Do you have a budget? Yes, I’m going there today because this is an important financial topic. No matter who you are or how much money you make, you really do need a budget.
Now, I will say this. Budgets can be a tricky thing. They seem harder than they really are. In all simplicity, a budget is simply allocating where your money will go.
There are countless opinions on how best to write – and maintain – your budget. Following the 80/10/10 rule, maintaining a zero-balance budget, the envelope system, living on last month’s income…what should one do?
There are also countless software programs available to help you budget. Mint. You Need a Budget (YNAB). Dave Ramey’s Every Dollar. Those are just a few of the commonly used ones with countless other options…so which one should you choose?
Some of you may use some of the above and they may work well for you. If that’s the case, I’m so glad you have found a budget solution that works for your family. Well done! If you are still struggling with your budget, I’m here to share a different approach for you.
I’m here to propose a simple budget solution for you today. Try a paper and pencil budget.
I’ve tried all of the above budget options and this is what we keep coming back to. A simple paper and pencil budget is what currently works best for our family. Why do we use a paper and pencil for our budget? It’s simple. It’s clear. It’s concise. Our income fluctuates from month to month (due to my supplemental income) so a paper and pencil budget allows us to prepare for that. I found computer programs too tricky to manipulative the variables that we have in our income.
Here’s how we make this work for our family. I’m going to try and be as thorough and transparent as I can be (without sharing actual numbers) so you can see what this currently looks like for us. A paper and pencil budget is a simple budget option that keeps us on track.
At the beginning of every year (or whenever I know there are monetary income changes coming), I still down on my computer and prepare our budget. (Note: Technically speaking, I am aware that this not truly a paper and pencil budget. I can and do the same thing on paper, but I appreciate having a neater, typed list that I can print off and edit whenever income changes.) I start by opening up a word document and type out all the categories we have in our budget.
Our current budget categories include: tithe, mortgage, water, gas, electric, internet, cell phones, insurance, gas for cars, food, retirement, savings, emergency fund, household projects, car repairs, Colts tickets, haircuts, clothing, travel, Christmas gifts, spending money, entertainment, and personal “slush” funds.
This paper and pencil method is really just a simple math-based subtraction method. We begin with our total income and the most important expenses and start subtracting. When we get to zero, our income is gone and our budget is finished.
I start with my husband’s salary (after taxes are withheld) and start subtracting. I start with tithe and mortgage, then the rest of our bills. For us, that is water, gas, electric, internet and cell phones. Then, I subtract our car & house insurance, as well as our life insurance payments. Next up is gas for the cards, food, retirement savings and my husband’s haircuts. Those are the necessities.
This year, with me staying home, the rest of our budget categories are currently funded through my supplemental income of piano lessons, blog income and anything else I do to earn money for our family. Out of those earnings, we budget for our emergency fund / current savings goal, household projects, car repairs, clothes and travel. We also have accounts set up for my husband’s Colts tickets and a new car fund. Not much goes in all of these (and some months nothing does when I’m not teaching piano in the summer) but that is how our budget is currently set up. Yes, I would love if these categories were able to come out of our regular income but that is not possible right now. We have already allocated every dollar of my husband’s hard-earned income.
I’ll be honest that our budget is rather tight right now and we are being creative to fund the categories of spending money, Christmas gifts, entertainment, and even our personal “slush” funds. Once again, that means that some months, we aren’t adding to these in regular ways. I’ve sold books at Half Price Books for spending money. My Bing and Swagbucks earnings all go straight to our Christmas gift fund. It’s one of the sacrifices we’ve chosen to make so I can stay home with our children.
Still, even with our limited income and a tight budget, we are still making progress on our goals to financial freedom. Part of the reason we are able to do so is that our budget gives us a plan.
Once our budget is written and we know where the money is going, we check in every month or two to see how things are going. I have been doing this long enough that I have an averaged amount for all bills, based on the housing allowance numbers I use when we file our taxes. That helps us budget better for electric and gas bills that vary based on the seasons.
For some of our budget accounts, we transfer money among our 13 (and counting) savings accounts. I’ve written more about why we have some many different savings accounts in more detail here. It’s been a financial game changer for us! It’s also important to note that one of our savings account is a bills account that helps us cover unexpected bills or bills that are suddenly larger than budgeted.
A paper and pencil budget is not for everyone – but it works for us. You have the freedom to choose what budget solution works for your family. Try different ones! Try zeroing out your income. Try using a smart phone budgeting app. Try making a budget list in a notebook. The important thing is that you try something and start budgeting where your money will go.
What do you currently use to budget?