Step 2: What’s your method?
Ok, tackling everyday expenses: I fully believe that this is the breakdown of 90% of budgets. There are two parts to this challenge- how much you’re spending, and what your organization system is- I personally think you can do the two parts in either order. We’re not going to tackle how much to spend in this post, you just have to decide what the method of organization you’re going to do. You’re gunna have to create a system that works for you, and your spouse/partner if you have one. This is tough, and you might go through several variations before you figure out what works best, and maybe a combination of the methods is what will work for you. Try them out, see what works, but please don’t do what I did and stick with a method for months and months when it’s just not working. What do they say about successful people? They fail quickly? Something like that- try something, decide quickly if it’s working, then try something new. Keep going ‘til you find one that is manageable and helpful.
A couple ideas that my husband and I have previously tried, or I’ve heard other people do, and what I think of them:
1) an app, like Mint (which is sadly no more), Rocket Money, YNAB, EveryDollar, etc.
This might work for some people, but for my husband and I, it just didn’t stick. We just didn’t check it or update it consistently. For some apps, like the free Every Dollar app, you have to manually put in every expense, which is hard to remember to do. I believe Rocket Money, and other apps like that, automatically connect to your bank, but they often cost a certain amount per month to use it, so win-lose. For us, we would start out the month with plans to stay on top of it, and then life happened, we got tired (hello three kids and two jobs), and it got forgotten. Great idea in theory, but for us, wasn’t the winning ticket.
2) All everyday expenses go on a credit card.
This is tricky, and one I don’t recommend. If credit cards are not something you’ve been successful with in the past, don’t do this one. Graduate to it later if you want, but this is not the place to start. When we tried this one, the plan was “we’re gunna pay it off at the beginning of the month, and make sure the total stays below $X.” That didn’t happen, and it was much too easy to keep swiping even after we’d hit our budgeted limit, especially since our credit limit on the card was much higher than the budgeted limit. Again, could be a great idea, depending on the person, but can be a major pitfall too. Best not to test it until you’ve had some practice using and sticking to a budget.
3) All recurring bills and everyday expenses come out of one checking account
DON’T DO THIS! This is incredibly difficult. Even when I had no kids and wasn’t married, this was way too hard to manage. “I have $300 in my checking account right now- Do I have $300 to spend on groceries until I get paid, or has that $200 check been cashed yet? Maybe I have $100 left to spend? Oh wait, I forgot about that phone bill…. but will that come through before or after payday?” Unless you have just loads of time to manually balance your checkbook every single day, don’t do it. There are lots of other systems that are more user friendly. If you combine using an app with this one, this could definitely work, but you’d need to keep track of the app meticulously in order for this method to be helpful.
4) Cash budgeting
My husband and I used this right after we got married. It worked fairly well, but was difficult to do with two people. Oftentimes he would stop at the store after work, but the cash would be at home, or with me, so he’d use a card, and then have to deposit that money in the bank, but then sometimes he’d forget…. it was a mess. If it’s just you, then this method might work just swimmingly! If it’s a household, it could work, but it will take two individuals that are at least semi-organized and plan ahead. This method is also quite difficult if you do a lot of online shopping/delivery. It does make a huge impact on spending, since you can physically see your amount slowly (or maybe not so slowly) dwindle throughout the month, so again, win-lose.
5) Two checking accounts- one for bills, one for everyday expenses
This is the method my husband and I are currently using, and it’s working great. I make sure to put the exact amount that we have in bills in the bills checking account- car payment, student loan payment, subscriptions, mortgage, utilities, etc come out of that account- I fill it at the beginning of the month and don’t think about it ‘til the month is done. We also have a set budget for our everyday expenses, and put that exact amount in this spending checking account at the beginning of every month, and we know that needs to last us ‘til the end of the month. If it’s helpful for you to do it on a week by week basis, maybe put the whole amount for the entire month in a savings account, and transfer a portion of that every Sunday for the week ahead (or schedule transfers so you don’t have to think about it- that can be SUPER helpful if your brain is as full as mine). This is helpful for things like groceries, gas, coffee, eating out, etc. Not exactly so helpful if you have things that you only buy once per month- we’re big fans of Amazon Subscribe & Save, so that order comes out at the beginning of the month, so if we were to do the week by week method, our first week would be shot before we even left the house. This method does make it a little harder to keep track of the different categories, like exactly how much goes to groceries, gas, etc, without breaking it down manually, but I figure, as long as we’re staying below the budget, I’m fine with a little give and take between the categories.
Bottom line, find what works best for you- each person is going to be different. Maybe you use method 5 for groceries, but you get cash out to use for eating out. Or you only put gas on your credit card, groceries out of the dedicated checking account, and use an app to track everything else. Personally, I think groceries are the biggest kicker- I think it’s fairly easy to predict gas expenses for a month, and you can usually skip eating out if you’re out of money for that category, but groceries are hard to budget- not only are grocery prices higher than normal right now, but you can’t just say “no more grocery shopping for the rest of the week/month” because if you’re out of milk, you’re out of milk. If you’re going to do some kind of combination like I mentioned above, try to pick a method that has strict and noticeable cut offs for the grocery category.
I’ll talk about how to budget for the different categories in my next post, but for now, think about your lifestyle and what will work for you. If you’re married, chat about what method, or methods, are manageable, or brainstorm different methods that I didn’t talk about here. The right answer is the one that works, doesn’t matter if it makes sense to anyone else or not.
