November 2, 2017

Thrifty Thursday: Getting the Family on Board with a Budget

The idea for this post was suggested to me by Bridgette, a reader of my blog. She asked how I got my family (especially the kids) on board with budgeting to pay down our debt; how we explained to them what it was all about; and how we decided how much allowance we should get.

First of all, the budget is still going really well! October was the worst our least productive month so far in how much we've been able to pay toward our debt, but that's because we incurred a lot of expenses we don't normally have: a down payment on Eli's orthodontics; Jerry's hospital bills from the ER visit; my physical therapy co-pays; and several other things. I wasn't even sure if we'd have any money left over at all!

(I have no photos for this post, so I'm just using what I can find--this is a picture of Eli with braces when he was three years old! He had a cross bite that caused him to choke on his food because he couldn't chew well, and the braces corrected it. He only had them for three months.)



We didn't overspend on anything this month except for those necessary extra expenses we incurred; so while our debt payment wasn't nearly as much as last month, we did manage to pay just over $600 onto the credit card.

So, our new debt balance is $4871.03.

I am pretty amazed that we managed that for October. Prior to our budget, we would have accumulated MORE debt last month. Jerry and I went on vacation, so not only was he not working (and not earning money), we were also spending money in Portland/Seattle.

Because we had each saved up our allowances to spend on vacation, we didn't have to charge things to the credit card. And we were very conscious of how much we spent, rather than "spending now and worrying about it later".

We don't have extra things written into our budget. Instead, we just use the extra money that we earn that we would normally pay toward our credit card debt. (Extra money is anything over $3300 for the month--see below for a quick explanation).

Our "zero sum" budget in a nutshell:

  We start each month with the "bare bones" amount that we will need to cover all expenses for the month (all of our bills, food, gas, regular medical co-pays, and allowances). Our "bare bones" total is $3300--maybe next week I'll break it all down into specifics. So, we start each month with $3300, knowing that we have all we need for the month.

  Each paycheck that we earn during the month gets set aside for the following month--so we aren't spending this month's earnings on this month's bills. We are using last month's earnings to pay for this month's bills. We are always one month ahead.

  Once we earn the $3300 that we'll need for the following month, anything we earn on top of that goes toward the credit card debt. For example, if we were to earn $5000 this month, then we would set aside $3300 for next month; and we would take that extra $1700 and pay it onto our credit card debt.

So, what I was saying before is that when we have extra expenses (like Eli's down payment for orthodontics), we pay for it with the extra money that would normally get paid onto our debt. It just means that we'll have less left over at the end of the month.

I'm actually really happy with that--in the past, months like last month would have accumulated quite a bit more debt (especially considering our vacation). It's kind of unbelievable to me that we actually had money left over!

Finally, I will get on with the topic that Bridgette asked about--how I got the family on board with living on a budget.

This part was actually really easy. I've come up with budget plans before--actually, pretty much every time I've had a hypomanic episode, I get a little crazy with the budget planning. I get very excited and calculate all the numbers, then plan it all out really well. I get the family on board with it, but then I've never followed through. (Again, how did I never recognize these symptoms of bipolar? Haha!)

YAY MATH!!

So, coming up with the plan itself was nothing new to my family (especially Jerry). He is used to seeing me getting crazy-excited about budgeting and paying off our debt; and then just days later, coming home from work to see me starting a project that we don't have the money for. He always laughed and found it endearing. Poor guy.

bipolar meme

There was a rather big difference this time, though (aside from the fact that I am on medication to hopefully prevent me from getting hypomanic): we used a different type of budgeting plan. It's called "zero-sum" budgeting, which is what I explained briefly above. (Next week, if it interests anyone, I will write a very detailed example of one of our months to explain better.)

Anyway, the zero-sum budget was perfect for what we needed. Jerry's paychecks vary greatly from week to week, and I only get paid once a month (my checks can vary quite a bit as well). So, working with a set amount of money for an entire month was just what we needed; and since we didn't know how much we'd earn that month, using the previous month's earnings made perfect sense!

Once I figured out how that would work out, I was super excited--crazy excited, really, but in a non-crazy way (hahaha). Thankfully, my mood was stable and I was thinking with a level head. I explained to Jerry exactly how the budget worked, and he was impressed with how much sense it made.

I had already calculated the numbers--our "bare bones" amount per month, our average income per month, our debt total, and how long it would take us to pay off our debt if we earned X amount of money each month. He couldn't believe how quickly we could be debt free if we stuck to the plan.

I also went a step further and calculated how long it would take to pay off not only our credit card debt, but also our car and house. As of this month, if we stick to our budget, we will have all of it paid off in 35 months. Less than three years!

When I told Jerry, he instantly wanted to pick up as much overtime at work as possible. He was super excited about getting our house paid off. It took no convincing for him to get on board with the budget, because the thought of paying off our credit cards, car, and house while our kids are in high school was mind-blowing to us.

When we told the kids about it, they were actually really excited about the budget, too. We were honest with them about the debt--I want them to know about debt so they can avoid it when they are older!

