I am currently gainfully unemployed. With that being said – and tax season and other money matters on the brain – we have been very focused on budgeting. I started a budget in January of last year (when I was also looking for employment; funny how I’m sensing a pattern here) and it went really well until I got a job and we were not so concerned with our budget and finances as fire season and boat-loads of overtime came pouring in over the summer. So, here we are at the end of February and I am FINALLY satisfied with how I have structured our budget. It all started with our grocery budget, because I feel like that is where we have the most control over outlandish spending vs. reasonable purchases and meal planning to keep things under control. I spent several hours this past weekend
stalking intently reading threads on grocery budgeting and the average amount a family of two spends on groceries every month. There is a very wide range of grocery budgets, but I feel like the average two person family spends about $300 – $400/month on groceries. This doesn’t include alcohol or eating out. That made me feel pretty good, because there are definitely a lot of families out there who are struggling to pare down their grocery budgets from $1,000 a month!!! Holy buckets, people! That’s a lot of money, and for a lot of couples that doesn’t include eating out! Anyway, we are doing pretty well since I’ve been home and able to search coupons, plan meals, and make a lot of creative leftovers. I was struggling to keep our monthly grocery expenses under $200/month, but after actually seeing where we were spending the rest of our money and also looking at our grocery receipts to see where our money was being spent at the grocery store, I’m comfortable with not killing ourselves over trying to keep the grocery budget under $200 and have given us a little wiggle room.
So what I’d like to talk about is how I established our entire budget and how I decided how much to allow for each category and item. I found this really excellent article called Your Ultimate Budget Guideline: The 50/20/30 Rule put out by a company called LearnVest which has really useful online tools for creating your budget and tracking your expenses. You can link to all your accounts (bank, credit cards, etc.) but none of your tracking our routing information is stored in the website, and you can’t actually manage or transfer your money through the site, so it’s very secure – i.e. if your LearnVest account gets hacked no one can siphon off your money from the site. Anyway, the article recommends the 50/20/30 rule to divide up your budget: 50% of your income goes to essential expenses, 30% of your income goes to lifestyle expenses, and 20% of your income goes to what they call “priorities.” What I will do now is give you an idea of how I broke our budget down and hopefully this will help those of you struggling with how to prioritize and budget for yourselves.
Essentials: 50% – This category is basically anything you absolutely can’t survive without; a roof over your head, food in your belly, heat, gas in your car, etc.
- Housing costs – rent or mortgage
- Utilities – we are on a cistern for water so we get water delivered approx. every 6 weeks, plus we have a separate electricity bill with no natural gas. Yours will likely include sewer/water if you live in the city
- Gas – damages paid for public flatulence. Just kidding, gasoline or diesel.
- Groceries – I chose not to include alcohol in this category since it’s really more an “Entertainment” category for us that we can cut out of the budget if we need to tighten the financial belt
Lifestyle: 30% – This category really gives you the wiggle room. Your income will ultimately determine what kind of car you drive, how often you go out to eat, how much you pay for TV/internet, etc. If you need to cut back, this is the place to do it. Do you really need 571 satellite channels of nothing to watch? (We do.)
- Vehicle payments – we each have a vehicle so there are two in this budget
- Insurance – necessary, yes, but you won’t die if you don’t have it which is why it’s in this category. You can substantially change the amount you pay for insurance based on your choices. Companies give BIG discounts for combining your policies. When we were renting, our renter’s insurance was only $4/month and lowered the cost of our vehicle insurance much more than $4, so we actually got way more coverage for less. You can also change the amount of coverage you have on your vehicles to decrease this cost if you’re looking to save. If you do combine your policies, make sure you ask and make sure the proper discounts are being applied. I found out our homeowners insurance wasn’t applied to our vehicle insurance and when it was corrected, our payments dropped $40/month! A month!! THAT’S A YEARLY SAVINGS OF A PLANE TICKET TO HAWAII.
- Cell phone bill
- TV/Internet/Phone – city dwelling folks have the great option to combine these. In most cases it’s really a good deal (as long as you get one of the locked-rate ones that doesn’t increase your bill by a factor of 17 after the “intro period”). Be sure to check – you can often negotiate out of the price increase, or just go with a different company.
- Entertainment – I included our alcohol budget in here, and this includes things like going to the movies, bowling, etc.
- Restaurants – obviously, most people like to eat out
- Miscellaneous – toiletries, cooking utensils, super glue or household repair items, furniture, you name it. This is what works for us as a catch-all category
- Dog – I wish she could be included in the “essential” category, but in reality, pets are a lifestyle choice so her expenses go here.
- Extra auto expenses – I included this in our budget here, but this doesn’t have a set budget every month. This includes registration, maintenance, and emergencies but depending on how you manage it, you may wish to pull these expenses out of an emergency fund or just go with it.
Priorities: 20% – This last category covers mostly savings. General savings, emergency fund, saving for a wedding, a trip, your kid’s college fund. It’s pretty important stuff. For now we have it all jumbled together into “savings” but it is, of course, up to you to determine what your saving priorities are. Oh, and paying off student loans and credit cards. Those are really important. Probably should be a priority if it isn’t already. Also, don’t forget things like retirement contributions if they aren’t already coming out of your paycheck.
This approach worked really well for us. I found it to be an excellent place to start because it forced us to focus on what was essential and what was fun. Sadly, when things are tight you might have to cut out some of the more expensive fun, but that doesn’t mean you can’t find other ways to spend your time. Maybe not eating out every lunch – whatever works. This is obviously just a set of guidelines but, while we followed the 50/30/20 guidelines you might have something that works better – maybe your essential expenses simply don’t use up 50% of your income and you can apply that to paying down your credit card bills or student loans. Check out LearnVest, by the way, and read some of their articles on budgeting and finances. I learned a lot from them.
I hope this helps. Please let me know! I am considering adding some meal planning and grocery budgeting discussions if that’s something y’all want to read about? In the mean time, here is a cartoon for you…