Monday, November 8, 2010

How We Budget

Jo Hunter Adams

Following yesterday’s post, here's more detail on how we deal with our finances month-to-month. I’m targeting readers who haven’t yet started discussing spending, and how you might bring life goals and financial goals in sync.

In 2010, we earned about the U.S. Median household income, which makes us awesomely average (well, median isn’t average, and Boston certainly isn’t average, but you know what I mean). I use Yodlee as a tool for tracking our spending, and Eug and i share a Google Docs budget which I update one or two times a month. Here’s a blank google docs budget as a sample. What works for us probably won’t work for you, but just starting is powerful.

Keeping Monthly Fixed Expenses Down
In our budget we have variable and constant categories. We've been committed to keeping regular monthly fixed costs as low as possible. We avoided a car payment, we didn’t have internet or a phone contract, and, until recently, we stayed in a 300sq ft apartment. We now have an internet contract, which we share with our neighbor, but we still don’t have car payments or phone contracts.

Controlling Variable Personal Spending without Stressing
Eug and I deal with variable personal spending by having personal spending accounts. All our other accounts are joint. The personal spending accounts receive $75 biweekly ($37.50/week, or $150/month). They cover all eating out, paying for a date [wait, we can't go on dates since this] or outing, gifts, pay-as-you-go cell phones, and most clothes.

This "pocket money" means we don’t feel guilty about limited non-essential spending because we’re using our own, designated money. Some pretty common expenses-- cell phone and clothing-- are also in this category, only because we don't have to parse out what's necessary and what's not. Thus non-essential spending is seldom something we have to actively think about.

Having this allowance has been hugely helpful in giving us both some space for a sense of abundance. Over the years the amount in this account has varied depending on our income, but we’ve always had it.

The biggest challenge we’ve had with unexpected expenses have been Noah’s medical bills and our new housing expenses. We auto-save a little each month (by sending it to ING) so that these kind of expenses don’t mean credit card debt. Car insurance is also always a shock to the system.

Having a line for both tithing and other giving has made me feel 'safe'. Having it as a line item in our budget (as opposed to waiting to be moved to give, and then finding the money) is not terribly faith-filled, but it allows giving regularly and consistently. Giving is a fixed non-negotiable expense that helps us acknowledge that, for all our genius plans, everything we have is a gift.

Multiple Streams of Income
One of the things in life I’m most grateful for is that I’ve never had to work for something I didn't believe in. Long may it be so. I work in refugee health, and even when I'm jaded and cynical or not having an individual impact, it feels meaningful. Yet working full time with a five month old is not necessary (I could do as much work in less time), but for the income and benefits it provides. So there's the distant dream of something more balanced for our family. I’d also love parts of our jobs to help support other unpaid work we do, like Conferre Magazine.

One way we’re thinking about how to be less dependent on one or two salaries is by trying to build multiple, (some tiny), streams of income. I’ll share about this as we have success.

How do you budget? What's worked best for you?

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