We’ve been reconfiguring our budget over the past few months, so I thought I’d share a little about budgeting – namely, why and how we do it. Plus, talking about money is always a good time and something I personally enjoy reading about doing.
I’ve had a budget since I was in 8th grade and making $100 a month babysitting. I got Mint 8 years ago and my budgeting habit got a boost.
You might say I’m obsessive. Or that I just like to know how much money, exactly, I have to go on vacation and go out to dinner.
I find that knowing where my money goes gives me a sense of freedom and control instead of always feeling vaguely guilty for spending money. I know that I’ve already planned to buy a latte and croissant every weekend, so it’s not a guilt-inducing splurge, but part of my very responsible budget. Magic!
How We Budget
If you’re getting started for the first time, or just wanna know how we do it, here are a few things that work really well for us when we want to make a change:
1) First determine where our money is already going by tracking it in Mint for a month or two. It gives us a good feel for what our current comfortable standard of living is without trying to make any changes just yet. (I know some people don’t like Mint for whatever reason, but I’ve tried several different programs and find that if I have to manually put in my spending, I don’t do it! So, back to Mint I go.)
2) Determine our income – for some people, this is less variable because you have regular paychecks. Since I’m self-employed, it varies!
3) Determine our spending priorities (separately then merge if you’re doing this with a partner) – this exercise comes from this book, by the way)
- Some people really love going to concerts, other people want to be able to buy new clothes every month, other people really value super fast internet or the latest smartphones, etc. We can’t just say EVERYTHING is a priority, or the budget goes out the window (unless you’re super rich. Which we are not)
- Categorize the priorities and write them down.
4) Drill down on those specifics – put numbers to the priorities
- Do we want to retire? When? How much have we already saved? Are we on track? How much will we need to save each month to make that happen?
- Do we want to purchase a home? When? How much do houses cost where we want to live? How much do we need for 20% down? How much more do we need to save per month to be able to pay that downpayment?
- Are there big purchases we’ll want to make with cash? How much will that cost? Break that down to a monthly savings item line.
Here’s what 3+4 looked like in the end for us:
5) Calculate our budget by giving amounts to all the above priorities as well as:
- Necessary, non-negotiable expenses (rent, car insurance, internet, groceries, medical)
- Variable, discretionary expenses (Netflix, museums, eating out, gifts, shopping)
- We save this in a spreadsheet, then transfer the amounts to Mint.
6) Set up automatic savings transfers into our retirements or savings accounts with the amounts we determined (and emergency fund before we funded it).
7) Set up auto bill pay for whatever we can so I don’t have to spend the time and energy paying bills.
8) Check in at least once a week in Mint to make sure everything is getting categorized correctly (and check together if we’re staying within our budget). Then evaluate as needed.