Monday, February 1, 2016

How We Budget - Tip 1

In the exciting follow-up to "important money talks before marriage," I thought I'd get more specific and explain how we actually discuss, compromise, and budget. Of course, everyone's situation is different and so what works for us might not work for you! But here's what we've found to be sound for us...

How We Budget Tip 1: Have a Budget 


So deceptively simple and so, so impossibly hard. Unless you're making enough money to pay all your bills and save a ton, you need a budget. I learned this the hard way, aka failing constantly. I overspent every semester and called The Bank of Dad to bail me out. (I'm surprised I didn't get this in  return.) Part of this was because I was living off loans (and if you've done this, you've basically got to be eating oatmeal 3x a day to survive). But probably the bigger part, and it hurts my pride to admit this, is that I was irresponsible. I just had no concept of a budget and I certainly didn't want to stick to one.

But cue one income for two people and we needed a budget. The basic premise we follow is this: we allocate every cent into some category (line item) and do our level best to stay within that allocation. It probably goes without saying, but we budget out all of our bills first and then allocate to other categories once the essentials are satisfied. When (not if) you overspend in a category, record it properly. Then, next month, when you're making your budget again, notice your actual spending habits in comparison with your budget and adjust accordingly.

For example, we used to budget $100 a month for a date night (bonus tip: Lewis started budgeting for this before we were married and it's been excellent for relationship happiness!). However, we noticed we were actually spending more like $125-$150 depending on the restaurant (and how many drinks we ordered). So, we've up-ed that category to $125 to more accurately reflect our spending. Conversely, we were budgeting $150 for gas every month. But, we rarely spent that much on gas, especially with gas so cheap right now, so now we only budget $100 for gas. It follows then that if we know we'll be spending a lot more in a certain category that month (ex. "gifts" in December or "travel" in July), we try our best and budget accordingly.

Hence, an annoying and important thing we've learned has been that you have to make a new budget every month. Around the last or second to last day of the month, Lewis and I:

1. Eat dinner - SO important. Doing this on an empty stomach almost guarantees an argument.
2. Arm ourselves with drinks and more snacks if necessary.
3. Grab our calendar to see what's coming up next month.
4. Sit side-by-side at one computer. You're on the same team! We want to do it together.
5. Go through every line item and discuss each one. Some are easy, like rent, which never changes (and our fixed bills are carried over so we just check it over to make sure nothing's changed.) Others require longer discussions and compromises and checking our priorities.

But the whole thing takes us no more than an hour. We don't agonize over making it perfect. If in doubt, we over-budget and cut a non-essential.

We use https://www.everydollar.com/. It's free and super easy. AND there's an app for the iPhone (alas, not for Android, so Lewis doesn't have it) that syncs everything so you can budget on the go. How fun! Ha! [insert crying emoji] But actually, staying on top of the budget is so important....which is why it's what I'll be talking about next time!

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