As a single guy living the grad school life, budgeting was simple. I didn’t have student loans, my 2003 Honda was paid off, and my food costs were pretty low. I just had to balance my spending with my research assistant’s paycheck. That was always easy to do. One paycheck covered the rent, the other paycheck covered everything else. Over my two years of grad school, I even managed to squirrel away a decent chunk of money in my Roth IRA. But now I’m married and my financial situation has become more complicated. I now share responsibility for student loans and a car payment. It’s dawned on my that I need to be more intentional with spending. In short, it’s budget time.
Types of Budgets
There are an endless number of options for budgeting. Everyone has a slightly different system. Too often, the system is unorganized and comes up short! It’s imperative to be organized and dedicated to your budget system. The Frugal Jon system of budgeting is pretty simple. Over the first couple months of marriage, I tracked our spending. Luckily, my wife and I are both pretty good savers so we were well within our means. With that info I could make a list of expenses and income to plan a budget. I’m a self proclaimed planner, and I really enjoyed writing out lists and planning a job for our incomes. Marriage is a team sport, so my wife had plenty of input on discretionary spending priorities. It became a good exercise in communication as well, with both of us discussing our wants and needs in the budget.
My Budget Style
My style of budgeting is often called zero sum budgeting. To start my budget, I first calculated recurring costs. This includes monthly costs such as rent and utilities. It also includes yearly costs like car insurance. Budgeting ahead of time for yearly expenses helps to make it more manageable. Instead of staring down a large bill that you have to scrounge money together for, the cash has been accumulating over the course of the year so it doesn’t become a budget breaker. Then I subtract these from my wife and I’s monthly income with taxes already removed. The result is the income that doesn’t have a job yet.
The most crux of zero sum budgeting is this: every dollar gets a job. The goal at the end of the month is to have $0 in “surplus” that wasn’t accounted for in the budget. Jobless dollars are inefficient! The remaining income that doesn’t have a job after expenses for me goes into three categories: short term saving, long term saving, and spending.
Short term saving is saving for a specific purpose that’s meant to be spent. Saving for future car repairs, a down payment for a house, and for Christmas are all examples of short term saving. This money goes into a specific bank account separate from the checking account. Long term saving primarily takes the form of retirement saving. This money goes into our Roth IRAs, with the goal of maxing these out yearly. Finally, even Frugal Jon needs to have some fun and go out. Setting a limit on spending money forces us to decide what kind of entertainment we value the most.
Budgeting Tools
I personally like writing down expenses and budget with a pen and paper. It’s almost cathartic for me to write out lists. It might not be the most efficient way to make a budget, but it works for me. I would be remiss if I didn’t mention a couple of the big budgeting tools that are out on the web. Mint and YNAB are both budgeting tools that can also track spending. Mint is free and YNAB is a paid service that offers a free trial period. YNAB is a little more all inclusive, and a lot of people find great value for the low monthly cost(it’s $7/month). You can learn all about YNAB from this episode of the ChooseFI podcast, which I can’t recommend enough. I’ve tried out both services. They’re both effective budgeting tools, just not my style.
Do you have a different method for budgeting? Let me know in the comments!
Note: I am not sponsored in any way by Mint, YNAB, or ChooseFI. I think that all three are great and the recommendations are all from personal experience.