Marriage is expensive! Just ask my husband Andrew. He was debt free when we got married and worked really hard to get that way. Andrew is a natural spender so when he got his first job with no bills naturally, he made a lot of bills for himself. After a while this lifestyle no longer appealed to him so he made a radical change and paid off the debt. He discovered Dave Ramsey at church and took the course “Total Money Makeover”. This was life changing for him.
I give him a lot of credit for eating beans and rice when he did not have to, with the goal of paying off the debt as fast as possible. However frugal I may have lived, I came into our marriage with 35,300 in debt. I had a car loan balance of 10,300 and student loans of about 25,000. Anyone with student loans will know the effort it takes to graduate with so little debt. I minimized what I borrowed, and paid a lot towards my loans, with the goal of knocking out the debt as quickly as possible. Regardless, this is where our financial story as a couple begins. I continued on with education and stayed home while Andrew worked.
This resembles our first budget at the beginning of the month:
Let's talk about what you see above:
The Income column is the amount of money brought in each month. “From SAV” is the amount of money taken from our savings account. “Person 1” and “Person 2” is the amount of money each person brought in from jobs. “Carry Over” is the amount we would save from one paycheck to the next in order to ensure our bills were paid in full. “Other” is sporadic money received such as bonuses, tax refunds, gifts, etc. The total of this column is how much money we were working with for the pay period. This total must always match the total in the Budget column. It is important to plan where your money is spent to make sure it doesn’t just disappear.
The Payment Method column tracks how I paid our bills. As you can see we have a credit card payment method. This may seem strange for two people who are trying to live with as little debt as possible but it all comes down to rewards. We pay off the card monthly and enjoy the rewards points. Look at the Credit Card column with a total of $369. This is the total of the budget column with a payment method of “Credit Card”.
Contrary to popular monthly payment practice, you can make multiple payments to your credit card with no penalty. I don’t know if you would get credit for the balance towards rewards by doing this (I assume not) but it might be worth the rewards sacrifice to stay on track if needed. If you pay every two weeks it is harder for your credit card balance to get out of control because you will have a tight grip on it. In this example if the credit card budget is $369 and the actual CC balance is $320 then we have $49 extra to pay on the car or into the savings account. The “Budget” column is how much we allocated to categories per pay period based on what we paid in previous months. The actual column is how much we spent. The “Remaining” column is money we did not spend or how much we went over.
End of month budget example:
Let's talk about what you see above
In this example we came out ahead for each pay period. I moved the $49 from the first of the month as carry over bringing our budget total to $1,449 for the 15th of the month . I increased my car payment to $521 versus the planned amount of $472 (seen in beginning of the month above).
Let's talk about category names
The obvious ones we will skip. I consider household items things like cleaning supplies, paper products, candles, etc. Entertainment is things such as movies, eating out, ordering take out, taking wine to a dinner party, etc. Person 1 and Person 2 spending is essential. Each person should have a set amount of money they can spend on whatever they want. $40 every two weeks may not seem like a lot but it adds up to $160 a month which was almost 6% of our monthly budget.
Giving is an important category. I think it is important to give. If you don’t have money give then don’t, but if you have extra it is important to help other people, charities, church’s, communities, etc. We are lucky to live in a country with so many luxuries and sometimes we forget there are people suffering here as well. It never seems like enough, so most people forgo the practice of giving. The truth is a little goes a long way and can make a very big impact.
Let's talk about if our budget went poorly for the month.
Yes, it happens. A budget is an educated guess based on previous data, but it can never be exact because the future has not happened yet. This is why no one should place guilt on themselves for not staying perfectly within the boundary they set.
Maybe you got sick with strep throat and had an unexpected doctor visit with a prescription you were not counting on. Maybe you hosted a dinner party. Maybe you had an extra drink at the bar. Life happens and you need to live it. However, going over the budget does have consequences such as not paying more to debt, not having savings, not having entertainment money for the next pay check, etc. This motivation makes us want to stick to the budget as much as possible so we can get ahead and have a healthy financial future.
If you find you are constantly going over or under in a category such as grocery then you will need to adjust your budget to how you are actually living versus how you “ideally” want to live.
Try it yourself.
I created a google doc where you can create a copy in your personal google drive to customize your monthly budget. Once the google doc is open go to File > Make a Copy > OK. You must be logged into your google account in order to save this document in google drive. Then start to edit in your own private budget google doc.