About the budget, we told them that instead of us paying for things they want, we were going to give them an allowance, and they would have to use their allowances to buy the things they want. We said we would still buy the necessities, but they would not be allowed to ask us for things that they don't need--instead, they would have to save their allowances for it. They loved the idea of having their own money to spend however they want!

There were a few key factors that I think have makes this budget pretty painless for all of us:

1) We kept Netflix and Hulu in the budget. They aren't necessary by any means, but we don't have cable and there are a few shows we like to watch together as a family. If we eliminated all of the fun from our budget, we wouldn't last long. So, it's worth the $18 per month for the two apps.

2) We budget money for "allowance" (cash for each family member to use on anything we want that isn't in our budget). Without this, there is NO way that we would have stuck to our budget this long!

Jerry usually buys his "fancy" beer with his, and I saved almost all of mine for the first few months to use as spending money in Portland. However, since I'm having a hypomanic episode right now--hopefully not for long, because I increased the dose of my meds today--I've spent almost all of the money I had saved up (I mostly bought clothes at Salvation Army). Next time I start to get hypomanic symptoms, I'm going to give Jerry my money to hold on to.)

Jerry and his fancy beer

Anyway, I think the allowance is the most crucial part of sticking to our budget. None of us would be on board without it.

3) I also budgeted a "family fun" amount ($100) to do something as a family each month--going out to eat, to the movies, bowling, getting ice cream, etc. This gives us something to look forward to doing together; and, because it's in the budget, we actually set aside the quality time together each month.

Bridgette also asked how we decided how much to budget for allowance. At first, we planned on a weekly allowance, and we thought $10 per week was good for the kids. However, since everything else was monthly in our budget plan, we switched it over to a monthly allowance as well. Jerry and I each get $100 on the first of the month, and the kids each get $40.

The kids aren't old enough to drive yet, so they aren't going out with friends all the time (which keeps them from needing more money). Noah does go to the mall or movies with friends once in a while, but his allowance is enough to cover that. (Now he is more careful about how he spends his money--he's learned just how expensive the popcorn is at the movies!)

Those amounts seem to work well for us. It has certainly made us think before we buy things! I was so used to just throwing things in the cart or grabbing last-minute stuff I didn't need. Or when the kids were with me at the store, they would ask for things and I didn't give much thought to it before buying it. Now that we are using our own money for the things we want, we give a lot of thought to whether we REALLY want it. It's turned into a nice habit!


22 comments:

  1. Hi Katie! Love your blog!!! I love this budgeting idea, but I still don't understand how to get started. how do you save 1 month to get the 1 month 'ahead'? Do you just defer paying any bills for 1 month? but if so doesn't that put you behind in the bills? thanks!!

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    1. Hi Mandi! That was one issue I meant to write about, actually, and I forgot to. That is a big issue when starting a budget like this, and if we hadn't gotten really lucky with our timing, we likely wouldn't have been able to do it. The month we started happened to be a VERY good income month for us (probably the best we've had in the 18 years we've been together). Jerry worked a ton of overtime, and I had written a couple of sponsored posts. There were five pay periods that month, too. So, we paid the minimum on all of our bills that month, and we managed to scrape up the $3300 we needed to start the zero-sum budget for the next month. If we hadn't been lucky to start our budget that month, then to get started, I would try this: Start living as if you are on your "bare bones" budget so you don't overspend. Save as much as you can that month, and set it aside for the next month (it may not be enough for the bare bones amount, but with a few months of saving any extra, you should be able to have enough to start your month with the bare bones amount.

      So, starting the budget can be an issue if one doesn't have the bare bones amount set aside (and I would guess that most of us with credit card debt probably don't). But a few months of living with minimal spending should allow enough extra to start being ahead by a full month. Hopefully I explained that okay!

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    2. With tax refund season coming up, this might be a good time for people to set back one month’s budget and get ahead of their money...throwing the rest at debt, if there’s any left over.

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  2. Hubby and I each get "mad money" once a month -- this is the same as your monthly allowance, but it's usually used for fun date days or for something that we want that isn't a "need" or a "could use".

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    1. It's fun, right?! Knowing that the money is set aside just for that purpose makes it feel less guilt-ridden (not that we should feel guilty, but when we would go out knowing that we didn't have the money to, I couldn't fully enjoy it)

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  3. I would love a more in depth look at this budget! I would like to start something like this for me and my husband. If we ever decide to start a family one day, it would be nice to be ahead of the game so to speak. I'm terrible at budgeting. I always end up giving up on it. Sounds like you really have it together!

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    1. Being ahead of the game each month is SUCH a relief! I love not having to worry about whether we will have the money to pay our bills on time.

