Now that we’re a few days in to 2017, you’ve had some time to go join a gym you’ll quit in February and write up a grocery list full of veggies and soy milk that’ll have “hamburger” scribbled in before you get to the parking lot. Don’t worry, you’re not the only one. New Year’s resolutions are a dime a dozen every year, and I can’t remember a time I actually stuck to any of mine through December. One thing that I think keeps us from following through on our well-intentioned goals is the lack of a support network and education. Doing something new on your own is an extremely daunting prospect, and it’s compounded even more if you don’t know what you’re doing. Never worked out in a gym before? Good luck figuring out how to use that leg machine — or is that an arm machine? — that kind of looks like a dentist’s chair. Got through college on pizza and ramen? Those 73 other aisles in the grocery store might as well be the unexplored Amazon. Sure, you can YouTube just about anything now, but if you don’t know what you don’t know, even that doesn’t help much. I can’t help you with the hashtag-worthy gains (or losses) at the gym, or how to go from frozen pizzas to four-course dinners for 8 in the kitchen, but if managing your money better is the promise you made for this year, I can show you what R and I do with a budget.
♫ This Is How We Do It ♫
You sang that in your head just now, didn’t you?
The often misunderstood budget is a quiet animal, fiercely loyal and wildly varied in appearance. If one were to read all the literature on the different species of budgets, one would have compiled quite the reading list, indeed. The type of budget that R and I use is called the Zero-Based Budget, otherwise known as the envelope system. The “zero-based” comes from the fact that at the end of every month, we have $0 left over. Not in our bank accounts, mind you, but in unaccounted money. In other words, every dollar we earn has a job assigned to it before we get it. Any money we receive that we weren’t planning on (last-minute overtime, gifts, etc.) goes towards pre-determined categories that we decide on together. Once a category is depleted, that’s either the end of spending for that month until it’s replenished, or it means we have to rob from another category until our next payday. We were both pretty bad about this before we got the joint account, which is one reason I strongly recommend joining your finances if you’re married. Forced accountability is the best accountability! Practically, our budget has two facets: an Excel spreadsheet, and our bank account itself.
Ain’t No Party Like A Spreadsheet Party
Man, I am killing it on the 90s songs today!
Yes, spreadsheets can be boring. That’s why I decided to spruce ours up with colors and formulas and underlining! But seriously, if taking an hour or so every month to do something boring means you and your family can stop living paycheck-to-paycheck, are you really going to pass up on that opportunity so you can watch another episode of Stranger Things? I’m a visual person, so I thought it might be helpful to show you what we do before I explain it. Here’s a picture of our monthly budget, with the actual numbers fuzzed because let’s face it, this is still the Internet:
Alright, so we’ve got a few things going on here. Across the top, we have all of our paychecks through the month listed out. On the left are our categories. Everything we plan to spend money on throughout the month is listed. These categories change from month to month based on that specific month’s needs, both in amounts we allocate to them and the categories themselves. For instance, at the end of the year, our Gifts category swells to account for Christmas gifts and our Electricity category goes up because our apartment has cold air literally leaking in through the outlets. If it’s been a while since we went out to eat, the Restaurants category might go down so we don’t build up a huge amount there and can use that money for something else. Right now, we’re saving for a trip for R’s family reunion, so we added “Vacation” in. After we get back, that will disappear and its funds reallocated.
As I go along every month, I slot in amounts from every paycheck until each category is full or until the money from that paycheck is used up. Those yellow tabs in some of the categories are reminders of due dates and minimum payments, so that I can make sure we have the money available before it’s due. Looking at the whole month at once like this helps us see that even if the money we need for rent isn’t in our account yet, it will be before we send the check in. That helps us stay calm and keeps us from having to guess whether or not we’re going to be short if we buy an extra package of Oreos at the grocery store.
Our Bank Keeps Things Simple
All of this planning is very meticulous, but it won’t do a thing for us if we don’t follow through with it. For some people, resorting to withdrawing cash and physical envelopes helps, but is pretty tricky when you’re dealing with two spouses who aren’t joined at the hip. There are attempts at solutions through apps like Dave Ramsey’s EveryDollar that link to your bank account, but that can still be tricky if something doesn’t update right away or get categorized correctly. We are very fortunate to have a bank that builds budgeting tools right into their website and app. I promise this isn’t an ad for Simple, and I won’t get any kind of kickback if you go sign up with them, but banking with them has truly been a game-changer for us. They have the envelope system built into their accounts, and they call them Goals. We set up our Goals to mirror the categories we have in our budget spreadsheet, so on payday, all we have to do is move the amounts we allocated to their Goal home. As we spend money, each transaction gets assigned to a Goal, and both of us can see how much is left in each Goal at any time. When a Goal reaches zero, that’s it; we can’t spend any more from that Goal until it gets refilled. And transactions are updated as soon as the card is swiped, so we’re not waiting for things to clear and guessing what’s available in the meantime.
Email Me For A Template!
The Zero-Based Budget is definitely not the easiest of budgeting methods. If the idea of going back almost to square one every month and making sure you know what every single dollar is going to do before you have it sounds like something you’re not going to stick with, there are other options out there that are better suited for a more passive approach. But if you’re ready to fire on all cylinders, use every weapon in your arsenal, and keep your debt in your sights until it’s destroyed, this is the best method I’ve found. If you’d like a template for the spreadsheet that we use, send me an email, and I’d be glad to give you a copy!