A budget is the cornerstone of personal finance. To be able to pay off debt… or to save… or to have money to have fun with… you need a budget! For years I thought that a budget would be a very restrictive thing. But using a budget has given me control over my finances.
I absolutely recommend that you create, use, and stick to a budget!
Some Notes About My Budgeting System
Here are some quick notes about the budget I show below.
- I live on last month’s income. This prevents me from living paycheck-to-paycheck. The income I listed below was actually earned in January, but I didn’t budget it until now, in February.
- I run a zero-based budget. This means that I budget every dollar and every cent into some category. No money is left over (budget wise, not checking account wise).
- I have several payroll deductions from my primary income. Expenses like medical premium, vision premium, and group life insurance are not included in the table below. Also, my 401(k) savings is automatically deducted from my paycheck and not shown below.
- We use two joint checking accounts and one Health Savings Account. One checking account is strictly for savings (retirement, emergency fund, and college). This checking account holds money temporarily until it distributed to other savings account. After deductions, roughly half of my paycheck is directed into this checking account.
- A small portion of my primary paycheck goes into the Health Savings Account.
- The remaining portion of my primary paycheck goes into the second checking account, which is used for our day-to-day spending and bills. All of our other income also goes into the day-to-day checking account.
- The budget below breaks out my household’s day-to-day checking account and Health Savings Account, while keeping the, umm, “savings” checking account out of sight, out of mind.
- Lastly and most importantly: Even though this is what I have budgeted for February at the start of the month, I give myself the flexibility to move money from one budget category to another. What is budgeted at the end February is likely to be different.
My Actual Income for February 2014 (Earned in January 2014)
Let’s first take a look at my household income. I live on last month’s income, so this is actual money already earned (well, most of it is earned).
|His Income #1||The breadwinner. Accounts for more than 75% of our household income.||$2,284.09|
|His Income #2||My side hustle(s). Currently, just tutoring (didn’t earn any money in January). Hopefully, more side hustles to come!||$0.00|
|Her Income #1||The wife doesn’t have a full-time job. This is from her wedding planning part-time job.||$485.00|
|Her Income #2||She also watches two kids in the morning and afternoon.||$275.00|
|ESPP Income||Actually, in a convoluted way, comes from my primary income. I sell my ESPP stocks for more than $9,000 every 6 months. I “pay” myself $1,500 every month.||$1,500.00|
|Other Income||Interest, dividends, “free” company contributions to HSA.||$388.82|
|Total Income||Money, money, money…!!!||$4,932.91|
Again, this is what comes into our Health Saving Account and primary checking account.
My Budgeted Expenses for February 2014
From the income listed above, this is how I have budgeted for my expenses.
|Charity||Really, just our tithes for now. Seems disproportionate to our take-home income but is 10% of our gross.||$800.00||16.2%|
|Child Care||Day care (mostly; day care is expensive!), baby/toddler supplies (small portion of budget).||$865.46||17.5%|
|Gifts||Birthdays, Christmas, etc. (Umm, Valentine’s Day… oops, forgot about this!)||$0.00||0.0%|
|Health & Fitness||Medicines, prescriptions, office visits, gym memberships.||$352.91||7.2%|
|Housing||Mortgage, insurance, pest control, maintenance, repairs.||$1,231.86||25.0%|
|Miscellaneous||Ah, the miscellaneous bucket. Includes allowance for the kids and “his and hers” spending cash.||$46.50||0.9%|
|Personal||Clothing, hair care, financial planning, life insurance, taxes, organizational dues.||$132.46||2.7%|
|Recreation||General entertainment, birthday parties, kid’s activities, vacation.||$46.31||0.9%|
|Savings||College, emergency fund, retirement… above and beyond automatic deposits into the dedicated (separate) checking account.||$0.00||0.0%|
|Transportation||Insurance, gasoline, license, registration, maintenance, repairs, car replacement.||$698.23||14.2%|
|Utilities||Cell phone, electricity, TV, Internet, water, sewer.||$327.51||6.6%|
|Total Expenses||The whole shebang…||$4,932.91||100.0%|
Some Final Notes
I am debt free (other than my mortgage) and have been for several months. I also have 6 months of expenses in an emergency fund. Currently, I am saving for retirement and for my kid’s college.