This time of year it seems everyone I know is fervently watching thier dollars. We are among you! This time of year we are always reminded that we NEED TO PAY ATTENTION!
Today, I want to share with you how we budget as a family and make our finances work.
It seems a lot of people struggle with this, and we did too, especially in the early stages of our marriage. Me staying home forced us to look at our finances very closely on a regular basis. Here are a few things I have learned and a few tips for those of you who want to get organized in your financial life.
1. Communicate. The first thing that greatly helped my husband and I get our finances on track a few years ago was to start talking about it… a lot. We talked about our goals, we talked about our spending habits. The most important thing we learned to communicate about was how and when we were spending. This isn’t just one conversation and then we were set. This is a daily conversation. This may seem tedious to some of you, but honestly in the beginning we spoke to eachother about every dollar we spent. I would call my husband and tell him I needed to take our son for a haircut and that it would be $15. He would call and tell me he needed to get his ice skates sharpened and it would be $5. Was it because the $5 was going to break the bank, no. It was because we were building those good communication habits. If we both just went out and spent what we needed to without communicating we could easily blow through a few hundred dollars and niether of us would be aware of it. That could be bad at certain times of the month, and early on in our marriage, it was bad. We still talk about our expenditures every day. We sit down every paycheck and discuss what bills we have to pay and how much will be left for groceries, clothes and activities. We have gotten so good about discussing these things that it has become second nature. We always seem to have a mental handle on what bills are coming and which weeks will be tighter than others. So, my first advice to anyone who is trying to get thier finances in really good shape is to communicate constantly with your spouse about it. Get anal about what you talk about. Yep, I still tell my husband if I am going to spend $4 at Starbucks. It helps. Remember, it is not asking permission, it is getting on the same page. He tells me about each of his expenditures as well.
2. Budget. Budget. Budget. Ok. This is a no brainer. You need to have a budget set up on what it takes to make your house run. Calculate how much your bills cost you, how much you need to spend on groceries, how much you need to set aside for new shoes for the kids, how much you put away for retirement or savings, how much you want to spend on entertainment. Then write it all down and see if it is what you actually spend. If you don’t have an idea of what you bring in every month and where it goes, then you can’t make realistic changes and improvements. You have to start somewhere, you have to set the framework for how you would like to spend. Don’t forget to make sure it all adds up to less than what your income is! Sure, ideally I would like to have $200 to spend at Sephora every month, but that just isn’t in the budget.
3. Track it! I think this is the hardest step. It is easy to start talking about it and it is easy to set up an ideal budget. The actual tracking is the not so fun, and really tough part. One must get really organized with this step. This is the follow through to make it all start ticking. Since I am the one in charge of paying our bills I have a spread sheet of all the things we way to companies every month. I go through and write the amount we pay after we make the payment. This way I make sure nothing is overlooked. If I have big open spot on my sheet I know we forgot to pay something. I know that seems kind of silly to some, but I don’t know how many times in our early years of marriage we would get disconnect notices on one of our bills. Not because we couldn’t afford it, but because we had put it aside and forgotten about it. Bummer! Here is the spreadsheet I use, feel free to download it and use it yourself. There are plenty of spaces to write in extra items.
bill pay workbook
4. Link it up. This may not be for everyone, but we swear by it. We use a free online program called Mint. Once you are logged in, Mint will link up to each of your accounts and track your spending for you. It links up to your mortgage, your bank account, any credit card accounts, your retirement or college savings accounts, your savings, anything you want it to really. Then you can set up your budget and it will alert you when you have overspent. Bummer, you budgetted $100 for eating out this month, but you spent $120. It brings that budget into reality and tells you where you are messing up. It is lik a virtual envelope system so to speak. This is helpful when you know your husband spends more than he thinks he does on something. Those numbers don’t lie. My husband swore he only spent a certain amount of money on lunches during the workweek, when he saw the number it was a wake up call that he couldn’t argue. Mint will help you set up goals and tell you how much money you need to set aside each month to reach those goals. For instance, when we wanted to update our floors with the Pergo. Mint told us it would cost $155 a month for about 23 months to pay for it. Then you can decide how much you can set aside each month for your goal. If you have a vacation you are saving for you can set up a goal to meet. It also gives you a month end pie chart that shows where your money goes. Sometimes just seeing it visually is a real eye opener. OMG- we pend $100 at DAIRY QUEEN! If Mint sounds like something that would be helpful for you, check it out HERE. We really love it.
5. Cut it out. Once you have a couple months spending under your belt and you have tracked it all, you can see what areas can be cut a bit. For us, the biggest area that can be cut is always groceries. We look at our spending at the end of every month and decide what we would like to do better. Or we applaud ourselves and say, YAY!
6. Space it out. This one may not work for everyone, it depends on when your bills are due. For us we space out our large expenses to a bi monthly system. The first of the month we pay our mortgage which is the biggest bill we have due. We don’t pay any other “bills” until the second paycheck of the month. At that point we pay EVERYTHING else. We pay our electic bill, gas bill, cable bill, phone bill, everything on the same day. That ensures we hit them all and we are not killed having to pay them all at the same time we pay our mortgage. Again, this method may not be for everyone, but it works really well for us. We pay our mortgage and we know that the rest of the money left in the paycheck goes toward food, activities, etc. Then when the second paycheck comes about the middle of the month we pay all of the rest knowing that what is left over goes toward food, activities etc. For us, it seemed the easiest way to find balance.
7. A couple things people forget. It is easy to track and budget for things you spend money on every month. But what about things that come only once in awhile? Make sure you have those in your budget too. Christmas, how about set aside money every month for gifts so that you don’t have to use a credit card? Or do like we do and buy Christmas gifts throughout the year so that your budget is spread out over 12 months instead of one. Home repairs and improvement- we all have things we would like to do to our homes, why not set aside a few bucks every month for that new fancy shower head and eventually it will be yours. Gifts for friends- birthdays sometimes sneak up on us. I know I don’t know the exact birthday of each of my friends kiddos. So, when we get invited to a birthday party I have to run out and get a gift. We have a certain amount of money budgetted for gifting so that if this happens we are prepared.
8. Don’t use credit. Plan ahead, then you won’t have too. That is pretty much it on that end. Use your budget to make this happen by thinking of all of those things ahead of time. It takes a bit more work, but it will save you so much in the end. Credit is throwing money away.
Here are a couple financial goals we have for this year:
Cut our Grocery Bill by $200 per month
Make Lunches at home to bring to work more often (more leftover prone meals)
Add a couple hundred bucks a month to savings
Ok, that is it. I don’t claim to be some financial guru, but we seem to make our finances work without using credit, and without terrible arguments. I hope someone out there can benefit from our tips.