Building an Easy Budget
I was asked today if I would share my budget ideas with a newlywed couple, and then another of our friends wanted the message to so today I posting the whole thing as a blog.
These are the ways we do what we do on one military income (no children but we have two very spoiled dogs).
We bought our first house without needing to put anything on credit cards (new carpet, painters to paint the whole interior, and landscaping that was extensive) I barely even broke into savings.
Pay extra when you can: The mortgage gets an additional $100 every month, this will at some point whittle down the years of our mortgage, there are some calculators out there to figure out how much it will help you. We purchase one vehicle at a time, and pay it off as fast as possible, with additional principle payments. One of us is always driving a brand new or nearly new car. We have absolutely NO credit card debt, and four savings accounts of various types, all on one income, the most expensive part of our life is organic gluten-free food…my grocery bill is ridiculous.
Here is the basic budget model I started with when I was first married.
- 1/4 bills,
- 1/4 insurance (get renters insurance you will be glad you have it) and transportation,
- 1/4 savings,
- 1/4 household, food, fun, clothing, and other stuff.
If your rent and utilities is already over 1/4, some say you are already living outside your means, so whittle this down. My cell phone costs us $15 a month. Negotiate with cable, phone, and internet to bundle either a great plan or just buy bare necessities. Find and utilize as many free services as you can, if you have an iPad or similar pad there are free texting programs and so forth that you can load. Do one Google search on free stuff and you will be amazed at what is out there.
Here is a budget model I use with my coaching clients:
- 26% Housing (all expenses, utilities and bills, phones, internet, cable, including insurance for a roof over your head) (Notice this gives you one more percent then my first model).
- 10% Transportation (car payments, gas, repairs)
- 12% Food (including eating out)
- 10% Retirement savings and investments (never touch this money once it is in a 401K or Roth IRA)
- 4% Short term savings (this is money set aside for vet bills, or surprise expenses that are emergencies) Combined savings almost 15%
- 16% TAXES (this is part of your budget that often gets overlooked and may be less depending on where you live)
- 7% Insurance (everything it takes to protect you and your family except homeowners or renters that is in your housing allowance)
- 4% Entertainment (date night, fun stuff, and so on) There are tons of things available for date night that are free, check your paper or local online resources.
- 11% Other stuff (clothing, and stuff not covered by the rest of the categories.)
Notice this does not account for credit card bills….if you can’t pay for it then you can’t buy it. We use credit cards, with the understanding that those balances are temporary and are to be paid off monthly. You will build better credit if you are actually paying off a balance on a CC. Just do not use unless you need too. For instance, I will pay for a big item like, tires, or a repair, or a vet visit that will come out of the emergency fund, and then I pay off the credit card with money from that savings account.
One of our savings accounts is now an insurance-like account; we will use it for vision, dental, and vet bills instead of paying for insurance. *Last year we paid over $1000 in these expenses just for insurance and then paid exorbitant additional amounts for co-pays and non-covered services, so I dropped dental and vision insurance. I felt like we were actually being robbed, this may not be right for you but I encourage you to do the math! I am putting in the same amount to it each month that I would have been giving to an insurance company, that way it stays our money.
Also read Suzy Orman, she is a hard-ass but she knows her stuff. I read several of her books many, many, years ago and they helped me a lot.
Remember that quality is better than quantity, buying ten things for a $1 is not always better than buying one great thing for $10. Especially when it comes to clothing, if you buy quality, you only have to buy one and keep it for a while, whereas if you buy junk it does not last. This works in jeans and sweaters, coats and shoes, the rest buy cheap…t-shirts and trendy stuff should be inexpensive. Better yet, find a great consignment shop and buy, sale, and trade.
If you can help it, never pay full price for anything except groceries and household necessities even then use coupons if you can. If you are shopping at places like Dillard’s, Michaels, Macy’s, Hobby Lobby, World Market, and the like get online and look for printable coupons before you hit the store. We are military so I ask as often as I can remember if they offer a military discount, it should go for senior discounts as well.
When shopping online I have three major things to share.
- Always Google a promotion/coupon codes before check out, I look for at least a percentage off that covers shipping. Join the shopping clubs, sign up for the promotional emails of the sites you shop the most. And if they allow you to use more than one code per purchase, do so.
- Shop around, if it is a name brand hit several sites to see who has the best price including shipping. Wait if necessary until they give you a coupon, I do this with Victoria Secret and Sierra Trading. I always shop their sale sections first, then move onto whatever I was after.
- Get on Amazon and pay for Prime. Free 2nd day shipping, free movies downloads, and lots of great deals on bulk items like coconut water by the case, or household goods like canned dog food per case (I save 40 cents a can). Just make sure it is Prime eligible before purchase and shop away.
Finally, I rarely use cash as it can easily become something you lose track of, keep all of your receipts and log them into some sort of banking balance software like Quicken at least once a week.
~Joli A. Campbell