I sometimes wonder how other people do it. I mean, how do other people pay all the bills (on time!), put the recommended amount in their “emergency fund,” feed the kids, and still have money left over for things like dinner and a movie. Well, of course, the first thing that comes to mind is that those people must have more money that we do. And that’s a very real probability. But there are just some people who have the ability to manage whatever amount of money they have and make it work for their family.
After years of reading all kinds of financial planning and budgeting advice, and trying this and trying that, and still finding that we have unexpected expenses (like the flood and the $2,500 deductible on our home owners insurance), and emergency doctor and dentist bills, and needing new tires on the car, and a few other necessities, I have come to the realization that all of the theories about budgeting in the world might be helpful, but there are always exceptions.
One of my goals this year is to do my best to be prepared for those unexpected events by attempting to build up that emergency fund of $1,000. Which wouldn’t have covered all of the “emergencies” we’ve had over the past three months anyway, but it would have helped. But that is tricky to do when the paycheck comes in and after the bills are paid (mostly on time!), there is only about $16.00 left over. Makes it hard to do much else, especially putting aside money for that ambiguous “emergency” that is looming on the horizon.
So I have gotten a bit discouraged with reading all the theories about budgeting, because as helpful as they are in theory, they don’t always work in the real world. If you are in a place where you’ve tried budgeting based on the rules and suggestions of those famous money management gurus, please know you are not alone. We’re doing our best, and some months are better than others, but sometimes when the kid needs a winter coat, it can be challenging to decide whether to buy the coat or buy groceries. Especially if you are TRYING to follow the advice of the professional budgeters and not use credit. But then sometimes you really have no choice.
Here’s what has worked for us – and it is probably not what will work for you – but at least it might be an encouragement to someone who is rather frustrated with all the stress that comes from money management.
In our family, there are two parents and two teenage daughters, one of whom is now driving and has a job away from home. That helps. When she wants a pair of ripped up jeans that cost $59.99, she can invest her own money in stuff that I couldn’t afford, even without all those holes in them. But the basics, like paying the mortgage and the electric bill, putting gas in the car and the car payment, the monthly orthodontist payment, life insurance, car insurance, etc. still add up even if we’re not buying ripped up jeans.
It helps that I was raised to be very frugal. The truth is, I wouldn’t pay $59.99 for a pair of jeans, holes or not, under any circumstances, including if we were millionaires. For starters, then, we are very frugal. (Hope Miss Holey Jeans gets that lesson one day!) But even so, there are times when there is just more need for dollars than there are dollars to go around. I’m doing my best to work from home, and I do work everyday, but not everything that I do here at home generates consistent income.
So basically, we are a one-income family. Most of the time we are doing just fine (see above for note on house flooding and insurance deductible), and this is how I’ve been able to keep things going even on weeks when it is a challenge to balance all of the needs with the real, actual dollars available . . .
1. I made a list of all of our payments. I included the day each payment was due and how much (sometimes I have to estimate, because we don’t know for sure on things like the utility bill, but I can guess pretty close).
MORTGAGE 1st of the month $******
CREDIT CARD 7th of the month $*****
CAR PAYMENT 10th of the month $*****
ORTHODONTIST 10th of the month $*****
UTILITIES 20th of the month $*****
LIFE INSURANCE 23rd of the month $*****
AUTO INSURANCE 24th of the month $*****
TRUCK PAYMENT 25th of the month $******
And whatever else is on the monthly rotation for payments.
2. Then, when a bill comes in (or there is an automatic withdrawal scheduled -which I HATE but some things like life insurance won’t let you do it any other way), I know which envelope to put it in. This is a bit like the Dave Ramsey approach of putting money in envelopes, which is actually a great plan if you can do it, but I kind of work backwards by organizing the bills into weekly categories. Like this:
MORTGAGE (set aside for the first of next month) $******* (The largest monthly payments are divided by 4 and put into the weekly budget. Sometimes it works, sometimes it doesn’t!)
Car payment $*****
Credit card $*****
MORTGAGE (set aside for the first of next month) $*******
MORTGAGE (set aside for the first of next month) $*******
Truck Payment $*******
House Payment $***** (DUE on the 1st of each month)
I write all of this out on my individual envelopes (or on a piece of paper that I clip to the specific bills that need to be paid each week / or bi-weekly for some people) that looks like this:
I’ve been doing this type of budgeting for several years, and it usually works. Depending on the latest “emergency” expenditures, I can usually set aside part of the monthly mortgage payment each week, and sometimes even set aside a little bit for the “emergency fund” savings account. But all of this is based on one, rather old-fashioned financial planning theory: when the money is gone, stop spending it!
Unfortunately for most of us, there are times when we do need to use credit cards. We try our best to avoid those kinds of situations, but when your house floods and you need to replace the floors and some of the walls, over and above what the home owners insurance offers, well, there you go. But we do try to pay off a credit card before we use it again. Another one of those good intentions that doesn’t always work in the real world. But we try!
Finally, after planning this out for every week of the month, I then schedule payments online to make sure I don’t forget and miss a payment. After the necessary payments are made or scheduled, then I look at what is left over and we plan for groceries, gas in the car, and maybe a family pizza night. “Extras” come along when I do a free-lance editing job, or teach a class, or sell something online, and then we might go out to our favorite Chinese restaurant or even be able to buy a new snow shovel. Or something else that we just can’t live without!
So you see, my budget probably is not the same as your budget, but it has worked for us for a long time. The bills always get paid (usually on time but not always), and we have a bit left over for groceries and gas in the car . . . and sometimes we even can put aside a few dollars for that elusive “emergency fund.” Until the dentist bill comes . . . but I’m trying, I really am!
I would love to hear how you budget for your family. I’m going to be working on this a bit more in the coming weeks to see if I can make it more specific, so if you are looking for ideas for your family budget, some of my ideas might be helpful. Works for us!
Hope you are having a good week and staying warm on this blustery winter days. Would love to hear from you!