For 2 mos. my husband and I have been experimenting with a new (for us) type of budgeting. The concept is very simple: every single purchase is tracked. It may sound like a lot of work, but the fruit it has produced has been so visible.
Let me first give a quick overview of our money story:
-My now husband had no form of credit card debt before we married. He did, however, have a small student loan, several medical bills, and owed on his newly purchased for work (used) truck. I had no debt.
-We had a large wedding we set a realistic budget for but ended up with credit card debt by the time we were married and had paid for the honeymoon.
-My husband’s job is solid, but the paycheck is irregular and based on commission.
-I worked only part time and recently quit my two jobs due to health concerns. We have largely been living on one income since before we were married, throwing every bit of my paychecks to paying off debt.
-We were renting a house at the top of our means and decided to move to an affordable duplex to save money to buy a house.
-As of now, our only remaining debt is my husband’s student loan, a small one of my own, my car, and a very small no interest medical bill. We paid off the credit cards in entirety, the truck, and all other medical expenses. Our credit score has drastically improved. We lived as frugally as possible to do so, doing things like restricting spending and making our own laundry detergent.
-We now have built up savings and
are about to purchase our first home together just purchased our first home together! Our mortgage payment will be even lower than our rent!
So now, we are at the place where we are throwing less money towards debt but still need to be careful as we are buying our house and will be investing in redoing it. I don’t plan on returning to work in the near future (more on that later), so we have to manage our money well. Our budgeting system is based on our marriage counselor’s example. It goes like this:
A notebook is set up based on spending categories. Yours will look different depending on your lifestyle, but ours currently include:
Gifts, Groceries, Household, Pet, Shopping (Michaela), Shopping (Solomon), Entertainment, Health, Gas, & Auto.
Our categories are simple and you may want to do more (like a Personal Care category, for ex.), but for us it works. We sat down together and estimated what we thought we would spent/ wanted to spend in each category, and decided to track for 2 mos. before changing the amounts. And guess what? The first month we went over in almost every category. We both border on the line of being too frugal. However, we only actually spent just over $175 more than we had budgeted for, which was still well within our means. By the second month we realized that some of our expenses are currently set–like health, seeing as I have dr. visits every 2 weeks–and we need to increase our amounts to reflect that.
We literally write down every.single.purchase. Our notebook looks something like this:
Week of Jan 1-Jan 7
Category Store Notes Amount
Entertainment Starbucks date 6.60
Groceries Target coffee 21.47
Gas Sheetz 25.37
You get the idea. We save all receipts to make the process easier and try to write down the amounts every 2 days or so. We then throw away all unneeded receipts. At the end of the week we total everything to see where we are at so we have an idea for the rest of the month. For us, this looks like this:
Week At a Glance
Categories this week combined left
Entertainment 6.60 30.60/60 29.40
We make a point of talking this through at the end of every week. At the end of the month, we review our categories and set goals for the next. Eventually we will get our categories so firm that if we overspend in one category, for example, we can take money from one we have margin in to cover it. Additionally, if we don’t spend all of the money in one category we decided to either save it or role it over to the next month.
What I love about this system:
-we are in charge of tracking it, not an app. That means we have to be intentional about writing and reflecting on our purchases on a daily basis. (We like the paper version but there are apps available that will do some of the work for you if you prefer.)
-It encourages open communication between us. We set goals together which feels so great.
-We always know where we are at. We don’t have uncertainty about our money & where it is going/ the amount in our bank account.
-We each have spending money we don’t have to feel bad about using! additionally, we can splurge on a date because the money is set aside for that purpose.
-It prevents overspending (obviously) and allows you to use that money for what you really want. For example, we love taking small trips, so we are budgeting to allow for that extra cash throughout the year.
-It is freeing. Truly! It may seem legalistic but it has encouraged the opposite spirit in me in actuality. But you do have to give yourself space to make mistakes and exceptions. Be flexible.
**Note: we mostly use a debit card, but this system works just as well with cash (think: Dave Ramsey envelope system) or a credit card that is paid in full at the end of the month.
I believe that you don’t have to have a lot of money, but you do have to learn to manage it well. What is your budgeting system? I’d love to hear about it!