Budgeting, blah. What’s the point right? It just never seems to work! Something usually comes up unexpected. Or you totally forget something huge and then before the first week of the month is up, it’s blown! It’s OK. We have all been there. Budgeting takes practice. Lots and lots of practice. But if you are serious about getting out of debt, you need a budget that works right now! So here is a model that I personally use that has made all the difference.
First, you have to flip your budget upside down. What I mean is, take your total debt except your home (unless you only have a mortgage to pay off) and see how much you need to throw at it every month to pay it off in 2 years or less. Usually when people (I have been guilty too) write their budget, they deduct all of their bills and lifestyle expenses first and then apply a little to their debt. It seems logical to do that but 90% of the time there are unnecessary things that are clogging your budget. Needs and wants get blurred. And before you know it, you are justifying why you need a $60 latte budget every month.
Once you understand that it’s going to take $2000 every month for you to get out of debt in 2 years, then you can adjust your lifestyle accordingly to make it happen. Now many of you are like “What! I don’t have $2000 to throw towards debt!” Well, you may be surprised. Most people feel like they just got a raise when they actually sit down and do a budget. $20 at Target and $30 on Amazon may seem harmless, but I’m telling you, small random purchases add up fast!
There are 2 sides to this budgeting equation. It’s income vs. expenses. If you have a really low income, it’s time to find either a new job or extra jobs to supplement. Side hustles are very helpful! You can babysit, house sit, dog sit, do consignment sales…whatever, be creative. Dave Ramsey always recommends pizza delivery for fast cash. That could be a yummy second job! Just saying.
If your bills are too high, it’s time to reduce and remove. You’re going to to have to get real with yourself. That $2000 is not yours! You don’t own it! It’s a nice big bill. A bill you have to pay for every month just like the others. So you have to pretend that money from your paycheck does not exist. In reality folks, it doesn’t. Debt is one big fat lie. It makes you think you can afford things that you have no business buying in the first place.
OK, so now we have established how much money we need to pay towards debt. Then, it’s time for a makeover. The rest of your budget needs to stay as basic and simple as possible. These next 2 years are not suppose to be easy. It needs to hurt a little. We are changing habits that have been there for awhile. Really, really bad habits that are not good for you or your family. It’s time to get mad at debt and attack it! Debt is an evil monster! Punch it! Kick it! Spray mace in its eyes!!
OK, OK. I’m calming down now.
Let’s say the rest of your income comes to $2500 per month. That’s $30,000 per year. To be completely transparent, this is how much we live off of every month, not including our student loans. Wow, I feel vulnerable now. We have reached a new level in our relationship!
This is how our budget works. All the bold categories are in envelopes.
Living Income: $2500
Cell Phones: $35
Car Insurance: $97
Life Insurance: $40
Sinking Funds: $200
Diapers/Hygeine/ Toiletries/ Cleaning products: $40
Personal Spending for Hubs, Kids, Myself: $60
Our sinking fund system works a little different than most. We have a general sinking fund. I call it our non-emergency emergency fund. There are things that tend to happen every month that are irregular. Birthday parties, house repairs, trips to see family, car repairs, water filter cartridge purchases, Christmas…the list goes on and on. All the different bank accounts or envelopes for every very specific thing, stresses me out! My brain is just not that detailed oriented. So a general savings account works wonders for us. Again, this is a non-emergency account. It is separate from our $1000 emergency savings. $2,400 is an average amount that we feel we spend on a yearly basis for random upkeep, travel or Christmas, divided by 12. This is how we got $200 per month. Make sense?
I also have a little extra in medicine and supplements because I don’t buy supplements every month. But when I do, it’s usually when Vitacost.com has a 20% off your entire order sale and I buy in bulk. So my bill is usually $300-$400. Not to mention, sickness is the #1 budget buster for us. With 4 kiddos, we have learned to expect sickness and plan for it. So far, $150 every month seems a little high so if there is too much in the next month or 2, then I will probably eventually adjust it down to $100. But for now, I like the little extra because we usually treat things more holistically. With 4 kids, we can go through elderberry syrup like it’s our job!
So when you look through your budget, ask yourself, “what seems to always throw us off?” That’s the area you are probably shorting yourself the most. Finding a budget that works is all about balance. Sure, its easy to say that you are going to go dirt cheap on everything but if you are being unrealistic, your budget will not work.
Spending money. I am a saver. I don’t feel like I NEED to spend any money. But once in awhile, I get a twitch to spend. $20 is not much but it allows me to buy a new shirt once in awhile or go do that “Mommy’s night out” with the ladies. My husband is more the spender. If he gets squeezed too tight, he goes a little crazy. $20 in his wallet every month makes him feel like he can get something here or there once in awhile and satisfy that urge to spend. If you don’t give yourself any spending money, you are setting yourself up for a “I CAN’T TAKE IT ANYMORE!!!” explosion. Even if it’s only $10 a month each, give yourself something to claim as your own free money.
I want to clarify something about a miscellaneous fund. It is NOT a use it for whatever you want fund. It is not a spending fund. It is your buffer. It’s the oil that keeps your budget moving smoothly. It is for things you didn’t think of or random stuff that comes up.
We don’t have a clothing fund. I find a clothing fund tends to tempt me to buy non essential clothing items. As things wear down, or kids grow out of stuff, we will go buy shoes or whatever is necessary out of the miscellaneous fund. If you have a job that is hard on your clothes or are in a more professional setting where a certain dress code is required, by all means, put it in your budget.
Now, for the hard part…sacrifice. There were a few things that we had to reduce or get rid of all together to fit our budget. Our cell phone plan was $95 a month. It was a great plan with awesome coverage but it didn’t fit. We found a plan that only cost $35 a month for both of us! I have to admit, the coverage is not as great but for a $60 savings, I am 100% certain we will survive. I have learned to be way more diligent about meal planning. I can no longer just go to the grocery store without a list. Nor do I have a budget for fun snacks like Larabars or organic beef jerky. We have to make due with raw carrots and hard boiled eggs.
I had to cut out extra curricular activities. My oldest was going to a co-op once a week that was costing us $65 a month. Not to mention, it was about 35 minutes away so the gas cost a pretty penny. My son was in soccer. I should have listened to my Hubs. The kid is 3. Have you ever seen a coach try to teach a bunch of 3 year-olds soccer? It’s like trying to herd a bunch of cats! I was paying $40 a month for that! I think extra curricular activities and curriculum is my biggest temptation as a homeschool mom. I have to keep reminding myself that the library has a wealth of amazing books and a free worksheet online is just as good as an expensive workbook.
The best budget is one that works! Customize your budget to fit your needs, not your wants. Remove temptations that will squash your goals and steal your dreams. Get some accountability and stay focused! Take a hard look and ask, “do I really need this? Is there a way I can make it cheaper? If this or that happens, where does it fit?” Make a plan, and stick to it!! Practice self discipline. Your future self will thank you!