In case you’re new around these parts, welcome! You should know that we used to spend a LOT of money. We used to spend everything we made (and then some, hence the credit card debt we paid off in 2015). And then we decided that enough was enough. We got honest with ourselves, our assumptions, how we spend our money, and what we really want to spend our money on. We shared with the world what we’ve spent via a year-over-year spending review.
Hustling through the journey to debt freedom has a way of making time fly by. Nights and weekends spent working hard to crush debt faster are well worth the progress, but not at the expense of health or relationships.
That’s why we started going to back to basics in November.
Get our household budget spreadsheet that we use to track our spending. (You'll also get our 7 steps to financial freedom and monthly updates!)
We spent more time with family and friends.
We did some form of exercise each day (sometimes twice daily).
We went hiking on the weekends, often visiting local parks that are new to us!
Garrett resumed work on on a design project he’s had in the queue.
We finished several books.
And we’re still budgeting money. Actually, we budget money daily, monthly, and annually. Here it is, our annual budget.
|CATEGORY||2017 ESTIMATE||INCLUDED||2017 SPENDING|
|Auto Expenses||$2,800||This includes all expenses for the one car we own outright, a Volvo: oil changes, gas, insurance, and tolls.||$4,746 [YIKES!]|
|Electricity||$1,181||Our electric bill for our 100% electric small house.||$1,117 [WOOT!]|
|Garbage||$220||We pay our garbage bill annually, so we get a discount. Woot!||$180 [WOOT!]|
|Groceries||$7,200||Much of what we purchase is organic, fair trade, or grass fed, which isn't always cheap.||$6,990 [WOOT!]|
|Insurance & Taxes||$2,100||Since we have no mortgage payment, we don't have escrow. We have to save to pay taxes and insurance.||$2,626 [YIKES!]|
|Home Supplies||$2,450||Varies sundries, like soap, toothpaste||$2,103 [WOOT!]|
|Medical Needs||$1,100||We anticipate 4 visits to doctors this year, so this includes copays and coinsurance.||$1,221 [YIKES!]|
|Storage Unit||$1,284||We have temporary storage for the teardrop camper during the week when the camper isn't in use.||$1,791 [YIKES!]|
|Personal Care||$100||I pay for haircuts. I cut Garrett's hair, so his haircuts are free.||$339 [YIKES!]|
|Pet Care||$2,600||We have three cats, so this includes vaccines, vet visits, dental care, food, and cat litter.||$1,636 [WOOT!]|
|Water & Sewer||$636||Our water and sewer bills for the year for our small house are so low!||$631 [WOOT!]|
|Discretionary||$1,200||fun money 🙂||$4,363 [YIKES!]|
|Gym Membership||$240||Planet Fitness||???|
|Travel||$2,560||We're planning two and a half vacations (half of one vacation is half business).||$2,820 [YIKES!]|
We’ve been doing well, so why go through the task for budgeting money since we don’t have debt?
Why We Have a Budget (and Why You Might Want One, Too)
After reading about the “pay yourself first” approach highlighted in David Bach’s The Automatic Millionaire, we gave some consideration to ditching the budget, especially with some of the changes we’ve made for 2017.
Garrett will max his 401k contribution for the first time ever.
Since I am self-employed, I contribute 25% of my income to the SEP-IRA I set up with Vanguard.
Now that we paid off our mortgage, we no longer have an escrow account to pay taxes or insurance, so we have automated transfers from checking to savings within our local bank. We’re calling this low-interest savings account (.05%) our “escrow account” as we’re retaining only that which we need for taxes and insurance.
Lastly, we have our emergency fund with Ally. I’ll be honest about our emergency fund–we’re bad at this. Really bad. That’s why we moved it to Ally. It needs to be out of reach, enough to make it a headache to access the money. (Ally’s 1% interest rate is a nice bonus though.)
We’ve automated our savings, so why keep a budget? Frankly, we don’t trust ourselves. We need to maintain a budget for accountability, visibility, and peace of mind.
What We Don’t Have in the Budget
We’ve talked about what we DIY in order to cut down our expenses on the page we use to track our debt, but there have been lots of changes since then that helped us cut our expenses further.
Here’s a list of some items we don’t have in the budget.
- Our automated transfers to our savings and investing accounts transfer a portion of our income on the first of every month so that we always “pay ourselves first.” The exact amount each month varies wildly because of annual expenses (like car insurance), Garrett’s bonuses, and business income.
- Last year, we gave money, food, and toys to a dozen different organizations at random times throughout the year. We’d like to automate our donations instead to be consistent, so we’re trying to figure out how.
- We continue to mow our grass and shovel snow.
- We cook food, so no more restaurant meals.
- We cut the cord and three lifelines. Several years ago, we dropped cable and signed up for Amazon Prime, Netflix, and Hulu to replace TV. Over time, we’ve dropped all three services in favor of a low-information diet. Today, we don’t pay for any media.
- Since I work from home, our business pays for most of the Internet service and my cell phone (the personal portion is handled when we’d file taxes online).
- We return two leased vehicles this month to the dealership, so we’re down to one car: a Volvo that’s been paid off for years.
- We paid off our mortgage in 2016, so no rent or mortgage payments.
- There are a handful of student loan payments remaining, but they’ll be paid off in the next few months, so I didn’t include the $422 payment.
Tools We Used to Prepare Our Budget (You Can Use Them, Too!)
We continue to use Mint.com to keep track of our transactions. We have our checking account, savings accounts, and investment accounts attached to Mint, which
us lazy management easier.
In 2016, we set up a budget in Mint using the same categories noted above. However, Mint struggles with annual expenses. Setting aside money each month to pay our annual car insurance premium never showed up properly.
For 2017, we started with our annual spending for 2016. Because we kept our transactions well organized in 2016, we simply copy/paste the totals for each category.
To help us get into the nitty gritty, we used the Debt Free Guys’ spending analysis spreadsheet as our monthly budget template. This is the only monthly budgeting spreadsheet we’ve tried, but we love it. It’s comprehensive, thorough, and provides a few different ways to look at our spending. For example, groceries comprise 26.28% of our monthly spending. (WHOA!)
Initially, we took the totals from 2016 and divided by 12. Boom. Monthly budget done. I mean, that’s how we’ve always done it, so why not?!
Because some of our expenses are annual, like auto insurance and garbage service, the old way of budgeting didn’t make sense. I never felt like we had a good handle on allocating money on a monthly basis for those annual expenses.
But it was the DFG spreadsheet that made us pause to take a deeper dive. Now, we have a slightly different budget for each month, which makes more sense than the way we were doing it before.
In addition to our annual and monthly budgets, we’ve also started tracking our spending and budget on a daily basis in 2018. We’ve also stopped using Mint and starting using BB&T, which is available from our bank. See how we manage our money.
P.S. Close to paying off a mortgage? Wondering what to next after you paid off your mortgage?
|Taxable Brokerage Accounts We Use||Where to Sign Up|
|Betterment focuses on long-term investing, but they have fees. We have a brokerage account to see if it might be a fit for us. Use our affiliate referral link to try it out.||Sign up for Betterment|
|M1 Finance offers a platform free for investing by way of a brokerage account, which we use ourselves. Seriously, no fees. Use our affiliate referral link to try it out.||Sign up for M1 Finance|
|Vanguard is handles our retirement accounts and a brokerage account. We're investing only in Vanguard ETFs since they are free to trade.||Sign up for Vanguard|