Our Budget

I talk often about how my husband and I are on a written budget and are trying to pay off debt. I wanted to address our budget more specifically for those interested. Most of our budgeting ideas came from the Dave Ramsey Show. Dave is a financial adviser. You can check out his website for yourself.

The first full year we were married, we attempted to do a watered-down version of Dave's budgeting system. We (my husband) wrote down our expenditures and our sources of income. We found out exactly how much debt we were in and compared that with what we made each month. We wrote down our "dreams" (purposely using that word here because they weren't actual goals..they were dreams at this point) of what we wanted to spend in each category of life.

*Side note here. It's important to know who in the marriage is the detail oriented person. Usually one of the two of you are more detailed than the other. Luckily, my husband is this person. He is the one that put together our budget. BUT, it's very important to see that we AGREED on this budget he wrote out. I argued for some changes and he argued for some changes and then we agreed on a final budget. One major argument was with clothing money. It took a number of months to get this worked out. I continually over-spent (which can be fixed with the envelope system that we initiated later...see below) in the clothing category. He finally realized that the budget was too low and we agreed to a much higher amount for clothing per month.You can read more about my emotional spending habits here.

Back to the budget. So the watered-down version left us going over our vision each month in multiple categories. If you don't actually add up the amount of money you are spending, each time you spend it...you easily wind up over-spending at the end of the month. So for each month in 2010 we overspent.

We started to realize this wasn't working at the end of 2010. This is when we turned to Dave Ramsey's envelope system. I'll tell you we saved 500$ in the first month we used the system. The envelope system is basically you putting actual dollars into real envelopes at the beginning of each month. For example, we put 100$ into our shared "fun" envelope at the beginning of each month. My husband and I actually have 3 "fun" envelopes. We put money into "Karl's Fun" envelope, "Lindsey's Fun" envelope, and into a shared "Fun" envelope. Yes, we have about 15 envelopes we put money into each month. It's a lot of envelopes. I am able to reach into my personal fun money whenever I want. If I wanted to eat out during the day, this would come out of my fun envelope. If Karl and I wanted to go on a date, that would come out of our shared envelope. The trick is, that when the envelope is out of money...you stop spending money.

There are some down sides to this plan. Someone does have to write out the budget, that can be time consuming. You and your spouse have to agree on the budget. That can be argument-inducing and difficult. But, I promise it's worth it. Having conversations about money that don't end with crying and leaving the room is healthy for couples to learn how to do. The funny thing is that the shared goal (of paying off debt) really unites you as a couple. It may not happen as quickly to all couples. Some couples are in a world of hurt related to money. That conversation is for a different post though. For now, suffice it to say that this plan works.We have had to make some difficult decisions about our fiances. We may run out of grocery money at the end of the month and have to live on leftovers for the last 3 days of the month. We did have a month where I thought we had about 80$ left in the grocery budget. When I opened the envelope I found only 20$ left. We wound up eating pasta and beans the rest of the week.

There are so many perks to this plan. One is that you and your spouse will be on the same page about money. When Karl and I first got married, he would confront me every time I came home from shopping. We got into an argument about me buying socks! Now that we have an agreed upon budget, it doesn't bother him to see me come home with shopping bags AND he doesn't interrogate me about what I bought. He is happy that I found something I wanted, because he knows I only spent what was in my envelope. Also, we save a lot of money. This money goes towards paying off our debt. We are excited as we look forward to getting out of debt and begin to build wealth. Third, this plan has changed our perspective about finances and financial decisions. When you know you only have 100$ to spend, you treat your money differently. You tell friends that you can't go out to eat. You hold off on something you think you WANT in case there is something you NEED at the end of the month. I'll write more in other posts about our money decisions, but this is a basic description of our budget system.