Tuesday, January 25, 2011

Saving Money Series: Create a Budget

Alright, fast forward two years to the beginning of 2010.  Sure, we'd kept our out of pocket costs down when it came to vehicles, but not much else.  (Well, we stayed away from high priced cable.  In fact, we stayed with the 19.99 comcast plan that literally made our monthly payment $21 and some change.  Last year after we incorporated our budget we 'treated' ourselves by getting rid of our 20 channels and upgraded to Directv so our monthly expense is now $36.99.)

Anyway.  in the year previous I had watched a fellow youth pastor's wife take up couponing with a vengeance.  She was amazing!  (Man, I wish we had a Publix!) I watched her blog and all of her deals intrigued me.  Then I read why she was doing what she was doing:  she had looked over their finances and literally seen what they were spending monthly on food, groceries, toiletries, etc.  A stay at home mom to twin boys, if she wasn't earning an income, she could at least be stewarding their money in such a way that she was 'making back' money they already had.

I was immediately convicted about my own grocery spending and set out to find how much we'd been spending in the grocery store each month.  Being the beginning of the new year, we were not only going on a budget (I needed the peace of mind), I was taking up couponing as well.  (We'll save the rest of that story for another blog.)

So I sat out to get a budget written out.  I'll be honest.  I was doing the bills in our family again,  and I would worry each bill time that the money we needed wouldn't be there.  I firmly believed that God was miraculously allowing us to make ends meet each month.  (There may be a little bit of truth in that statement seeing now how we were spending our money.)  Because of this fear, making a budget terrified me... what happens if I look at what money we have and what money we need and there isn't enough there?  *Gasp*  And just the opposite happened.

In a matter of about a 1/2 hour I had written down all of the bills we paid, when we paid them, and how much they were.  I then separated them into two different segments, bills to be paid each month on the 1st and bills to be paid each month on the 15th.  (Aaron gets paid bi-monthly.)  This made sense for us.  (Remember, you have to work it out how it makes sense to you.)

Our budget broken down basically looks like this:
Pay on the 1st:
  • Tithe 
  • Building Fund Commitment (for our new church building)
  • Mortgage payment (includes our homeowners insurance and our property taxes)
  • Phone bill
  • Water Bill
  • Herwill (our sponsored world vision child)
  • *Grocery (includes anything bought at the grocery store: food, toiletries, diapers, formula, etc.)
  • *Misc. (includes all of our out to eat meals, gas, extra-curricular things such as events, etc, clothing and so on)
  • Savings
On the 15th we pay:
  • Tithe
  • Blow Money (Money that Aaron and I each get per month to 'blow' on whatever we want.  It's not much, but it's nice to have that in your wallet each month.)
  • Car Payment (Bleh... working on it)
  • Car Insurance (which will go down some once the car is paid off)
  • Life Insurance Policy
  • Trash Service
  • Utilities (Gas and Electricity, again, bleh)
  • Directv
  • Internet Service
  • *Grocery
  • *Misc.
  • Savings
(Thankfully we have no credit card debt to have to pay off!  God protected us from that!)

* Denotes items we use cash only for and items that have a semi-flexible dollar amount in our budget.

So now we had it all planned out, and it became increasingly easy to look at what had to be paid when, do the math of taking the amount of Aaron's pay check, subtracting all of the set outgoing bills, see what was left over, and come up with an acceptable amount for Grocery and Misc.  Whatever was left went into savings.  I do this every month based on our needs.  (Sometimes grocery is a little higher, sometimes a little lower, etc.)

Doing this allows me to know that every bill that comes to my mailbox, can be paid for and has already been accounted for.  That, my friends, is financial peace.

I also realized how much I'd been spending at the grocery store and on miscellaneous things by building this budget and was appalled to see that $400 + was going to just grocery shopping monthly.

I'll be very candid about our cash envelopes (which I'll talk more about tomorrow).  Our grocery envelope started last year with $125 in it each two weeks, making it $250 a month.  Remember, all of our food, toiletries, diapers, etc came from these folders.  In September, after getting more familiar with couponing and finding deals, I decreased our grocery envelope to $100.  Our misc. envelope sees the most flexibility, depending on needs that need to be met each month, but the highest that goes into that envelope each time is $150.  That gives us $150 to eat out on, put gas in the car, pay a sitter to go out, buy clothing that is needed, etc.  We also use some of this money to 'budget' for things we know we'll need coming up (such as healthcare, dental visits, vacation, a new piece of furniture, etc.) 

And that's the idea of a budget.  Our budget was the keystone that got us on the right track financially.  It's not always easy, there are times Aaron and I have had to discuss whether we can eat out one night in order to be able to eat out with friends on Sundays, or have had to discover really inexpensive ways to go on dates.  There is sacrifice to be made, but the result is two fold:  first, you get the peace of knowing your bills are taken care of when they reach your mailbox.  Second, Aaron and I know we won't have to live like this forever.  As we work our way out of our car loan, begin to put money back in the savings each month, and learn to spend money wisely, we know that the reward is in the marathon, not the sprint.

Tomorrow, cash envelope system :)  (Our biggest obstacle to the Dave Ramsey system, but once we allowed our selves to try it, we found it worked for particular parts of our budget!  It's worth a shot!)

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