This is for a few girls who asked me how I manage our money, and I decided to explain our money routine here because it is a lot easier than typing it on a teeny little instagram screen!
So first of all... I am in no way an expert at this haha.. so I am quite flattered that anyone would care to ask! We do, however, manage to have a good lifestyle on a modest, recent-grad salary.
So, I will do my best to explain!
Now I do all of our budgeting off of a percent system. I will give a breakdown for you at the end, I promise.
For StartersI'll start with basic living expenses.
Experts recommend that rent/housing should be in the ballpark of 25-30% of your net income. Our rent falls at 21%, and we use another 3 ish% for other housing expenses, like electricity and renter's insurance.
Total housing= 24%, roughly. Also depending on summer or winter utilities.
We are left with essentially 75% of our income after housing. That should be most people's goal.
CarsThe recommended percentage for transportation is at 15% of your net income.
We have no car payments. That is a biggie- some people spend a lottt of $$$ on cars. We have been fortunate that way.
Insurance- we have full coverage on our Acura, and just liability on our Mazda. We did that because our Acura is a nicer and far more expensive car, and our Mazda.. well.. we would probably thank someone if they stole it. Car insurance comes out to $98 a month for both - a way good deal after hours of searching one day.
I plan on having both our cars' oil changed every 3 months give or take. Since Mitch refuses to take our cars anywhere but the dealership to get their maintenance done (after a bad experience at a local shop), it is a tad pricier than normal. I keep $20 a month for car maintenance. When the time comes, its not an unexpected, big expense.
We spend 4% of our income on our cars themselves.
(pretty good ;) )
Gas is another story. Our Acura is an SUV and gets okay mpg, but my Mazda will go and go. We end up spending about 9% of our income on gas.
Total for cars, around 13% of our net income.
We love good food. Like I mean seriously- we love love love food. We go out a ton to eat at both favorite and new places. We love ethnic and different food and exploring different cultures... it's a hobby of ours. We love to try new things together. Mitch served his mission in the West Indies (by Barbados) and since then, he will eat anything. Since marrying him, I've come around to enjoying some of those things myself. Some.
|Mitch in Suriname|
Needless to say, this is a large expense, as it is what a large majority of our entertainment comes from. Groceries vary week to week, but I have set a budget of 11% of our income per month for groceries.. about $100 dollars a week. Now before saying "That is way too much!", #1) ALL detergents, soaps, toiletries, filters, cleaners, etc comes from that. Basically anything I would get at a normal grocery store, has to fall into that budget. #2) I am not into couponing... but I would love to learn sometime.
Eating out- when I was working, we ate out a lot more because the last thing I wanted to do was come home and work more! Since being at home and doing school, I have more time to cook.
Bottom line, we usually eat out once a week usually on a weekend, and occasionally one more time during the week we will get take out. So usually one- but occasionally one + a low cost take out. I'll go ahead and say that the weekend meal is usually around $30+ for just the two of us, and the take out around $15 ish. Another percent, I know, but this is 6% or so of our income.
Total for food- around 17%.
That is on the high side, like I said! But so worth it:)
Okay. So far, we have housing, transportation, and food covered- basic necessities. We still have 54% left of our income!!
What's left? Entertainment (besides eating out:) ), savings, school, and of course tithing.
Now, there are two parts to this.
A big part of this budget is monthly things, that we plan on and are entertainment: TV satellite, netflix, subscriptions, etc. This is about 3% of our income.
The second part are things that vary week to week like going to the movies, any date really. Anything that is fun, or a variable or an unexpected thing goes into entertainment- clothes and any shopping, getting a pedicure, a random trip to target or anything like that to our entertainment budget. Also, gas for roadtrips don't go to our gas budget- I take it out of entertainment, as it is part of taking us to our activity! This whole second part, being such a large base/covering so many different things, has a percentage of 11% of our income (about $100/week.. you would be surprised how fast it goes!) Again that is besides eating out.
Total entertainment for the month- 14%
Savings, School, Tithing
Although these are the last things I am talking about, right when we get paid these are the first things to be budgeted. If not, I've learned it won't happen.
Tithing- of course 10% + fast offering. We end up at about 12%.
School - Mitch has no debt. I am in school, with no debt, but continually paying each semester. That has to be budgeted. I figured out how much school costs as an average per month, and it is 6% of our income.
Savings- A base of 8%, no matter what. Plus any left over not spent from the month.
have you been keeping track? Of course not. Way too many percents. So here is the breakdown:
Base Savings- 8%
We only budget 94% of our income, including savings.. not 100%. I have learned this to be so important!
So, we have a nice 6% cushion that I let rollover in our checking account every month unless needed. This attributes nicely to trips back to Utah or just extra that I add to our savings account if I notice a lot extra in our checking account after a few months. ( or it buys a nice unexpected surprise of $800 all new tires for your car... ;( you never really know. )
I believe it is important to live so that you don't bind yourself to a certain way of living.. for example, looking at my budget, though small, I can definitely see a large number of things I can cut down on should the need arise. That way, we never get stuck and wind up in a mound of debt.
Last Word of Advice
We don't use our debit card.
We use credit cards.
[[[[[insert gasps here from anti credit card people]]]]]
Let me say two things.
1) this piece of advice is not for those who cannot manage money well haha
2) if you do manage money well, and are responsible and use it like a debit card, you can make money.
We use two cards.
1) the Chase Freedom card- for all expenses such as gas, food, entertainment.
2) American Express Blue Sky card - for all airline tickets.
I check and manage balances on these every day! The budgets in place above are for these cards, so I never spend more than what I have allotted. I pay them off every month straight from our checking account, in full. That way we are using them just like a debit card.
We never ever ever ever ever carry a balance- in other words, we never buy things that we say 'oh we will pay for it next month, or make payments.'
So why do we use them?
1) Because on each card, we get FIVE percent back on what we spend if we pay it off every month. So, we basically make money for using it like a debit card.
We make $75+ a month. They literally send it to us in a check. Every month. That pays for our TV, or one week of gas, etc.
But it only works if you are smart!
Second cool reason- it raises your credit score like CRAZY!!!! I have posted before about my favorite credit-monitoring site before. It is free, it DOES NOT hurt your credit whatsoever. Promise. It will also give you tips on what you personally should do that will raise it. It is amazing. So since we started budgeting the way we do, our score jumped 7 points. Good credit is critical to have.
|again--- DO IT! creditkarma.com.|
Last reason, fraud protection. If someone jacks your debit card, that money is gone, forever. Savings accounts are linked to checking accounts! Our savings are too precious to risk that. With a credit card, you literally call the credit card company, and it is taken care of. No loss.
There it is- all of my grand advice:)
The most important thing ever.....
Basically I have the cutest little teacher ever!!! We will be sad to leave in June!
What do you think of this system - is it too crazy? What do you guys do?