Budgeting

Hopefully, by the time you're reading,^† this I have started my new job and earning my first paycheck at my new place of employment. So I needed to update our budget to adjust to the influx of money and I thought it might be useful to share my budgeting strategy.

E3 Stole My Beanie Baby!

My Background, Some History
I am horrible with money. I grew up parents who made enough money that our family didn't have to worry about budgeting in order to pay for daily necessities like food or utilities nor did they really have to budget for the not quite necessities like yearbooks, restaurant food, sporting equipment, and other things that you don't need to stay alive but that you need to participate in school and society. My parents weren't irresponsible they tried to teach us to budget by giving us budgets for buying toys, later clothes, and budgets for souvenirs on trips.

But it's one thing to know you have X dollars to spend on beanie babies. It's different now though. One thing that has been incredibly hard for me is budgeting to replace things like my broken camera which aren't truly necessary like food or heat but are a common modern convenience that my parents would have replaced without much thought^* because their income was large enough to absorb purchases like that without planning. Our budget isn't able to absorb event the tiniest unexpected replacement purchase, especially so when we rely only on Hubs' income (he takes home $960 bi-weekly¹) and even now we don't have wriggle room since we're trying to save up for a home.

I Want More Pictures in my Wordy Posts
This is a Picture

How I Start My Budget

I start by tracking what I spend my money on. I want my budget to be a realistic reflection of my expenses. There's no point in limiting my gas expenses to $10 a month when I have to spend $30 a month on gas to get to work. I use Mint.com to track my expenses since it pulls data from various fantail institutions and puts them all in one place where I can categorize the expenses. I think this concept is especially important for odd, irregular expenses like doctor bills, medicine, auto repair, heat, &c. Though each payment is kind of irregular, my hope is that the average amount we spend on these things per month probably a useful number. I used the average of the various irregular expenses in my budget. I also averaged out the cost of yearly expenses, like our car registration, to figure out how much they cost us each month. I like thinking month by month.

One thing that always gives me trouble with budgeting is the irregular but necessary expenses. Like my doctor bills or car repair. If I've already maxed out my prescription med budget but I get an infection and need antibiotics what do I do? I likely can't wait until next month when my budget resets to treat my illness, I might be dead by then. The same with car repairs if I need to drive to work, my car needs to be safe so that I don't crash. So even though I get numbers for those categories I know that I may have to tap into our emergency fund in regards to these sorts of expenses.

This is a picture of a plant.

I log on to Mint about one a week or so to make sure everything is categorized correctly, to make sure nothing suspicious is happening, and to make sure there's enough money in the bank to avoid low balance fees. But, I don't use Mint's budget feature too much. It stresses me out and isn't flexible enough. I do like that it sends us alerts when we have unusual spending or when we spend over a certain amount of money.²

I also use Mint to track what I call our "simple" net worth. Net worth is all your assets less your liabilities, it's the total money value of everything you have including your car, your car loan, your student loans, real property, investments, everything, &c. My student loans make me sad, I owe more than we made last year. I also have investments that I don't think of as mine since my relatives gifted them to me and seeing those fluctuate with the market makes me nervous. So I just keep track of our simple net worth that just includes our current credit card debt, don't worry we pay them in full every month and don't carry a balance on them, and our bank accounts. I like this number better that net our real net worth because it is a positive number and it only shows the hard work that Hubs and I are doing.

Actually Making a Budget
To actually make the budget, I didn't use Mint, I created a spreadsheet with categories and loaded in the data I got from Mint about how much we spent on things. I also created an ideal spending column as a goal. I to get the "ideal" expenses I tried to think about if I could reasonably cut back in that category. For example, when only one of us is working only one of us needs to drive to work everyday so we didn't need to spend so much on gas.

Category	Average Debit	Ideal One Income	Ideal Two Incomes3
Car Insurance and Registration	$175	$175	$175
Life Insurance	$19	$19	$20
Water and Sewer	$27	$27	$30
Cable TV, Internet, Phone	$120	$120	$120
Electricity (including Heat)	$110	$107	$120
Cellphone	$70	$70	$70
Professional Dues	$27	$27	$30
Student Loans	$175	$175	$175
Gas & Tolls	$245	$126	$320
Car Servicing	$14	$14	$30
Pharmacy	$34	$27	$35
Doctor Visits	$63	$60	$60
Contact Lenses	$9	$10	$10
Car Payment	$321	$321	$325
Rent	$700	$700	$700
Groceries	$200	$180	$240
Non-Food Groceries	$10	$10	$15
Hair Cut	$11	$11	$15
Toiletries & Makeup	$30	$15	$45
Fun Money	$0	$0	$160
Retirement Fund	$0	$0	$550
Charity	$0	$0	$375
Save for House	$0	$0	$900
TOTAL	$2,340	$2,194	$4,520
	-$417	-$271	$0

