budgeting for the rest of us

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When Choy and I decided to move in together I went searching for “How to Live with Your Boyfriend” books. I knew it was a big step and I wanted to make sure we had the best shot at forever. But, I couldn’t find any “How to Live with Your Boyfriend” books. I could only find newlywed books/ “How to Live with Your New Husband” books.

Curious and hopeful for our future, I flipped through one of the books, The Nest: Newlywed Handbook, and found some pretty helpful and interesting things.

Learning to live with someone can be challenging. It was helpful to get my own neurosis somewhat in check; I’m sure Choy would tell you I’m still a little neurotic. The most helpful thing that I took from the book was a budgeting tool, however.

Choy and I modified the list somewhat and started tracking our spending. We started in May 2012 and in 2013 we had a complete record of our 2013 spending and we learned some amazing things about our spending habits and our lifestyle.

I mentioned in my new year’s post that rarely did we come in on or under budget in 2013 in the restaurants and puppy categories. We wouldn’t have known that had we not tracked our expenses all year. In 2013, Choy and I spent $5,000 on eating at restaurants. Five THOUSAND dollars. I can’t believe it. That is $5,000 we could have used for our wedding; $5,000 we could have used toward a new car or $5,000 we could have saved for our move to Los Angeles. There are a million things we could have done with that money, but we ate it.

So with a new and focused ferocity we’ve modified our budget and have been following it pretty closely. Sure, it’s still the first month of the new year, but we’re already reaping benefits: saving money, trying new recipes, and a fun routine of finding recipes, making weekly menus, making a grocery list and spending time together, for each other.

I’m so proud of our budgeting that I wanted to share it with you.I modified the list some and modified the monthly budgeted amounts for the sake of your not knowing every single thing about us. ;P

Download this sample budget here: Blog Budget. The formulas should be intact so I’ve saved you a step.

Behold:

Screen shot 2014-01-25 at 3.40.37 PM

The elements:

– First column: all your spending categories. In our actual budget we have a line item for my graduate school expenses and planned trips.

– Second column (Budget): your monthly allowance for that particular line item.

– Third column (Year End Total): This column is the budget column multiplied by twelve. I found it helpful, after 2013, to know how much any particular line item would cost us over the course of a year. Sometimes it’s helpful knowing the end total so you can adjust your monthly allowances if necessary.

For example, we thought it was completely ridiculous to spend much more than $1,000 on restaurants for the year, so we dropped that monthly budget from $150 to $85. At $85 a month, we come in at $1,020 for the year which is still more than I’d like but much, much better than the $5,000 we spent the year before. And in December, when the year is about to end we’ll drop that monthly budget by $20 and come in at $1,000. I’m hopeful that we won’t spend that much monthly and will come in well under $1,020.

You have to be realistic. Choy and I like to go out to restaurants so we couldn’t eliminate it from our budget completely otherwise we’d be setting ourselves up to fail. And you have to do the same thing. Yeah, $1,000 is a lot, but without a guide you’ll end up spending $5,000. Crazy!

– Fourth column (Remaining Yr.): This column takes the sum of each line item’s monthly spending and subtracts it from the third column (Year End Total). It is a helpful visual. I can see that number drop as we spend and it gives me heart palpitations. Even though we’ve budgeted to spend that amount over the year, the visual is a reminder that we don’t have that money any more. Already, it has helped us think twice about how we spend our money.

– Fifth column (Remaining Mo.): This column takes what we’ve spent for any particular line item and subtracts it from the monthly budget amount (first column) and reminds us how much we have left for the month. This is particularly helpful for grocery shopping.

– Sixth column (January): This is the column where we track our January spending. We would, of course, add columns to the right of the January column for the subsequent months of the year.

– Seventh column (Year End Total): This column is here to show you that at the end of the year, we have a column that sums all the line items to tell us how much we actually spent for the year in any particular category. It really is eye-opening to see how much it costs to live.

The Newlywed Handbook provided an example of the first and second column, but Choy and I added the rest to help us really know our spending month to month and over the course of the year. It has been really helpful. The color coding is for me. :)

See the second half of our sample budget below:

Screen shot 2014-01-25 at 3.42.35 PM

In the first image, you see mostly essentials to living. In this second image, we start to have a little more fun with our entertainment expenses. You’ll notice that Choy and I each have individual food line items. Though I take my lunch to work most days, there are those days that the office goes out for lunch and that line item helps us account for that spending. You can build out the Misc. and Entertainment sections to reflect your lifestyle.

At the bottom of the image you’ll see three rows:

– Total Expenses – sums the entire column so I know how much we’re estimating we’ll spend in one year.
– Need Only Budget – This sums only the necessities. Though it is not entirely realistic for us, it’s helpful to know how much we spend/could save on things that we consider to be non-essential.
– Spending – sums all the non-essential spending.

In this particular example, we’ve budgeted to spend $53, 352 in one year, on everything. Holy! That is a lot of money! (It’s just an example). But that’s the kind of reaction you might have if you do this for your household. You’ll realize how much money you actually spend.

Also, in this example, we realize that it would only cost us $22,980 to live if we only spent money on the necessities. So, the next row (Spending) subtracts the $22,980 from the $53,352 to tell us how much we spend on the non-essentials. In this example it is $30,372.

You could pay off a car with that spending. Amazing, huh?

Like building all other good habits, awareness is key. You need to know what you’re doing to adjust your behavior.

I’ll end with just one more piece of advice. About a million years ago, I read an article in some magazine that estimated that people should spend:

70% on Living
20% on Creditors
10% on Savings

The article further advised to:

– Negotiate sales
You do this where you can. I mean, you can’t walk into a J. Crew and ask for 50% off pants that aren’t on sale and you don’t want to open a store credit card. You can negotiate with people, not box stores. Make sense? What you can do is negotiate when a sale has recently occurred. If you buy a pair of shoes that just yesterday or maybe tomorrow will be on sale, ask for the discount anyway. It can’t hurt. I heard this crazy story where people ask for the “Good Guy” discount and more times than not, the cashier provides a 10% discount, you know, just because he was a good guy. 

– Avoid impulse buys
I try to wedge at least 24 hours between my spending. If I see something that I want, I give myself at least 24 hours. If I find myself still thinking about it a day later, I go get it. Most of the time I forget about it. Telling.

– Track expenses – check!

– Use coupons and rebates
I love coupons and rebates. Take a little time and you’ll be delighted at what kind of deals you can get. I always feel like I’ve conquered the system when I save a little more with coupons. 

– Avoid convenience stores (and the items at the check out line)
Since I found this article, I reduced my convenience store purchases and now, I don’t buy anything from a convenience store. Not ever. 

I found this article maybe about 15 years ago. I was 15 years old and I kept it. I wrote it down and on a ratty piece of paper I kept it in my wallet for 15 years. It is now a “post-it” on my computer screen and now you have it too.

Notes:
– My budget chart has formulas so it does the calculation for me. If you don’t know how to do this have someone teach you. It is pretty easy.
– Work on your own budget by downloading this example budget: Blog Budget
– Choy and I save our receipts. We put them in a designated place and at the end of every week we update our budget together. The “together” is important because a household budget isn’t just one person’s responsibility.
– My friend Julia has a problem with saving receipts. She thinks it wastes paper. If you can write down what you spend, when you spend it, good for you. I was always forgetting so I had to keep my receipts. This was before the iPhone, however. A smart phone could be an easy solution to this paper waste.

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