Staying on Budget

For people who love money.

Every Income Needs to Budget – Using Credit Cards

Starting out with one income and 35,300 of debt!

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 he made a lot of bills for himself. After awhile 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 his 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 knows the effort it took to graduate with so little debt.   I minimized what I borrowed, had scholarships and paid a lot towards my loans while still in school 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:

Income Column

The Income column is the amount of money brought in each month.

  • From SAV: Money from our savings account.
  • Person 1 and Person 2: The amount of money each person brought in from jobs.
  • Carry Over: Amount we would save from one paycheck to the next in order to ensure our bills were paid in full.
  • Other: Sporadic money received such as bonuses, tax refunds, gifts, etc. 

The total of the income column is how much money we were working with for the pay period so in our case it was $1,400. This total amount must always match the Budget Total column.

Category Names

Category Names are vital to having a successful budget. They describe the money you plan to spend. Most of my category names are obvious. In order to have a less granule budget I group some spending items into buckets.

  • Household items include: Cleaning supplies, paper products, candles, etc.
  • Entertainment includes: 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 per person 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.

It is important to plan where your money is spent to make sure it doesn’t just disappear.

Payment Method

The payment method column tracks how I paid our bills. 

  • Checking: Money that comes directly out of our checking account.
  • Credit Card: Bills or expenditures we would pay with a credit card. 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 on the left had side with a total of $369. This is the total of the budget column with the payment method of “Credit Card”.
  • To Savings: Money we would transfer to our savings savings account.

Budget Column

The Budget column is how much we allocated to categories per pay period based on what we paid in previous months. The total of this column MUST match the total from the income column. In this example the Total Budget is $1,400 and it matches Total Income $1,400 on the left hand side.

Actual Column

The actual column is how much we spent on each of these categories during the two weeks. These numbers help plan future budgets based on what we were actually spending. 

Remaining Column

The “Remaining” column is money we did not spend or how much we went over. In this example the total remaining is $28. This means we have extra money to put towards savings or debt payments.

If this amount was negative then we would need to pull money from savings or sacrifice during the next pay period to make up the difference. We would probably choose to sacrifice our entertainment money by not going out for two weeks to make up for over spending. 

Credit Card Columns

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 rewards by doing this (I assume not) but it might be worth the rewards sacrifice to stay on track if this is something you struggle with.  

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 the Jan 1st example we budgeted $369 and had a balance of $332. We spent less than we planned by $37. 
  • In the Jan 15th example we budgeted $450 and had a balance of $425. We spent less than we planned by $25.

This is a perfect example of how you can use credit cards responsibly. It just takes a little preplanning and restraint. These credit cards were paid off with no problem.

End of month budget example:

Let's talk about what you see above

In this example we came out ahead for the January 1st pay period by $49. When creating the budget for the January 15th pay period, I start with the income section. I place the $49 in the “Carry Over” category. This brings our Income Total to $1,449 for the pay period.

I chose to increase my car payment by the extra $49. At the beginning of the month I planned to pay $472 towards the car note. Now I am going to pay $521. 

It is amazing how adding a little towards your principal debt balance speeds up the payoff.

Let's talk about giving

I think giving is an important category because so many people need our help. If you don’t have money to 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. 

Something else to think about if you can’t give money then give some of your free time. There are a lot of organizations that can use your skill set to benefit others around you. 

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 extra principal towards 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.

A budget requires adjustments

Actual Monthly Spending

I use this spread sheet to track our actual monthly spending. Without this snap shot I would not know what I typically spend in each category each month. It would make it impossible for me to set a realistic budget each month. I analyze our spending within categories every 3 months and if I see changes in spending then I make changes to our budget. 

If you find that you are consistently going over or under in a category such as grocery then you will need to adjust your budget to how you are actually spending versus how you “ideally” want to spend. Sometimes these changes are not within our control an example of that is inflation.

When you create your budget for the first time you will have success and failure but with this sheet you will get it down to a science year after year.  

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 your personal google drive. Once downloaded, start to edit your own private budget google doc. After you make a copy, I cannot see it only you can, it becomes your private document. 

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It is fun to think that there might be a short cut but the reality is planning plus diligence equals financial freedom.

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