I totaled up each column using the SUM function. And then below that I displayed our "monthly income" less the total. To keep things simple I only looked at our take home income not our taxable income⁴. Similarly, to keep things simple and leave some wriggle room, I assume our monthly income is twice each paycheck. But that is not always the case. April, for example, had three paydays. So our actual yearly income average out over twelve months is slightly higher than two paychecks. We also have side jobs going on, tutoring and contract work, but because those are irregular I didn't include them in our income.

Not including our irregular income is one of the reasons is why I'm okay with those negative numbers up there. If things were really bad we would have saved more by cutting the cable, internet, and our phone bills. And, I would have increased my income with a more predictable part-time job. Fortunately, I found a job in my field before it came to that. I have no idea what I would have done without the internet.

A Feral Rooster on Kauai

Making these Numbers Work for Me
I'm really embarrassed because I did such a bad job saving money when I had my last temporary job. I thought: "Oh! I'll have a job for the next few months so I'll just try to save some of it." Then those few months turned into an almost year and our lifestyle grew and we were not saving as much as we should. For example, I am truly mortified that I didn't put anything aside for retirement until my last month at my temporary job. We were only able to increase the balance of our house fund a little. If we we had continued to live like we had before I got the temporary job, and I didn't put anything aside for retirement, we would have enough money for a downpayment right now instead of only being a quarter of the way there.

This time I have a plan! I am going to set aside money for a home and retirement first! My paychecks are being direct deposited into my retirement holding savings account.⁵ Then I'll set up an automatic withdraw for the amount of our expenses. I'll be paying myself first by putting my money someplace where I have to think about it before using it. So I won't spend it as frivolously. I just pay for the things I need and I use Mint's tracking features to make sure I'm not spending too much at the grocery store or burning thru my fun money too fast since those are really the only places where it's easy for me to spend too much.

I feel this seems needlessly complicated sometimes? Do you guys spend this much time and energy wrangling your budget?

Footnotes

^†I'm drafting a lot of blog posts that I can schedule or at least have ready to go with little effort so that I can focus on getting used to working again.

^*Please don't laugh at me but I wanted to cry so bad when my camera and my fancy noise canceling headphone broke within weeks of one another right after I left my previous temporary job. I knew there was no way I could afford to replace either one and I could not deal. #richkidproblems

¹ Teachers should be paid more. They have to work with children. Plus Hubs works so much harder and longer than I do. He regularly does work on the weekends. He leaves for work well before I do to prepare and he comes home at about the same time as me or later most days. Also, he's doing so much more to add value to our country than I because he helps young people realize their full potential or at the very least ensuring that they can be employed later on because they know how to do math.

² FYI. Last summer I bought a lot at Lilly Pulitzer's Endless Summer Sale and Mint ratted me out to Hubs. And he was upset because I spent close to five million dollars on dresses without telling him about it beforehand. So though I generally don't encourage lying (including lying by omission) to one's spouse, you gotta do what you gotta do to stay safe so you may not want to use the alert feature if you are struggling with being honest with your spouse about your spending habits.

³ Like how I rounded everything to the nearest multiple of 5? My ideal world only has easy to work with numbers.

⁴ Our taxable income, the number on our W-2s includes money withheld to pay for our taxes at the end of the year and for benefits like Hub's retirement plan and our health insurance. It seems silly to add those things back in and then subtract them again so I don't. Some people do.

⁵ I like having lots of savings accounts for various purposes. I have one to holds retirement money before I put it someplace for the long term. My job situation is precarious and I don't want to put money someplace where I can't touch it until I am 70 if I may not have a job. If we have a real big emergency I want to be able to use that money now so that we can stay healthy and live to be 70. If I die before I retire it doesn't matter if I have anything saved. I have another savings account for the Lilly Pulitzer warehouse sale, it's full of money I made cleaning out my closet on eBay. We also have a savings account for our house downpayment fund. I have a savings account dedicated to student loan repayment so I know there's always money there for the automatic repayment plan to take without messing up my checking account.