Budgets can be hard! My husband and I have been really strict about avoiding debt, but we realized a while ago we could also be saving more. We have recorded everything we spend for the last 4 years, but even then, it wasn’t enough because a busy week of spending would come along, and we wouldn’t realize we were over budget until the end of the week when we recorded expenses.
In the past, we tried pulling out cash and putting it into envelopes, but I didn’t like carrying all the envelopes around, and sometimes we stopped off for last minute errands. I would put it on the card, then we’d have to put the money from the envelope back in the bank. And then there was the bother of Costco trips; what comes out of which envelope, looking through receipts, and all over frustration.
Then a thought occurred to me–some months you spend more on some things than you normally would. When we host Thanksgiving dinner in November, our grocery budget is obviously going to be a lot higher than in August when we have fresh produce from our garden. This is when I came up with our new budget approach that is helping us take our finances to the next level!
Every month, we take our income, subtract our fixed costs (mortgage, utilities, internet, phone, that stuff), then we also subtract the amount we would like to save each month. For us, we have been aiming for 25-30% of our gross income which is a really lofty goal, but we have been doing it!
Whatever money is left over after this, we can use however we want, and we pull this money out in cash. Now, we don’t pull it all out at once! We aim for half the money on the first, and the other half on the fifteenth. You could even break it down to once a week. The goal is to not run out of money with 10 days left in the month because we all know that’s not going to happen. Once the money is gone, spending is OVER until we get more money. End of story. Period.
Some months we spend more on food, and some months we want to buy something a bit bigger, but it all has to come out of the money! I have been aiming to keep a little bit back for those times when the unexpected pops up–trips to the doctor, the car is acting not so nice, you know, the stuff we want to pretend won’t happen. Instead of these things dipping into our savings, we have them covered.
We still record everything we spend because we want to see where improvements can be made. I simply snap pictures of my receipts after shopping, and delete them once they are recorded on Monday evenings. Once you make the habit, it really isn’t a big thing, and it is so exciting to see the progress! To get yourself started, you can now purchase alittlecrunchy’s own Budget Tool to help you with your savings goals (you must have MS Excel to run the tool, PC or Mac is fine). It’s user friendly, and it won’t break the budget you are trying to establish in the first place!
Our savings account has really boomed! We are talking about money in a whole new way; can we afford another rental property, can we invest more into this stock venture, how can we afford a trip to Europe next year? It is so exciting to have more control and more freedom!
And the best part is, we haven’t missed the extra money. We don’t buy as much, but we prioritize better. Some months we don’t go out to eat at all, but that’s not a priority for me. But if it was, we could cut elsewhere to make it happen!
Even if it’s just a simple goal to save $100 per month, at the end of 5 years that is $6,000. Just because it’s small, doesn’t mean it’s not valuable.