Every year, Marcus makes a budget and we follow it.
Or, more aptly, every year, I make big declarations like We are going to save 10% of our income! Then, Marcus figures out how, exactly we can go about doing just that.
I’m great at the big picture, he’s really good at getting into the details. This is sort of like how I eat the chicken wings and he eats the drumsticks when we share an order of buffalo wings. It is a perfect union.
Chicken wings aside, each year since we started living together in 2010, this has been our process. It has worked out pretty well for us.
As 2016 begins, it occurs to me that many of you might be working to get some stuff sorted out in your own financial lives (who isn’t?) and might be wanting to know what other people do in order to keep theirs in-line.
So even though I do NOT set our budget, here’s how we do ours:
- We figure out what our combined, net (take-home) pay was for the previous year. If you’re like, KAT I DON’T KNOW WHAT THIS MEANS, this is the amount that shows up in our bank accounts after we have contributed to our 401(k)s, paid our insurance premiums, had taxes withheld, etc. This is the number that we use as the basis for our budget.
- We set a cash savings target (so this does not include our retirement account contributions)
- We figure out what our essential bills are (mortgage, insurance, utilities, gas, etc.)
- We double-check our savings target to ensure that this is reasonable against our essential bills
- We set the rest of our budget accordingly
Our budget categories are as follows:
- Monthly bills
- This includes our mortgage, utilities, phone, cable, Netflix, and standalone insurance bills
- Wine is a separate line-item in our budget, but you might like to just work that in here. 😉
- Meals at work
- Marcus has a very affordable cafeteria in his office, I do not have any cafeteria. So he eats lunch at work a few times a week, and I usually treat myself to a lunch “out” at work once a month. This might seem “unfair” to some, but that means I get first dibs on leftovers for lunch, which I actually like to eat.
- Charitable giving
- Car maintenance
- We have one category here for toiletries/cleaning supplies/gifts/clothing/miscellaneous stuff and another for haircuts. You could obviously combine these.
- Between the number of pairs of shoes I burn through each year, race fees, and Marcus’ obvious needs for fitness apparel as well, this makes sense for us.
- Medical expenses
- Baby (new in 2016!)
- Fun money/allowance
Can I just say that savings aside, of all of the things that we have included in our budget, the fun money/allowance item may be the most important? Obviously, this is the last thing to get allotted, but this is the money that Marcus and I use for dates, dinners out with friends, coffee runs, movie tickets, and other frivolous spending. Friends, this category is a marriage saver for us. Because we each get an allowance, neither of us ever have to worry about when/what the other is buying. If you do not currently have an “allowance” category in YOUR budget and personal spending is something that you and/or your partner struggle with, I would highly recommend using this method, provided you’re both able to stick to the number you set.
I will say that this is one of the few posts where I asked Marcus to review it before posting because this really is an area where he has more expertise than I do. Mainly, because he is generally the one handling it. What he would like to share with all of you is that setting the budget is not the hard part, tracking expenses is. Some methods he uses to track expenses are:
- Saving receipts for charges
- Writing down cash expenses
- Tracking expenses and updating the budget on a weekly basis
- He actually does this whenever his wallet gets too thick to hold the receipts, but he felt that weekly tracking just sounded better. I cannot blame him.
In a nutshell, those are all of our budgeting tactics.
Do you have any budgeting tips or tricks you’d like to share?