Thoughtful Money: Budgeting
A huge value in my life is the idea of living thoughtfully. Or, more thoughtfully at least.
I’ve been walking through a series of ways that we have changed the way we live to be a little more thoughtful and conscious. Here are the previous topics:
And today, we come to money. Everyone’s favourite topic.
I’m sharing with you how and why we got started with budgeting, what our money mindset is (spoiler: we aren’t sticklers!), and some of my top budgeting tips.
I’m no expert and we all have different relationships with money, but I hope this helps in some way.
Why we got started with budgeting: The Dave Ramsey Way
We started budgeting seriously about 2 years go. Before that, we thought, “We don’t have tons of money to budget and we don’t over spend and we pay off our credit card every month so, we’re okay.”
As I was trying to get my business off the ground, I was listening to some business and financial podcasts, one of them being Dave Ramsey. He can be a bit intense, but he has some really great budgeting and money advice. Really helpful. Sometimes he goes a little further than we’d like (i.e. “Cut up your credit cards!”) but he lays a really great foundation for anyone trying to sort through money, debt, and saving.
He has this set of rules he calls the “7 Baby Steps” for getting out of debt, saving money, and building wealth. Here they are:
Save $1000 to start an emergency fund.
Pay off all debt using the debt snowball method (which means: make minimum payments on all your debt except for your smallest debt and pay it off as fast as possible, then move on to the next debt).
Save 3-6 months of expenses for emergencies (like getting laid off)
Invest 15% of your household income into Roth IRAs and pre-tax retirement funds
Save for your children’s college fund
Pay off your home early
Build wealth and give
Dave Ramsey’s’ teachings were an important stepping stone in our money and budgeting journey and he lays out a great foundation, but it’s not the perfect system for us. Let me tell you why.
Our Budgeting Mindset
I love the framework Dave Ramsey lays out - having savings on hand, paying off debt and credit cards, giving. But it’s a bit restrictive for us. He preaches strongly about living on a tight and modest budget now so you can gain wealth and live and give like no one else later.
But I don’t want to just live for my future.
I want to live and enjoy now as well (within reason). So we travel. We get tattoos. We buy good over cheap. We go out to eat. We drink alcohol. We buy fancy coffee.
Don’t hear me wrong, I’m not talking about living beyond our means. In fact, I’m terrified of debt and spending too much money. Our only remaining debt is an education loan without interest that costs us $27.19 per month, and $6000 in debt for our one car. We always pay off our credit card. We don’t buy things we can’t afford. I hate loans. The idea of a mortgage makes me want to vomit.
Here’s the point: I want to be smart with money so I don’t mess up my future, but I also want to be able to live now. I think there’s a healthy balance here.
(It helps that we currently have no desire to buy a home and don’t see kids in our future yet. So there’s no rush to save for a mortgage or for our kids’ college funds, you know?)
So, do we budget? Yes. Do we “live on a budget”? Not really. And somehow at the same time, yes.
Here’s How We Budget
We use You Need a Budget for all our budgeting and to keep track of everything money related. There are a lot of great things about the program, like breaking down all of your transactions into custom categories, keeping track of where all your debt is at including loans and credit cards, and creating your own little savings accounts.
YNAB’s goal is this: to give every dollar a job and to make your money at least 30 days old. What does that mean? Every time you receive income, you categorize what it’s meant for. Groceries? Vacation savings? Clothing? You pick - but it all needs to have a job and purpose. Secondly, YNAB’s goal is to make your money 30 days old - this means that you are always spending money you made 30+ days ago. It eliminates the whole “we just paid this month’s bills and now have to wait 2 weeks until our next pay check to buy groceries” conundrum (been there). Proud to say our money is 2 months old, which means if we both stopped producing income, we’d be able to live the same for 2 months!
Some Budgeting Tips
Update your budget regularly.
YNAB has a great app where you can input every transaction you make as you make it. WE started doing that at first but we fell off the band wagon. I look at our finances every week anyways because I look at my business finances, so I just go in and input everything every Monday! So, we go into every week knowing what our budget is looking like.
We use the app as less of a rules system and more of a tracking system. Often there are a few areas our budget where we’ll overspend, and then some where we underspend, so we use the money left over in underspent categories to cover the overspent categories. So, it all balances out in the end and our overall budget is followed even if individual categories aren’t!
Have a “fun” budget
This is especially helpful for couples who share their finances. Give yourself individual budgets to use however you want. I’m a bigger money stickler between the two of us, so before we had our fun budgets any purchase that wasn’t a “need” stressed me out. If Mitch wanted something he didn’t need, I was opposed. If I wanted something I didn’t need, I wouldn’t buy it. The introduction of our individual budgets solved it. Every month, we popped $80 into each our our budgets to be spent however we wanted - clothes, makeup, self-care, hobbies, tattoos. It’s been freeing to have a little amount of money to not feel guilty about spending on ourselves in whatever way we want, and makes for a lot less “money fights” because you don’t need to care about what your partner is spending on themselves!
For singles, this would mean having a line in the budget that is for whatever you want. Let yourself enjoy that money, whatever amount you set for it.
Split up your savings!
If you set aside money as your savings but haven’t given it a “purpose” then what is it for? Split up your savings into different things you’re saving for so you cover all your bases and know when you’re allowed to spend that money. Keep an “emergency fund” savings for large purchases your weren’t expecting. Have a car fund and down payment fund. Have a vacation fund! Just know what you’re putting that money aside for, and use that money for it!
Think before purchasing!
Mitch and I live on the more minimalist side of life. Again, we don’t have hard and fast rules, but we try not to purchase things that we don’t absolutely love or need. This means buying clothes purposefully (I talk more about that here), not buying seasonal decor that we have to keep in storage for 10 months of the year, and making sure that any purchase we make adds some level of value to our life.