Alright, we’re diving DEEP. After talking about grocery budgets so many of you asked for the bigger picture – how we do our overall budget so I’m just welcoming you in to our late-night-on-the-sofa sessions as we hash out a new budget so you can see the process. We’ll dive right in:
Our main goal is to know for ourselves that we are CHOOSING and being POWERFUL with where our money goes.
1. Calculating our starting point for income. Right now our income is not fixed, we have no salary just a general idea of where it will land. So we’ll budget for the lower end of the range it might be to start with but when we had a salary (or if that’s you) we took that fixed income number to start with as our total. Our main goal in figuring this out is to know that we are CHOOSING and being POWERFUL with where our money goes. We want both of us to feel powerful in our relationship when it comes to money so we do this together and it helps SO MUCH.
2. We take the total expected income and first allocate money to the FIXED money needs in our lives. Well back up, the first thing we actually do it allocate money to give. Giving is something we want to do FIRST. We want to make sure that however much or little we make we are generous first. To make sure we do that even when it doesn’t feel easy, we make sure we’re giving at least 10% of what we bring in before any other spending. But after that we then look at our other fixed monthly costs and start to take them out of the total we have coming in and available to spend each month. For each area of spending, for each fixed money need (like rent/car payment/school payment/medical bill payments) we write a spending category title and put down the number that will be go to that category each month. Like “phone bill: $100.”
Within that, any costs that are annual we divide by 12 and make that a monthly category too allocating one 12th to come out of each month’s income and be saved so by the time it rolls around we have it saved and covered. [e.g. “car registration renewal: $15” over the year will give us $180 for an annual payment.] This means we’re not hit with tax bills, or car registration… or just a month with a lot of birthdays in. (Don’t you love those months?!) Instead we spend a little less every month and save a little for those things all year round so we have the money sitting when they come.
Helpful Tip A: We use the website Mint to actually do this. You can just use a pencil and a blank sheet of paper to work it out, and then put literal cash into envelopes but we want to use our United credit card and accrue airlines miles (we moved the family using entirely accrued miles so it adds up!). So we only spend on our card what we have allocated to spend, but it lets us build miles and Mint lets us track it. If you don’t think you’d use a credit card responsibly don’t do it, but we have a rule that works for us that we only spend on in within the category we’ve created so that we can always pay it off that month, we’re only spending money we have.
Helpful Tip B: When you’re first figuring this out you may have no idea at all of what different areas of life need or currently get from you. If you can, look back over your bank statements or receipts if you keep them to see what your spending has been over the last few months (we initially did 6), then you can get an idea of what you might need. Then on the flexible things you’ll see what you want to change and what changing one area would allow in others. Only when you look at everything together can you see what increasing or decreasing spending in one area will do in another.
3. Time to juggle the more flexible money. Once we’ve taken our income number and subtracted the things above, we are left with an amount that means we don’t owe anything to anyone else, no expected bill is going to go unmet and we’re not going to be late on anything. The rest of the money has to cover very definite things (we haven’t got to food yet!!) but there is a different level of flexibility. These are self determined numbers from here on, not externally defined. It’s where the relational ‘fun’ comes in too 😉
So from here we write a list of the different areas we want and need to spend money. It’ll be things like food, savings, saving for doctor bills, house maintenance, clothes, travel, beer, personal spending money for Jared and me. Then we start down the list of items putting in what we’d like to spend monthly in a catrogory until the money ‘runs out’ but this is just planning thankfully, no running out. Then we laugh (or cry a little) because we got it so wrong, and go back over the flexible categories to see how we can adjust it. We rehash the list until we have every dollar of monthly expected income allotted in the way we feel we need and want it spent.
Honestly, when we had two full time salaries and no children this was bit easier. Now there are categories we put in nothing, and new ones we want to fill.There are some categories that only get filled with ‘extra’ money like birthday money or when we make more than we think we will in a month, or when we don’t have to pay for something we expected to pay for. Relationally this part can be hard but the hard work is up front so it’s worth it.
4. And this brings me to the number one truth that really changes it for us and that we remember through it:
“YOU CAN’T HAVE IT ALL”
Once you settle on this I think it removes a sub conscious feeling that there will be enough money for everything you want to do and have. But actually the truth is you can have joy with whatever your budget allows. And I’m not talking about having joy ‘even when you can’t buy the light roast coffee beans from your go to shop’. No, I’ve spent time with some of the people in the world who have the least, monetarily speaking, and they have SO much joy. Obviously there is pain and difficulty there too – but money is not the distinguishing factor that brings ease and joy.
Maybe I’m going deep here but truly, resting your budging on this foundations changes it ALL. Realizing that you can’t have it all, you’re not trying to be anyone else, and you’re not trying to make your budget do it all is something few people truly dwell on. WE ALL HAVE DIFFERENT LIMITATIONS. WE ALL HAVE DIFFERENT RESOURCES. Being ok with those is a choice, working with them is a skill, and maximizing life within them is a life long discipline.
We now love the journey to figuring out and adjusting a budget and I promise you can too. Sometimes we see things go that we want to keep, sometimes we come up short and have to figure out what to let go of – but we know that by being ahead of the game and being powerful and choosing how to spend money before it arrives and with perspective of a whole year and beyond… we’re investing in peace. Going without then doesn’t feel powerless but powerFUL as it’s a choice we’ve made to be able to say yes somewhere else. Even if the yes is only to not going into debt.
Whew, we made it. That’s what a budget planning night looks like for us. We rework out budget every few months or when something changes to make sure we’re still planning for the way we want to live and it gets easier every time.
In the next couple of weeks I’ll dig into a few other aspects of budgeting to break down specific parts of the conversation for us!
Hope it helps!