Monday, January 26, 2015

Our New Budget

So my goal to only work one hour a night is not going so well. Perhaps I shouldn't have been so ambitious? Going from 3-4 hours/night to 1 hour/night is kind of unreasonable. At least the work I'm doing finally feels like it's transition from "treading water" to "swimming forward"! 

The other good news is that I have more energy on the weekends. Last Friday, after the kids went to bed, I asked Matt if we could work on our budget. Although it's not his ideal way to spend a Friday night, he agreed to work on it for about 30 minutes. 

First we started with our income. We logged into our bank account and made sure that our incomes were adequately represented within our budget document (since our paychecks take out taxes, retirement, etc.).

Then we entered numbers into our Excel budget. It's set up so that I enter each expense as a negative number and it gets subtracted from our total income. The goal is to get the "net" box to equal 0. In other words, we are assigning our total income to all of our expenses and whatever is leftover is getting assigned to various saving categories, such that we should have $0 left over at the end of the month (it doesn't mean we are spending everything--it means it is either being spent or tucked away into a savings account). 

We feel good about how much we assigned to each category, and we feel great that we are actually able to start saving in certain categories that have been on hold for a while (such as college for the boys and retirement for us). We have a lot of retirement savings from many years ago, but while we were trying to build our house, we weren't able to save much for retirement. 

The biggest question that came up during this process was how we were going to keep ourselves within our budget. The savings part is easy; we can set up automatic transfers into our savings account. The harder part is making sure that we aren't overspending in categories like groceries, eating out, miscellaneous, and home improvement. It's so easy to go to Target and come back with a $150 receipt (ahem, Matt, I'm looking at you). It's also easy to rack up several different $50 Amazon bills (I'm guilty of this one). 

I thought about the possibility of using different credit cards for different things, but we ultimately decided to start using again. The trouble with Mint is that it automatically assigns purchases to certain categories. And if they aren't the right categories, then their tracking system becomes useless. I'm going to see if I can get in the habit of logging in regularly and fixing any purchases that have been miscoded. 

Matt and I also talked about the ways in which we waste money. Matt agreed that when he eats out for lunch, he will use his personal allowance (this one is tracked on a different credit card, so it's really easy at the end of the month to see how much was spent). We also routinely overspend our grocery budget because we like to purchase as much organic food as possible. Now that we are both working full-time, we decided to increase the amount we allocate to groceries. 

We've been thinking a lot about our savings goals, and we decided to start saving for the downpayment on our next house. We imagine that we will live in our current home for at least 15 more years, but once we decide to move, we figured it would be nice to have the option to rent out our house rather than have to sell it. Our current mortgage is already lower than rent in Austin, so I can only imagine what it's going to be like in 15 years. Any money we make from rent could be put back into maintaining the house. Then in 15 or so more years, we could sell it and use the money for retirement. At least that's the current plan!

Another one of our financial priorities right now is travel. We want to be able to go on adventures as a family throughout the year. 

It's been interesting to see how our financial priorities and goals have shifted over the years. I remember working really hard to only spend $2,000 on our wedding so that we could afford the downpayment on our first home. Then we worked really hard to live off Matt's income so I could stay home with Henry. Once we wanted to get Henry into a Montessori school, then I took a part-time job to help cover the cost of the daycare and to save for our current home. Now that we are both working full-time and our childcare costs are starting to go down, we have more money than we ever have. I've talked to Matt about whether we should be saving money so that one of us could drop down to part-time work, but we're both really happy with what we're doing right now, so we're going to save for retirement, college, and a future home but then choose to spend the rest on travel, home improvement, and charity. If one of us loses our jobs for some reason, we would just tighten up our budget. Our mortgage is based on one income, not two, which gives us a lot of flexibility. 

Image courtesy of my friend's new business, Ami Textiles

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C said...

What kind of house are you guys hoping to have in 15 years? How does it compare to the one you already have? My husband and I have talked about building our "dream" home, but then he's told me that he (like you) only wants to live in it for 15-20 years. I guess I thought our dream home would be just that.

Where do you guys hope to travel?

Sara E. Cotner said...

Hi, C!

Moving in 15 years wouldn't be about a different house, it would be about a different location. We might want to move to a new city, depending upon where our boys go.

As far as traveling this year goes, we are looking at San Diego, Puerto Rico, and Seattle/Portland!

BethanyBoo said...

If you guys are willing to track all your expenses, I really recommend You Need a Budget. It's a desktop app mostly, but they also have iPhone/Android apps for tracking on the go. I hated Mint too. It tries to force you into granular spending categories and categorizes everything wrong. I'd rather just track it all myself. YNAB is really flexile and works similarly to how you say you're budgeting currently. At the beginning of the month you allocate all your money to different categories. It also allows you to change things on the fly quickly -- like if you need to go overbudget in a category, it's encouraged to just decrease the budget on another category.

Kate said...

I totally agree with BethanyBoo above -- my husband and I have used a spreadsheet and mint for budgeting but nothing compares to YNAB. You can get a free trial and they give away licenses in all of their training classes, which I would recommend anyway. It is SO worth it.

Cali Cole said...

I love, love, love your organizational style. My partner is just a natural born saver, so mainly everything he makes, outside of bills, he manages to save...not necessarily to any category. He doesn't quite understand why I want to categorize my savings. Its just what helps me the best. I saw once, Sara, where your monthly allowance was $20 or something around there...does this amount go toward lunch with friends, coffee here and there, etc.? If so, I need to prioritize my spending because I'm fairly certain I go above and beyond that per month. It did make me feel better to see that Amazon can get you, too, sometimes! :) Do you pull cash out for this?



Sara E. Cotner said...

Hi, Cali!

Matt and I allocate $100 to each of us for our personal allowance. He usually spends his on candy from the gas station and lunch out. I usually spend some of mine on a pedicure and save the rest.

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