One more thought: if you are trying to create a budget in order to significantly increase savings or cut expenses a lot, focus less on the coffee shop visits and more on big-ticket items.
Yes, it is always a good idea to get a grasp on where you are leaking money and make adjustments — too many lunches out, too many streaming services, a high-cost insurance or phone plan that should be switched. But that kind of thing generally adds up to hundreds of dollars saved a year, not thousands.
To REALLY save, eliminate debt and limit big expenses. I left the workforce for a time when the kids were small. To prepare for the loss of my income, we elected to stay in an older home that was arguably too small for us rather than buy a home comparable to our peers. Then we used our savings to pay off the mortgage before I left my job and lived mortgage-free for a decade in our 40’s before we finally upsized. We had already paid off all other debt like student loans.
We also saved to buy our cars for cash. We used to alternate car purchases. Every year, we’d save $6000-$7000 toward a car. Every five years, we’d use the savings to buy a new car for the one of us with the oldest car, who would then drive it for 10 years. Since Covid, we stopped using our cars so much and are extending the life of our cars further. DH’s is 13 years old and mine is 8.
We traveled frugally. More road trips and VRBO rentals, fewer flights and beach resorts. More BBQ on the patio, fewer restaurants. One trip per year.
I feel like my idea of saving for emergencies has broadened.
It used to be for home or car repairs or illness- but going forward should expand to include things like decline of parents / grandparents ( extra travel for end of life care or for funerals) or weddings/ births for the kids and younger cousins.
Then there are hopes for celebratory trips post graduation. There is a risk of double dipping from the savings bucket for all these events.
I’m type A/obsessive by nature, so it carries into budgeting. I use Excel and have probably 25 different line items: there are the usual ones like mortgage, utilities, groceries, eating out. There are also line items for non monthly, re-occurring expenses like DD’s college, medical, life insurance, auto repairs, clothing, house/lawn, vet, travel, gifts, etc. I put a set amount into those categories every month and carry the unused to the next month. We both get a very modest “allowance/fun money” each month, and we discuss any purchase outside our “allowance/fun money” that wasn’t in the budget. Any monthly amount in the vehicle expense line item not used for repairs just accumulates to become the “savings” used to purchase the next vehicle for cash. Same goes for lawn/house, which accumulates and sits as a mini savings line item for things like furniture or larger lawn equipment purchases. We used to use cash for all purchases until we got got really good at controlling spending within the budget. If we don’t have money in the bank to pay for larger items, we don’t buy them. We have a 6 month emergency fund that we do not touch except for true emergencies (not wants or items that could’ve been saved for in the regular budget, like a furnace). We first try to cashflow unexpected items within the working budget.
On top of 401ks & Roth IRAs we save 10-15% of our take home into savings; that is on top of the future needs line items like vehicles. In essence it’s our fun money to be used on future remodel projects for the house or fun purchases.
I keep >one months buffer in checking, so income in one month goes to the next months expenses. We spend every dollar in our budget, NOT every dollar in our checking account!
Most importantly, we work together and both agree on the budget. It isn’t a “I need to run every purchase by my spouse” type of situation; it’s more of a “I was thinking about buying xyz, what do you think or let’s check to see if we have room in the budget this month” type of situation. It’s involvement and respect, not permission.
I feel like I have been pretty good about making the switch from saver (I am a born saver) to spender (I am not a born spender). But it was the shock that dh’s admittedly lacking spreadsheet “showed” otherwise that sent me in a spiral. Maybe we had embraced the spender mode too much! A few months of tracking actual spending will be great and is much overdue, IMO.
Thanks, everyone, for sharing your systems. I hope this helps others as well!
We pay bills once a week and track them as we are paying them using Quicken which aligns with our online banking account. Some cash probably does not get accounted for. We haven’t budgeted per se, but have always maximized retirement plans. We did a big review of our expenses before DH decided to retire to make sure we could do everything we wanted to do.
My big moment? Recognizing that “unusual” expenses are actually expected expenses… and recur frequently.
A big credit card bill because I hosted a bridal shower for my niece. Sure- unusual. But the next month we were kicking in for a 50th anniversary party for the in-laws, and a month later, helping out a neighbor going through a family tragedy, and a month later… you get it. Getting a handle on your own lifestyle, family obligations… the big picture- was hugely revealing to me.
