It's the last day of August (how did we get here already???), which means that another budget month is coming to a close, and a new month is upon us! I'm a bit of a geek about our budget, and when I actually follow it, it works really well and we are able to save some money! I've switched things up in the last month to make it even easier for me.
This is the way I used to budget. It was long and complicated and involved way to much moving of money during the month (it was all automated, but still, lots of money moving around). Also, because I worked off of my pay dates, my month didn't follow a calendar month, which tended to confuse things just a bit. One of my favorite blogs is Six Figures Under. I love how transparent she is about finances, and they have used their budget to do amazing things to pay off their debt! She often talks about how they live on last month's income. This intrigued me, but I never thought I needed it because we don't have the irregular income that her family does. We get regular paychecks that are usually the same amount, unless my husband works overtime. That and his occasional third paycheck (he gets paid every two weeks) were the only variances.
Then, I started listening to the YNAB podcast (available here). He also talks about living on last month's income. Then, suddenly, one day I realized that it would make sense for us to live on last month's income. And we had enough in savings to be able to do that and still have a nice cushion.
So, last month I switched. And it was glorious (hey, I'm a budget geek. I can say glorious!).
Here's the new system. A few days before the end of the month, I transfer a budget month's worth of expenses from our general savings account to our online checking account (we have a local checking account and two savings accounts, and an online checking account and 11 savings accounts - more on that in another post!). From there, the amount we need for spending is forwarded on to our local checking account, and the rest is divided up among our "sinking fund" accounts. By the first of the month, when our mortgage is automatically withdrawn from our local checking account, all the money is there.
As we get paychecks or any other extra income throughout the month, I transfer them directly to our general savings account, to be used the following month. I record that income in an Excel spreadsheet so I can see exactly how much we have to work with the following month.
Tracking expenses is, of course, key to the success of a budget. I find that if I stay on top of it, it literally takes me less than five minutes a day to accomplish this. When I get up in the morning, I get my coffee, sit down at my computer, open my bank accounts online and pull up my budget spreadsheet. I record any expenses or income we had the day before. Voila. Tracking done. With few exceptions, all of the actual moving of money between accounts is done automatically, so I also make sure this happens on schedule and then track it accordingly. If it's a payday, I set up those transfers to savings. Easy peasy.
This month, the expense tracking will be made even easier. I have switched our budget from Excel to the free version of EveryDollar. It's essentially the same as my spreadsheet, but it has an app so I can track spending on the fly with my phone. I like to have redundancy when I'm trying out new systems, so I'll still keep my budget in Excel, but I won't track daily expenses - I'll just go back at the end of the month and put down the total spending in each category.
There you have it - our (very long) budget update. What's your favorite budgeting tip?
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