Budgeting

I love budgets.

It’s embarrassing to admit, but budgets get my blood all excited!

One of the reasons I love our budget, is because we really do make a very tight income work for a growing family.  There is no doubt in my mind that we’ll be able to swing the new Fay family member I’m growing.  We have plenty of wiggle room, and since we’re used to living on bare minimums before baby, it will make life that much easier to adjust to after baby arrives.

It’s been requested for me to post our budget, and how we are able to make it work, while still living happily – and most importantly, saving.

Before I get started – something to remember about our budget.  The Hubs and I live on a small budget.  The Hubs is working on his PhD, so although he gets paid to work for the school, it’s not a full salary, and it’s not guaranteed.  This fact has driven us to keep our expenses low so that we can minimize hardship in the event of loss of his salary.  That being said, we really enjoy living minimally and never feel that we go without.  Not only has our situation led us to live comfortably, it has built us a very generous nest egg, secured us a nice home for our family, paid off debt, allowed for wonderful purchases, and in general, made us very proud to be us.

This, my friends, is our budget, pre-pregnancy (I’ll post about those budget changes, and baby budgets at a later date)

Mortgage $800 (this is more than our actual payment – we always pay extra – it includes things like taxes,warranty, insurance etc.)

HOA Dues $60

Water/Sewer $50

Electricity $150 (Fluctuates over the year, $150 is the average)

Internet $32

Cell Phones $97

Jaye’s Student Loans $268

Netflix $10

Food $250

Gas $150

Misc. $100

Personal $100

That makes our monthly expenses just over $2K.  I’m not posting our income – because it changes so much throughout the year with the stipend situation…but I will say, even in the lowest months, we have a surplus of well over 1/3 of our take home.

You’ll notice that there are a few things missing – car expenditures, gifts, etc.  Well, we base our monthly surplus off of the excess money after TWO pay periods.  We both get paid 26 times a year, which means there are an extra two paychecks that we don’t account for.  We pay our car insurance bi-annually, don’t have car payments, and usually only spend money on gifts for the Holidays.   No, this isn’t the way that most people go about it, but it has worked for us.

That surplus I mentioned above goes to various things.  Some months we are doing work on the house, or paying for a vacation, or buying an expensive SLR camera.  But in general, the goal is that the surplus goes to savings or student loan pay-off.   Unless you have a generous savings, and a completed emergency fund, I don’t suggest being this loose with your surplus.  For us though, we have met all of our short term financial goals, so I feel comfortable loosening the strings a bit.   I’m going to make a separate post about savings, so expect more on this later.

The key to our finances – in general, we don’t have very many expenses, and that is why we have such a high percentage of our income left over after all is said and done.  This is not the case for everyone, and I realize that!  So, here are some budget pointers –

  • Cut out what isn’t necessary.  We used to have cable.  Then, we both realized how much wasted time we spent watching TV.  Not just shows we wanted to watch, but fillers.  Since cutting it out, we have barely noticed the difference.  There is a ton of available shows online, and we do keep Netflix,although I plan to cancel soon.
  • Scrutinize your bills.  Do you actually need all those cell phone minutes?  Can you minimize your electric bill by utilizing an equalizer plan, or off-peak usage plan?  Have you shopped around for comparisons in your car insurance lately?  Take a look at your bills, and start questioning them, look for options to make those bills smaller.
  • Eat at home.  We love eating out (especially pregnant Jaye) but it’s expensive.  So, we choose to go out minimally, and make nicer meals at home.  Eating vegetarian a few nights a week is a great money saving tip!
  • Scrutinize your grocery budget.  I’ve made food budget posts before – so I won’t rehash everything here.  Just remember, eating healthy doesn’t cost a fortune.  Rule #1 – cut out the processed crap!
  • Stop using credit cards.   Don’t stop using them completely, just start using them wisely.  Don’t charge unless you can afford to pay for it, and pay off that balance before your interest kicks in.
  • When in doubt, budget every penny.  If you’re struggling getting your finances under control, the best way to see them clearly is to budget every cent that you spend.  Look at your monthly expenditures over the last few months and actually visualize where that money is going.  Categorize and start budgeting for everything.  We’re talking haircuts, copays, pet food.  The best way to get a handle on a runaway train is to know it’s mechanics, inside and out.  Once you get a handle on it, you’ll feel more comfortable with having categories like Miscellaneous.
  • Use cash.  I will almost always suggest cash budgeting as a useful tool in starting a budget.  Like most people, if I use my debit card, I tend to spend without thinking.  Cash budgets mean you stop using the cards, and start carrying budgeted cash amounts for non-fixed budget lines.  Cash for groceries, cash for dining out, cash for personal spending.  When you run out that month, you’re done.  It’s simple, and can be quite an eye opener for quick spenders.
  • Snowball your debt.  The only debt we hold is our student loans and mortgage.  This wasn’t always the case though.  Not much more than a year ago we both had car payments and small credit card balances.  We tackled these by snowballing – putting everything we could to the highest interest rate until it was paid off, and then moving to the next.
  • Do the right thing, not the tempting thing.  One year I used my entire annual bonus to pay off my car.   A lot of people would have loved to use that money on fun things…but to me, it was a massive weight off my shoulders to know that I had finished paying off my car.    Yes, I’m gloating, but something to realize about being smart financially – when you do the right thing, you feel about a million times better than if you caved to temptation.  I promise!  Of course this doesn’t mean that we never have fun and splurge.  Heck, I LOVE nice things, and for the most part, will save the money to have the nicer item.   Doing the right thing the majority of the time enables us to splurge confidently when it matters.  Like our Dyson vacuum and that expensive hotel on our honeymoon!
  • When considering what your budget should look like, don’t start with you income line.   Doing this creates a misconception of what you can afford.  This causes people to spend every penny instead of living well BELOW their means.  Focus on minimizing expenses and maximizing the surplus.  Practicing this will mean that you will train yourself to live with a buffer – a buffer that satisfies monthly savings needs, long term goals and those spendy splurges.  Remember, there is a reason why many wealthy people end up in financial hardship – they looked at the income line first and made their expenses inflate.

I hope that by me exposing our finances a bit, maybe this post has helped someone.  If not, I guess I’m just talking to myself 🙂

I’m already working on another post to talk all about savings, so stay tuned for my next money post!

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9 thoughts on “Budgeting

  1. Jaye, I love this… Very informative!!! Especially since our budget will be changing a bit in the next few months.. Can’t wait to see the baby budget!!!

  2. Boo…. you have so successfully mastered the art of recognition, which so few people do until it’s “late” in the game. You used your bonus to pay off your car, so you didn’t splurge it on “wants”. However, in the long run, that freed up money to splurge on a “want” anyway. You didn’t do without. You just used your money smarter. You didn’t do without, but you covered both the need and the want. Most of us, cover the want first, for instant gratification and then we’re always chasing the ability to cover the “needs”. Great post. I’m so proud of you.

    • My loans right now amount to 25K. I didn’t take any more out than I needed for tuition and books.
      The Hubs on the other hand, is another story…but luckily we have a few more years until those start coming due.
      Do you have a bunch of different loans, Maria? Can you consolidate to get your payment and interest rate down lower?

  3. Jaye, do you know if you have 2 loans with a bank and 1 with the feds can you consolidate all of those down to one or no?

    • You can’t consolidate down to one, but you an consolidate your private loans and federal loans separately. There are a lot of different companies that will do private loan consolidation, and your bank might also be able to. Check around, compare interest rates and see if you can get yourself into a lower fixed rate.

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