Financial Fitness: The “B” Word

It would be entirely dishonest to say that setting up a budget is “fun”. It is, however, completely necessary. Over the last few months, I have dreaded our bi-monthly budgeting less as we have more control over where our money goes and how it’s being spent.  Like everyone says {and I agree}: It’s important to know where your money goes. Setting up a budget allows you to tell your money where you want it to go.

Over the last few months, Hubby and I have spent hours {literally} going over our budget. Every two weeks, we spend about an hour discussing when, where, and how we will spend. I don’t anticipate it will always take that long, but for now, it’s a discipline that we have embraced. Every two weeks we go through the following steps:

 Step One: For each paycheck, we start with our income and gradually work our way through the next two weeks making a list of all of the bills that are due {mobile phone, internet, storage unit, etc.} until we have reached the next paycheck. Side bar: I find that it works best to do this every two weeks instead of just once a month. It keeps us accountable to each other and very motivated to complete our goals. Plus, our paycycle is every two weeks, so it just makes sense to follow it.

An example of our bi-monthly budget for bills:

• Mobile Phone Bill: $180
• Storage: $120
• Netflix: $7.99

Step Two: After we have paid all bills {or simply marked that they will be debited}, we make a list of all of the things that are coming up: occasions to purchase gifts, dinner dates, activities, etc. We make a list and prioritize what we need to have available.

An example of irregular occasions:

• Movie night: $25
• Friend’s birthday party: $30
• Family birthday gift: $25
• Bridesmaid dress: $120

Step Three: We have a debt payoff goal amount {to be discussed next time} which we have broken it down into 12 monthly goals. Each time we sit down to do the budget, we have a specific amount of money earmarked for debt-only payments. This is a handy reminder that our end goal is still to have no debt.

 An example of our bi-monthly budget for debt:

• Student Loan: $290
• Consumer Debt: $900

Step Four: We allocate our remaining expenses into the following categories and take out cash to make all purchases. Cash has proven a very effective way to hold us accountable to our spending and to stay within our budget. We have an accordion file with various sections labeled {clothes, groceries, dining out, etc.} where we keep our cash. If there are certain purchases we would rather make with a debit card {fuel, online shopping, etc.}, we simply leave the amount in our checking account, and indicate on our budget worksheet. Side Note: We track our cash withdrawals from previous weeks to give us an idea of what we should withdrawal for each category. We adjust as necessary. For example: if there’s a week where we want to dine out more than cook meals at home, we will adjust our grocery budget to be smaller and our dining out budget to be larger. We remain flexible with our spending budget to adjust categories accordingly.

 An example of our bi-monthly budget for spending:   

• Groceries: $140 (cash)
• Dining Out: $80 (cash)
• Target: $40 (cash)
• Haircut: $20 (cash)
• Lennon: $40 (cash)
• Transportation: $40 (cash)
• Gifts: $20 (cash)
• PJ: $20 (cash)
• Hubby: $20 (cash)
• Fuel: $20

{Rinse. Repeat. Every Two Weeks.}

So there it is, folks: our budgeting steps. Do you and your partner have a monthly or bi-monthly budget? I’m interested to know how others tackle the “b” word.

Note: This is a series on the blog to share our path to financial fitness. We are no experts in personal finance. We are, however, on our way to becoming smart{er} consumers.