spend on going out, if we have enough to pay our insurance, etc.

We also have spreadsheets further tracking our spending for certain categories, like groceries, baby, and crafts.  These are mostly for tracking purposes, not planning, so we can see where we need to cut back or where we are doing well.  A lot of our money goes into these categories, and it is easier to control our spending if we know what is going on.  I used our baby budget to plan what I would buy for the baby, going from most to least important so we didn't end up with a jogging stroller but no car seat.  So far, we have come in way under on most of our items, but it was indispensable during my pregnancy so I could see what we needed and what was a convenience (we still don't have a jogging stroller by the way haha).

So, I am sure this is about as clear as mud, but its our way of making things work, and I LOVE it.  Every dime we spend is accounted for, and we plan by the year so we can plan for long term expenses and goals more easily.  We even have a plan for buying a new house, although it is a few years off.  But we will be able to do it because we can see our progress and we remember that it is there, needing some income allocated to it.  Without a plan, it is so easy to forget to save for things, and thus, they never happen.  Someday we will add vacations to the list when we can afford it, but for now, this is it!

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