How We Budget

I’m a spender, not a saver. One summer I made $12,000 as a waitress in Central WA and had it all spent by the end of the year. I spent it all during a time when my parents were paying for my schooling and housing and giving me a stipend for food. Very embarrassing.

When That Husband and I started dating, he made it clear that debt wasn’t ever going to be a part of his life, and if I wanted to be with him I would have to make some major changes to my spending habits. I began paying off my credit card debt and continued to pay off my car loan. I know, and he will admit if it you asked him, that he would have ended the relationship if he had not seen the changes he believed necessary in my habits for us to have a successful relationship.

When we got married, TH implemented a new approach to budgeting that has completely changed the way I approach my spending. Most people approach budgeting like this: Each month, you start out with $300 for groceries, then you spend until you hit $300 and try to stop spending. If you have leftover money it carries over into next month, but if you’re a spender like me you never have anything left, and you usually end up spending even more than your allotted $300. You start rich and spend until you are poor.

TH’s approach turns things completely upside down, approaching budgeting in a way I’ve never heard of, and most definitely would never though of. It’s based on 4 essential strategies.

1. Calculate what your total annual spending should be. We came up with a number by taking annual income and calculating money needed for savings, travel, housing, etc, and all other spending that falls under the “invariable” budgeting area. After we had removed all of the invariables we focused on creating a budget for the variables, the places where we would need to track my our spending most carefully. These categories include Groceries, Household, Jenna Clothing, Jenna Personal, Eating Out, etc.
2. Here is the step where TH’s system is so genius. Our Eating Out budget allots for$1200 of spending/year. Instead of starting out with $100/month, we started out with nothing and the amount we have in the budget grows day by day. It’s fun to say it that way. Instead of diminishing, our budget grows! Each day the Excel spreadsheet we use adds about $3 to our Eating Out budget total. If we only have $75 in the Eating Out budget and we overspend we have to wait until the daily amount builds up enough so we can afford to eat once more.
3. Credit cards only, no cash. Cash can’t be tracked as well unless you are incredibly diligent about keeping all of your receipts. Most avoid credit cards because you can spend money you don’t have, but in avoiding them you are also avoiding the rewards and bonuses that come with using them. Obviously, they must be paid off in full each month for this to work.
4. Using mint.com we can track absolutely all of our credit card transactions. We categorize them on mint.com and make sure that they go into That Budget on Google Docs as well.

He created an Excel spreadsheet that we use to keep track of our spending. It’s online using Google Docs so we both can access it at any time from our respective laptops.

I took a few screenshots to help you understand how it works. I wiped most of the tabs clean because spending is so personal (I admit, I didn’t want a bunch of people judging me for how I spend my money), but I left a few of them intact so you can see how it works.

By selecting “Budget” from the tabs that run along the bottom I am able to see a summary of all of our spending for the different variable budgets. The amounts you see under the “Per year” column comprise our actual budget. TH said it would be okay for me to share it with all of you because we spend so little on our variables (well I think it’s a small amount) it wouldn’t be possible for you to determine what he actually makes each year. :)

As I said, most of the tabs are wiped clean, but Clothing-J, Eating Out, and Entertainment have been left intact. As you can see, we have $82 in our Eating Budget to use this month, and $20 to go toward entertainment. Wondering why “Clothing-J” is jumping out at you in red parentheses? It’s because I’m actually almost $400 in the hole for clothing. $600/year might seem like a lot to spend on clothes for some, but I find it to be an almost impossible amount. I’m very, very, ready to pay off my photography debts so I can buy myself some pretty clothes with the money I make!

{click to enlarge}

Here’s what the individual tabs look like. Enter Date, Amount, and Notes about what the money was spent on so it can better be justified to husband later on. :) Sometimes I manipulate the budget by adding things to the wrong category to better distribute my spending. I added “Movie and lunch with Bees” to the Clothing budget because I didn’t want to put it in the Eating Out category and take away from money that could be spend with That Husband instead.

{click to enlarge}

The Eating Out budget. Every single time we spend money on food prepared outside of the house it goes into the Eating Out budget. Food bought at a grocery store, obviously, gets recorded under Groceries.

{click to enlarge}

And the Entertainment budget, which proves why we never do anything. This is absolutely everything we have done since the beginning of the year, and we still only have $20 to spend right now!

{click to enlarge}

If you would like to try this budget out for yourself you can access it here. Please don’t make changes to the original. Go to File->Create a copy and make a new version for your own personal use.

To customize it for your own personal use you need to go to the Clothing, Entertainment, and Eating Out tabs and delete all of the entries you find there. Then, go to the Budget tab and change the values under “Per Month” to match your appropriate spending habits. The values under the “Left” column will not change until you take the value under “Per Month” for each row, multiply it by 12, and then change the value under “Per Year” to match.

If you end up using this new budgeting system, I would love to hear back regarding it’s success (or why you think it failed, if it did). I’m sure That Husband would love to hear about it as well!