Wednesday, May 27, 2015

Our Budget: The Breakdown

Hello! Since Dan and I have become debt free, a few people have asked me exactly how we did it. So, I thought I would write a few posts about our budget and how we make our money work for us. 

The first step to creating and executing a budget is to determine what income you make per time period (week, two weeks, month, etc.) and then break it down by how you want to spend it. We make our budget a month at a time, which really seems to work for us. 

The task of determining all of your expenses in a month can be daunting at first and after doing this for a few years Dan and I still get surprised by certain expenses that seem to pop up out of nowhere (I’m looking at you, Amazon Prime membership fee). However, by now, we have a pretty solid foundation to work with and our budget runs like a well oiled (spreadsheet driven) machine.

Enough with the words, let’s get to the numbers:

Fixed expenses- not changing from month to month:
  • Tithing - 10% of income
  • House payment - 23% of income
  • Rental house payment: with the rental income minus random expenses, we come decently close to breaking even
  • Gym membership: $53
  • Auto Insurance: $125
  • Life Insurance: $20
  • Cell phone bill: $175
  • Satellite bill: $158
  • Internet bill: $47
Non-negotiable expenses - bills we have to pay but vary from month to month
  • Electricity: $60 to $450
  • Gas: $30 to $150
  • Water: $50 to $100
  • Child care: $300 to $500 (this is about to double, which I am so happy about!)
  • House cleaning: $200
I keep a spreadsheet from the year before that lists our bills by month, so I know what our electricity bill will be in July (re: freaking expensive)

Negotiable expenses - although these mostly don’t change from month to month, they can if we need them to to put more into savings
  • Groceries: $600
  • Blow money (no questions asked on how we spend it): $75 to $100 each
  • Toiletries (includes diapers): $50
  • Restaurants: $200
  • Gas for the cars: $300
  • Alcohol $60
Rotating Expenses- expenses we know are coming up but might not necessarily be in the current month. If we don’t spend the money in that month, it goes into a “fund” savings account for the coming months. I keep a spreadsheet to breakdown how much money has accumulated in each fund. More on that later.
  • Home expenses: $100 to $200
  • Gifts: $200 to $300
  • Timeshare maintenance fees and vacation: $200
  • Car expenses (oil changes, repair fees, personal property tax): $100
  • Trash bill (for some reason we are only billed a few times a year): $20 
  • Work expenses (Dan’s tools, my licensing fee, etc.): $40
  • Rental house expenses: $100
  • Clothing: $60
  • Medical: $100
Misc: ?
Most of the time this category doesn’t have anything in it, but if I know an extra expense is coming up, like decorating the nursery, I create a one time category for that month. The important part about this is that I account for that expense in the beginning of the month, not the middle or the end. 

Savings- ~20% of income.  This number varies largely from month to month, (it used to be the extra debt payment category) but when I start the budget each month I have a number in mind as a goal, and really try to stick to it. If I don’t do this, somehow the vacation, clothing, and restaurant funds tend to grow. Weird how that happens, huh?

A few notes:
  • We strive for a zero dollar budget, which means that every single dollar we earn gets assigned to one of the above categories. At first this was kind of stressful, because it meant our checking account went very close to empty at the end of the month. So, at the beginning of the year, I decided that we would budget money from the income we made from the month before. This took a little getting used to, and obviously took some moola out of our savings to jump a month ahead, but was great in that it provided us with a month’s buffer. 
  • We obviously don’t live as frugally as possible. Our grocery fund is generous (if you shop at Aldi), we enjoy satellite TV, nights eating at restaurants, occasional vacations, and pay to have our house cleaned twice a month. These are things we have decided we want to splurge on, but could and would immediately stop if needed. 
  • Before we had a budget, I never felt like we could “afford” to pay for things like fixing something on the house or our personal property taxes at the end of the year. This was because I had no idea where our money was going. Now, I know EXACTLY where our money goes and expect to pay for those types of things. 
  • This is just the first step, the next is to track the expenses that come out throughout the month. 
Stay tuned next week for Our Budget: The How. I can’t wait to share all of my spreadsheet excitement with you. 

Have a great day!


  1. We have a very similar system! Great job! I agree that things like yearly property taxes on the cars used to stress me out until I started setting aside money monthly for that end-of-the-year bill... now it's no big deal. I also find that it's so much easier to plan and budget for splurges like professional family photos, etc. We are planning on having our pics taken in September and I've been stashing a little money all year for that. Also glad to see we aren't the only ones who have "blow money" -- I feel like it's money that would get spent anyway and this way, it's no stress, no blame.

  2. This is an awesome breakdown of your expenses and I am impressed! I need to spend less and love the idea of a budget!

    Several years ago, we got put on an even payment plan with our gas and electric company to avoid any HUGE surprises. Just a thought.

    Thanks Rachael!

  3. This is very similar to how I organize my spreadsheets. The only thing different I really do is have a "Yearly Budget" category for vacation, gifts and health deductible which get their own separate sheets. I know my yearly amount, so I just divide that by 12 and deduct that from my monthly spending budget. It works for us!


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