Wednesday, April 17, 2013

Becoming a Millionaire: Budgeting

Part 1: Set your goal

Budgeting has been a hard thing to learn for me. When we were first married, we had only about $500, and I spent about $300 on clothes one day. That was our first big fight. It's something that I think a lot of people struggle with, because when you have money in the bank account, you feel like you can afford stuff, but you aren't really considering upcoming purchases like rent, groceries, gas, and tuition.

That was the only time I was really bad with money. I spent almost everything we had without considering Conrad. Since then, I've made some huge strides. We got better with money over time. We started making more, and I got better about considering more mandatory purchases before I spent money on "wants." 

In November 2012, we decided to get on a strict budget (by we I mean "we decided to put me on a strict budget). I wasn't spending more than we had, but we were having a hard time saving anything, and we had goals of getting a larger house and eventually getting new cars. When we started the budget, I wasn't pregnant, but by the end of the first month, I was. This was even more motivation to save. We were going to have a baby, which meant medical bills, more expenses per month, and we would really be wanting a bigger house and car. 

I'm about to discuss personal financial information. Some of you may think these numbers are high, and some of you may think they are low. This was our experience with learning how to budget, and I trust that you'll have respect for it. 

Conrad and I never make any financial decisions without each other, so when I say I "asked him for more money," I'm not saying he's controlling or dominating with our finances. 

In November, we decided that I should have my own separate bank account. Previously we had shared an account, which seemed to work. However, with the larger number in the joint account, I felt like we could afford whatever I wanted to buy because we still had a lot of money left. We sat down one day and decided that we'd save more if I had my own account and was responsible for budgeting certain expenses. 

I still have total access to all accounts, and am able to transfer money if I need it. I do not do this without talking to Conrad, and he does not make any big purchases without talking to me. The money in my "little" account is still our money. I'm responsible for buying food for both of us, and household stuff. Any money that I make is additional to the amount I get monthly. This is so I am able to save if I want. 

Here's what we calculated (per month):

Gas and car maintenance (for my car only): $200
Groceries: $500
Household items: $200
General shopping (including fun stuff): $300
Total: $1200 per month

I opened an account and transferred $1200 over. Within three weeks, I had spent it all, and I honestly couldn't even tell you what I bought. I went to Conrad and told him I needed more money. So he gave me an "advance" and gave me another $1200, and we decided I would have to make it last through December. I insisted this wouldn't be enough because we always spend more at Christmas. I think I made it last about halfway through December, but I needed more money.

I spent the second $1200 by December 6, just over two weeks later. Rather than transferring another $1200, I transferred $500. I was starting to see a pattern: that if I had too much money, I would only spend if faster. Surprisingly, I made the $500 last through December. 

That's when we decided to recalculate. $1200 was too high a number and I felt like I had too much freedom with the money. We knew when we created this new system that it would probably take a couple months of figuring out, which is why the budget started so high. We knew we would lower it as I got better with budgeting. So, we did what felt to me like counter-intuitive, we lowered the budget. Household items would be grouped in with General Shopping, and I would only have $200 for all of it, and the grocery budget would be lowered to $400. Here's the breakdown:

Gas and car: $200
Grocery: $400
All remaining shopping (want or need): $100 or $300, I can't remember what we decided at the time
Total: $700 or $900

When it came time to transfer money on the first of the January, I had forgotten whether the number was $700 or $900. Morning sickness was in full swing, as was mommy brain. So I asked Conrad, and we agreed that I should transfer $700, and if I really, really needed more, I could transfer an additional $200. I felt really proud that I had lowered the budget so much in just a couple months. 

January ended up being a little rocky. I had to make a couple deposits and transfers, and I even overdrafted once. But I never used more than the $900 we had agreed on! February began with a $700 transfer again, only this month I was determined to not need extra money. I wanted to see if I could stick to $700 instead of $900, and I DID! I was so proud of myself. 

Now I'm pretty used to the $700 per month, and we're saving so much more than we used to. We were talking about it recently and Conrad said, "I think there were some months when you spent $5000 and didn't even know it." But I was never spending more than we had, so I felt like I was doing fine! We track our spending on and calculated that now, with the new budget, we are saving about 30% of what we make and will probably be able to buy again by the end of the year. 

I've figured out a pretty good system for myself as far as making the money last for the whole month. Sometimes it's really hard, and sometimes I get really close to nothing. I decided to figure out a better system for groceries and food, since that was my biggest spending responsibility. More on that next time! 

PS - I'm giving away ad space over here today! Go enter!


  1. That is so be able to save 30% every month! Wow!

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