Now that PJO and I have nailed down most of the relevant figures for determining a budget (i.e. known rent vs. unknown mortgage amount, picked a daycare vs. estimating average costs), we decided to revisit our family budget and see where we stand.
It wasn't all doom and gloom. I managed to squeeze in a budget for an occasional manicure with student loan payments, 401K/IRA contributions and savings. I didn't mind too much getting rid of HBO and Netflix. But I couldn't help feeling a little dismayed when I realized that I'm not actually going to be able to replace my cat-scratched bedding or take up a new hobby anytime soon. And that idea that when we do buy a house, we'll be able to decorate to our hearts' content, free of budgetary restraints? Not going to happen.
I have to say, knowing that our money situation will be static for a while makes it seem much more important to stick to the budget we made. Previously, we would create budgets but it was harder to define our monthly income and expenses with my temporary jobs or one-time stipends. This time, we tried to honestly estimate or over-estimate what we spend on each category so that, if anything, we end up with extra money each month that we can use to pay down my student loans.
So here's what I'm wondering:
* How do you keep track of/enforce your budget?
I remember my mom used to take out a certain amount of cash at the beginning of each month, put it in labeled envelopes and limit herself to whatever was in them for the whole month. Then if there was anything left over, she would treat herself with it. I don't like the idea of carrying around that much cash, but I will have no idea what I'm spending on what (without considerable work) if I just use my credit card for everything.
* Do you use sinking funds, and if so, for what?
We were thinking of diverting money each month into different smarty pig accounts for several categories that are annual or semi-annual. Car insurance, gift-giving, travel. That doesn't seem like the most efficient way to earmark the money and keep track of it, but I'm not sure what else would be easier.
* What about miscellaneous spending?
We made a separate category for miscellaneous spending (because we always spend miscellaneously), but I guess you could just make it a catch-all fund from whatever is left over at the end of the categories you really need.
For you women that work, do you have a separate account for your own discretionary spending or do you just share accounts and budget separately for what you need? I'm thinking specifically about spending on clothes/shoes/bags/personal maintenance, but it could be whatever you want to spend money on.
I made clothing a category in our budget, but I didn't differentiate between PJO, Timmy or myself. A set amount of money will be set aside each month, but I'm sure we'll spend more sporadically than that. And I am pretty sure I'll spend more on my clothes than the other two members of my household.
What is your biggest budget pitfall?
I already know mine will be the food/grocery one. It always is. I can't help that I really like to order a margarita when I go out for Mexican food or buy wine with every grocery trip. I just can't.
Or do you not budget at all? Maybe you just naturally exercise so much fiscal restraint that you have plenty of money diverted to savings and investments without even having to try?
5 comments:
Here's what I do.
I balance my checkboook IN Excel. I copy/paste the transactions from my online banking site into the spreadsheet. I put a column for "category" and then as I add new transactions each one gets labeled. It's very important (because we eat out way too often) to have a separate one for Grocery and Restaurant. I use the categories to figure out our spending and make a budget. Here are a couple screen shots so you can see what I mean.
http://picasaweb.google.com/lh/photo/yrYj1kcIDTXg2_B3BqhCdEHTrQOSLNjZYTFDQshubxQ?feat=directlink
http://picasaweb.google.com/lh/photo/xSbnAEGHADxREAFYCM2re0HTrQOSLNjZYTFDQshubxQ?feat=directlink
I also put in a pie chart cause I'm nerdy that way.
I also use Excel--I have built a spreadsheet broken down into various fixed expense and discretionary expense categories.
To come up with a budget number, I figured out what my fixed expenses are for the year (rent, utilities, student loan, insurance, etc.) and my savings goals. I subtracted those from my net income and the result is my discretionary spending for the year. Divide that by 52 weeks and I have my weekly discretionary allowance.
Each week, I input all of my expenses into the Excel sheet (and into a category). If I am over in my discretionary spending one week, I know that I need to cut back the next week. At the end of each month, I figure out what my surplus/deficit was. If I had to overspend in one month for some reason, I know that I need to cut back the next month.
At the end of the year, I can see exactly what I spent on what. And that helps me to see if I need to make any lifestyle adjustments.
I have been doing this for a great many years now, and it works well.
We always say we should make a budget, but we never do. It's always worked fine for us, I think because we're both savers and we both hate shopping, except for food (our main expenditure). Right now it's easy because we're both making good salaries, but even at our brokest (he was unemployed for a year while I was a grad student, and we were living in the very expensive Boston area) we didn't use a budget -- we just tried, pretty successfully, not to spend a penny beyond our rent and ramen. We have regular (once every month or two) discussions about how much we've been saving, including the money we're putting away for retirement and in K's 529, and if we feel like we haven't been doing enough then we increase our automatic contributions to those accounts.
We also do not have a budget. Because we are rocking into our eighth fun year of grad school livin', we don't have any savings. Our goal instead has been to not use credit cards, which we've managed to do, and not dip into a small retirement fund. Beyond that, I'm with CM - spend nothing over rent and food, except very tightly budgeted birthday and Christmas gifts for close family only.
I find that a general knowledge of my budget and its limits keeps me from spending, and that's all I need. Plus my husband is a miser (but you didn't hear it from me.) One day when we have jobs (oh, sweet day), we will automatically debit things like long term savings, short term savings, a Christmas fund, a vacation fund, and a retirement fund, and then just float along with the rest.
We have a budget, kind of. Every month Liam has direct debit take out funds for our savings plan, rent, my monthly money (while I'm in school), the car and retirement savings. Anything after that is used for food, entertainment, etc. Anything left at the end goes to the savings and retirement plans. Once I'm working, we'll have a real budget because then we'll have a better idea of our actual expenses.
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