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  4. Hi Katie! I am loving reading about your budgeting and thrifty adventures. I also read a lot of personal finance blogs, and an idea that comes up ALL the time is whether it's better to pay off a mortgage first vs. invest that money. A lot of it comes down to personal preference, of course, but the gist is that by investing in index funds, over time data has shown you will earn an average of a 6% return every year. So the logic goes that if your mortgage interest rate is lower than that, you can choose to put whatever $$ you would have put toward extra mortgage payments into index funds instead, where it will earn you money.

    There are tons of blogs and articles out there on this topic. Here's one that has a good example to illustrate how the math works: http://www.investmentzen.com/blog/should-i-pay-off-my-mortgage-early-or-invest/

    There are a couple other benefits to investing vs. repaying, namely that you can have access to the money should a true emergency occur (like a devastating health issue, etc), and also the tax advantages of deducting mortgage interest.

    Of course, some people prefer to pay down their mortgage anyway, just because of the psychological benefits, which are obviously huge! I just wanted to let you know about this angle too in case it was interesting or you hadn't yet heard about it.

    Thanks for letting us all read along on your journey!

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    1. Oh, yes! Thomas (my friend in Portland) has told me about this (Thomas's job reminds me of Chandler Bing's job--I know he does something with mortgages, blah blah, finance, blah blah, numbers, and all that. But I couldn't tell you what his job actually is, hahaha!) Anyway, he suggested the investing idea to us a few years ago, and I loved the thought of it--but I had no idea how to go about doing that. Now, being just three years away from paying off the house, I think the mental freedom I would get from that would be the most amazing feeling. But I'm going to look into that again--thanks for reminding me! I'll check out the link you sent :)

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    2. Paying off the house also gives you freedom from worrying about a down turned economy. If your house is paid off, you don’t have to worry about being laid off from a job (because you could more easily live off of unemployment or a lower paying job), and in a downturned economy, you’d lose out in having to sell investments at a market bottom. We’re also paying off our house!

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  5. Thanks so much Katie! Great explanation! I would love to see more detail on how you budget! Great post as always!

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    1. Thanks, Bridgette! I love writing about this stuff ;)

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  6. I'm glad you're getting your debt paid down. The thought of having that much credit card debt at your age must be so scary. I learned in college, with a $500 limit credit card just how hard it is to pay off when you're making minimum payments. I'm 50 now, and we've had both our house and lake house paid off for 4 years. We only charge what we can pay that month on credit cards, and we use a high cash back card to put large purchases on for our business so we can pay for the bulk of our yearly vaca with credit card cash back. I was so traumatized by debt in my late teens, that I made sure I drilled into my kid's heads how debt works, and my 23 year old hasn't even got a credit card yet because he knows what will happen. Keep up the good work.

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    1. Having a credit card that you pay off completely every month is great for your credit score. You might suggest that your 23 year old get one that he ALWAYS pays off every month to help his credit score in the long run. It's hard to get the best rates for a house loan, car loan, etc if you don't have any history of being able to manage a loan. Also some of the deals are awesome! My husband and I charge everything we buy to a single card that gives %2 cash back, NEVER have an outstanding balance, and some high expense months we make over $50 in free cash. That adds up over time!

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    2. I agree, Shannon! My credit score is excellent, even though we have debt (I've always paid our bills on time, and our ratio of available credit to debt is actually really great). But also, we use a credit card to pay for everything we can each month (even now that we are paying off debt) and we then we pay it off in full every month--the card we use is our Delta American Express, so we earn SkyMiles. Each time I've gone to Portland, I haven't paid for my ticket! I use SkyMiles, and it's so fun getting "free" plane tickets.

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  7. Gosh, I only get $40 a month as my allowance, I totally would love $100!!!

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    1. Well, we literally use it on EVERYTHING that doesn't affect the whole family. For example, I drink tea every morning, and instead of using our grocery budget, I use my allowance because I'm the only one who drinks it. I could choose to quit drinking tea, but I enjoy it, so I don't mind spending a few bucks on it. But having a limit, whatever it may be, definitely makes me think before I buy!

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  8. You & your family are doing an amazing job with this budget thing! I personally would love to see a detailed example of one of the past months to make sure I understand it. Thanks. ~Brandi

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    1. Thank you so much, Brandi! I appreciate the support :)

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  9. Katie, How do you determine the food budget? Do you buy the same things each week?

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    1. No, I check out the ads before I write a menu for the week, and I tend to buy the least amount of ingredients I can get away with. I wrote a whole post about it recently: http://www.runsforcookies.com/2017/09/grocery-shopping-on-budget-and-debt.html
      I budget $433 per month (originally, it was $100 per week; but then with some months having 5 weeks, I changed it to $5200 (52 weeks per year) divided by 12 (months per year) to get a monthly amount.

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  10. I just wanted to say thank you for being willing to put real numbers in your budget post. I know that can open you up to criticism, but I really love seeing actual examples. It makes the information so much more useful to see the nuts and bolts of how you do it. I'm looking forward to more posts on your budgeting process.

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I'd love to hear from you! I read all of my comments, and if you have a question, I do my best to respond; sometimes, however, I get busy and forget to go back to reply, so if it's important, just email me! :)