I've been wanting to write about this for the past couple of months, but I haven't taken the time to sit down and put together a post about it. Let me forewarn you that this may be completely boring if you're not into budgeting and numbers, but this topic has actually been so exciting for me! hahaha
So, Jerry and I are on a budget right now in order to pay off some credit card debt. First, the back story:
For much of my life, I've been pretty good with handling money. My parents have always been thrifty, and taught me not to spend more than I can afford. My mom loves garage sales, and I used to go with her all the time. Once you see things at garage sales for a tiny fraction of the cost they are at a retail store, it's so hard to spend the money in a store when you can get it dirt cheap.
In high school, I bought clothes from the thrift store, too. My style was--well, let's just say it was "unique". I was basically a hipster before being a hipster was a thing. I love anything retro, and I probably bought clothes that used to belong to someone's grandmother.
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| 1998. I still remember the feel of those polyester pants and velour shirt. |
I didn't get a credit card until I was in college; and even then, I was very responsible with it. I asked for a $500 limit so that I wouldn't go overboard. My mom had ingrained in me that I should never get in over my head with debt. I didn't really learn about credit scores until Jerry and I applied for a loan to buy our house, but I was happy to see that my credit score was good--from the credit card and from paying on my student loan.
In retrospect, I'm pretty sure that my having bipolar disorder would cause me to spend money very impulsively. When hypomanic, I would get really excited about starting a project; then I'd use the credit card to pay for materials, telling myself I would pay it off at the end of the month (I usually didn't).
I would also get really excited about spending it on other people--giving gifts, taking people out to eat, hosting parties, and things like that--and again, I would just put it on the credit card and worry about it later.
Our income is SO varied, depending on whether Jerry works overtime and for how many hours (he is paid hourly). So, inevitably, there are weeks where his check is really low, and before budgeting, that would always throw us off on paying bills. We relied on the "big" weeks to get us through after a "small" week's check. Also, I am paid on the 30th of each month--so, we would rely on my check to cover anything we couldn't pay from Jerry's weekly checks.
Having a varied income has always made it really difficult to stick to a budget. When I don't know how much we are going to earn each week or month, how do I plan for it? Jerry and I had tried several times to budget our money, but it only lasted a few days because it was too hard to plan for things.
Anyway, debt didn't really become a problem until after we were married for a few years. Jerry's employer decided to cut all overtime hours, and our combined income (I was working for an OB/GYN at the time) was not enough to pay bills. So, we starting using the credit card more and more; and then about a year later, Jerry's employer reinstated the overtime. We were earning enough to pay our bills, but not enough to pay the debt we'd gotten into.
I won't write out the rest of the long story, but in 2014, when we built our garage, we had to take out a loan. And the credit card was still a problem. We were living paycheck to paycheck--whatever we earned in a week would be gone by the end of the week. I did set aside money for our house payment and car payment every month, but the rest was just paid on an as-needed basis every Friday.
As soon as we paid off the garage loan in December 2016, our furnace quit. To replace it was $5500, and we had to borrow money for that. I felt like we would never get ahead! When we decided to start this budget, our credit card/loan debt was about $14,500--a number that seemed totally overwhelming to try and pay off.
Our current income is definitely enough to live on, but we were still spending more than we were making, and we weren't sure where our money was going. Again, trying to stick to a budget each week or month was so difficult because of our unpredictable income.
I finally starting reading websites for ideas, and I found a way of budgeting that was perfect for us. For the life of me, I cannot remember what it's called or where I read about it. (Edit: I found it!
Here is the site where I got the idea. It's called a zero-sum budget.) But here is how it works:
I calculated a "bare bones" figure of what our
mandatory monthly bills are: house, car, insurance, property taxes, utilities, food, gas, medical co-pays, and the minimum payment on our credit cards. This would be the minimum amount that we would have to earn to be able to live on and pay our bills: $3300. Anything above that is extra.