We do not have autopay for the credit cards (2 main ones). I look over the statements every month to be sure that they are correct and to briefly review our spending. Then I pay it on bill pay myself.
Knowing where you usually spend your money is important. If you want to start allocating money now instead of in a few months, you can get a rough idea of your spending patterns using credit card and bank statements. Look at the statements for the past three or four months (for an even better picture pull up an entire year). Make a table showing categories of spending. You can do this on paper or a spreadsheet program. Some categories will be obvious - rent/mortgage, utilities, medical, dining out/coffee shops. Depending on where you shop, others will be more difficult - was that Walmart purchase groceries or school supplies? If you shop online, pull up purchase histories to help determine spending categories. Unless you never use case, you won’t be able to account for every dollar you spent, but you should see where most of your money went.
When you set up your first budget include a miscellaneous category. This is where you will record anything that doesn’t fit in another category. For the first year, tweak your budget every few months. Look at the items in the miscellaneous category - are any recurring expenses that should have their own categories?
We currently use GoodBudget to track expenses and short-term savings. We formerly used an Excel spreadsheet.
The goal of budgeting really is to make sure you have something left over as savings. So I work backwards and start with that vs trying to track the expenditure side. This is not to say that tracking expenditures isn’t also useful as you need that to see where you can cut expenses and save more. That $2.75 (or whatever) coffee you have at Starbucks 5x a week adds up when coffee is probably free at the company breakroom.
I found it easier to work backwards when I was younger and forced savings was more relevant. So this is how I also work on budgeting with my kids. I take my (and my kids) fixed monthlies (rent/mortgage; utilities, student loan or other loan repayments, insurance, etc…) and see what the difference is between that and my net take home (after taking the max 401k deduction), and then decide how much of that I want to save. That amount gets taken out of each paycheck ratably and placed into a savings/emergency account. Whatever is left is what I (my kids) can spend on “other” stuff.
Many moons ago when we first got married we set a limit on having to check with each other before spending. That was $75 back then. It is probably at $200 these days.
Basically all our bills are monthly with the only variation being utilities, but when electric goes up then gas goes down and vice versa. For the most part I would say our grocery bills stay with 5-7%+/- on a monthly basis. We put the rest on credit cards and we just keep an eye on how much we are spending. Of course some months things pop up like car repair or this summer was graduation gifts, dinners and dorm stuff.
I personally hate spending money on material items. I try to only make those purchases when something is worn out or broken.
“Total Money Makeover” by Dave Ramsey has great budgeting strategies. Based on getting out of and staying out of debt. And getting to the point you can invest.
Decades ago, this had become a frequent and major rift. One party felt money slipping through the hands, being spent just because it was there (leaving nothing to be saved), the other party feeling micro-managed, treated like an unequal…
Eventually a separate checking account was set up for the person who does virtually all “disposable income” spending, getting a fix, bi-monthly direct deposit from payroll.
The other balance goes into the primary checking account, used for the inarguable expenses (the term “necessary” was learned to be too explosive): Mortgage, taxes, utilities, insurance, cars & home upkeep/maintenance/services, amortization, college-fund,… and whatever was left to build up a cash reserve and/or long-term savings.
Far from ideal for either party, but a compromise that saved us on lawyers
We have always had separate checking accounts except for a very miserable 6 month period after a move, job change, etc. which had both paychecks deposited into one account.
I think as long as both parties understand the guardrails of what constitutes a “we need to discuss this” expenditure, it is a practical solution.
DH and I both have our own checking/savings account separate from our joint accounts. We also both have a ‘slush’ fund we separate out from savings/spending that goes into those accounts (started as $25/month when we got together almost 25 years ago - the amount grew as our income and inflation increased).
I’m a save up my slush account money until a big purchase kind of person, he is a spend his slush account on small extras kind of person. Neither of us tracks the other’s choices from the slush money.
Stopped arguments years ago by doing this - it is the “ask no questions” money every person should have some amount of (imo).
When the kids were little, I did spend about a year noting every expense in a loose leaf notebook (one page per category) when I entered the house. Some interesting insights - example: It did point out that even though I though we almost never spend money for clothing, it totaled $75/month.
These days where we spend almost no cash, it’s really easy to just look at Visa bills and checkbook register.
We have one shared checking account. But my husband does have a debit card tied to an account with inherited money. He uses that for travel with his brothers, family celebrations, pricey camera equipment (it was also his father’s hobby). I don’t log those expenses.
