Week 30 -The Nitty Gritty of the Budget

After my last post, some folks asked questions about how we did our budget.  When we finally landed on a tight budget that worked for both of us, we found three keys:

Working together. 
Dave Ramsey says in most couples, one is the nerd and one is the free spirit.  Then there’s us.  I’m a split personality.  I’m the nerd, I like love to do budgets.  But, I also used my nerdness to squeeze the budget for my free spirit spending pleasures.

In the past, Walt was the carefree but frugal nerd.  He preferred the “let it ride” approach to budgeting –put everything on auto bill-pay, check-in once a month if needed, and watch a little TV instead.   

That said, we needed more time to find our budget groove and truly TALK about the budget.  I still watch every transaction and move things around depending on how the month is going, but we now check in 1-2 times each month and discuss those decisions.  

For us, this also meant combining our checking accounts, but every couple is different.  We also use Mvelopes.com which puts everything in one place – the checking account, savings accounts, the student loan and credit card debt registers (no more!), and our bill pay.  Think of it as a virtual envelope system*.

Being specific. 
We learned through trial and error that detail, detail, detail is the secret to a good budget. 

Most budgets break down because of something unforeseen.  As Dave Ramsey says, most things we declared as unforeseen were actually quite predictable – take Christmas for example, comes every year, same time every year.  Birthdays, new tires, school clothes are other examples.

We have sinking funds for many of these things.  Rather than busting the bank one month for a large expenditure, we divide the cost out over 12 months.

Sinking budget categories we use:

·         Car license plate renewal

·         Auto repair/maintenance

·         Home maintenance/landscaping

·         Birthdays/holiday and special occasion gifts

·         Monthly memberships/professional licenses

·         Eyeglasses

Including fun. 

I’ve been known to suck the life out of a budget.  Slashing everything and then living miserably until we couldn’t stand it any longer.  Perhaps the binge/purge of  budgeting, ha! 

To find a budget we could live within happily, we included:  

·         Personal “blow” money each month. For us, this meant $50/month each while we were paying off debt.   This amount is a personal decision completely dependent on income, other family goals, and debt.  On the Dave Ramsey forums, I’ve seen this amount range from $20 - $200 per person each month.

·         A small eating out fund for the family.  Meals out at work came out of the blow fund.

·         Small vacations some years.  We did choose to forgo a vacation last year, and delay this year’s vacation until we finished Baby Step 2.  (Hoping the federal government’s debt situation doesn’t impact our ability to keep that plan!)

·         Some splurges in our future budget once we hit particular goals to keep us motivated.

All that to Say.

So I hope this explains things and helps you think about your own budget.  Also, don’t be discouraged if the first few budgets fall short or even fail.  That’s actually quite normal.  We learned during Financial Peace University that it usually takes about 90 days for most couples to figure out how to do a budget that works.  For us, we took about four years, but who’s counting?

*Envelope System:  Dave Ramsey recommends every dollar is assigned to a spending category.  For some of those categories (such as gas, clothing and groceries), he recommends you use cash and store the cash in envelopes. When the envelope is empty, you’ve spent all you should for that month.  Since we use debit cards for these items, we use virtual spending envelopes in Mvelopes.  Studies do show people buy less when paying cash, so cash envelopes may prove useful if you routinely overspend in certain areas.