Once I calculated that amount, I used Jerry's and my tax forms from the last several years to figure out what our average monthly income is. (Oh! I also applied for an 18-month 0% interest credit card and I transferred our balances from other cards to that one, to consolidate and obviously save on interest while paying it off. Thankfully, I have always had excellent credit, so there was no problem getting the card.)
Here is where the budget gets difficult to explain, but I'll try...
We now start each month (on the 1st) with $3300 in our checking account (money we earned the previous month). That amount is enough for us to live on for the whole month (if only paying the minimum on credit cards, and not spending on anything extra). We use this money to pay for everything for the month.
To use June and July for an example: In June, we started the month with $3300 in a checking account and $0 balance on my AmEx. During June, we paid for our bills, groceries, gas, etc., from that $3300 budget. Meanwhile, we set aside ALL of our income in June.
On June 30th, we made sure all of our June expenses were paid for (including necessary extras, like a couple of gardening tools we needed). Then, we looked at our income from June--let's just say it was $4300--and we move $3300 of it to our checking account to use for the month of July. Then we take the leftover income from June (in this example, it would be $1000) and pay down our debt.
(Side note: I use
my beloved Delta American Express card (that we pay in full at the end of each month) to pay for as many bills as we can, as well as our food, gas, etc. Then I pay off the AmEx with the portion of the $3300 set aside for such. This way, I can earn a lot of SkyMiles without acquiring more debt. If you are interested in applying for the card, I would be thrilled if you use
this referral link--I am not affiliated with them in any way, but we would both earn SkyMiles for a referral. And of course I would be grateful!)
Does that make sense?
Since our bare bones budget doesn't allow for "fun stuff" that we may want (Jerry's craft beer, the kids' toys/games/whatever it is they want, my future travel expenses, etc.), the four of us each get a cash "allowance" on the first of the month to use however we want (or save it for later--I'm currently saving mine for when Jerry and I go to Portland).
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I was looking for pics for this post, so I typed in "money" in my Photos app--
and this picture popped up! Hahaha, no memory of what this pic was about. |
We also agreed that any bonus money we earn (if Jerry gets a bonus at work, or if I write a sponsored blog post, or something like that), we will divide it up as a family to add to our allowances. Or, we may decide to use it to do something together as a family.
Today starts our third month on the budget plan, and it's been great so far! I write out a weekly menu on Fridays, and then go grocery shopping (just once for the entire week). I make a list for the grocery store and I don't buy a single thing that isn't on the list. I'm kind of amazed at how many things I ordinarily would've put in the cart impulsively.
At Kroger, you get 2x the fuel points (discount on gas) by shopping Friday-Sunday, so by doing my grocery shopping on Fridays, I am also racking up fuel points--this month, we get $1.00 off per gallon!
Having a particular amount that we are "allowed" to spend on groceries and gas really makes me think twice about buying things or going places. I try to plan my errands around the time/place that I have to go anyways--like my therapy or doctor's appointments--in order to save on gas.
We haven't dined out even
once since starting this budget, which is great! Looking back at last year, I'd bet the majority of our extra money went to dining out. Jerry's and my anniversary is on the 16th of this month, so we are going to try to fit a dinner out (with the kids) into our grocery budget.
It sounds like this whole thing would be miserable, but it's actually really fun--I like the challenge of it, and it feels fantastic to pay such a large sum onto our debt each month. Being a numbers person, of course I made a nerdy spreadsheet, and I love filling it in every Friday. Jerry said he really likes living on the budget, too. It has made us get creative with the way we do things and the things we spend money on.
The kids are loving it because they get an allowance now--before, we would just buy things they wanted (not always, but if it was something that they asked for, we might buy it for them). Now, they are learning the value of money and that spending $4 on an ice cream from the ice cream truck isn't worth it. We still pay for their necessities, of course, but other things have to be paid for with their allowances. (And they have chores they have to do in order to get the allowance.)
Most of all, this whole budget has made us realize what things are "necessities" and what things are just "wants". It's very helpful! And I'm much more aware of where our money goes. We used to spend it on impulsive buys, but now we are really putting thought into what we want/need. And if all goes as well as the last couple of months, we'll be credit card debt-free in about a year!