The YFS household budget has changed many times over the past few years as we’ve stumbled and tripped along our financial journey. Oh there were a lot of miscalculations and mishaps. I’M NOT PERFECT and to this day my budget isn’t perfect. But it’s damn close!. OK first things first let’s stop calling it a budget. What comes to mind when you hear the word budget?
The following terms come to mind when I hear the word budget.
It’s weird but when I read that list something just jumps right out at me and maybe that’s the reason people can’t or won’t budget now. You see we have a name problem! So from now at YFS we no longer say the dreaded B word, we will refer to it as a Spending Plan. But you can call it what ever you want.
Just associate managing your money with something positive. What comes to mind when you hear the words Spending Plan? This is what
I think when I hear the words Spending Plan.
Why use a Spending Plan
Aside from the aforementioned adjectives? Hmm…I’ll keep this simple. If you don’t tell your money what to do, your money will do what it wants to do. Your money is like a child. They mean well, but they need direction until they get mature enough to make decisions on their own. Unfortunately, money is the child who never grows up so get used to being a parent forever!
Tips to create an effective Spending Plan
There are three tips to dominating your finances.
- Track all income
- Track all expenses
- Leave nothing left over! (Creating a zero-based budget)
This is much simpler than it sounds. You can complete those 3 steps with only 30 minutes a month!
The YFS Spending Plan
We use a zero sum Spending Plan. That means at beginning of the month we determine 100% exactly what we will do with our money and have a total left over amount of zero. Our budget is broken down into a few categories
- Income – Net income for the month
- Must Haves – Things you have to pay if shit hits the fan
- Savings – Emergency / Annual savings
- Business – We budget in a small amount for our side hustles
- Wants – Variable expenses and things we generally don’t “have” to have.
- Totals – Sum of Income, Must Haves, Savings, Business and Wants
Here is how our current monthly Spending plan breaks down.
|Mrs. YFS Life Insurance *|
|Mom Student Loans|
|Additional Car Payment|
|Lawn care Fund|
|Dog surgery Fund|
|Appliance Replacement Fund|
|Annual Car Tax Fund|
|Annual Personal Liability Insurance Fund|
|Annual Car Insurance Fund|
|Annual Life Insurance Fund|
|YFS Fun Money|
|Mrs. YFS Fun Money|
|Mrs. YFS Trip*|
|Total Left over|
As you can see we plan for everything! The total left over amount at the end of the month is always zero. That is what I mean when I say tell your money what to do. To track spending we include a column for “Budget Amount” and “Actual Amount”. The budget amount column is what we expect the expenses to be. The actual amount is column specifies our actual expenses during that month. The items with a * next to them are expenses that occur either annually or once in a while.
Tips to keep it all together:
Automate, Automate, Automate. Our finances are on cruise control. We pay for everything on a credit card using their auto pay features and we auto deposit our savings into ING direct. I only have to perform two things manually:
- Schedule our credit card payment
- Track our expenses
We use account aggregation for managing our accounts so all our transactions are in one easy to find location. This makes tracking your expenses very easy. I personally use www.yodlee.com for account aggregation. Lastly, allow yourself some fun money. If you do not “Budget in the fun stuff” your spending plan will go as well as a crash diet. Meaning, you probably will be OK for a few months but eventually you will binge spend.
Your spending plan should be a road map to help you achieve your goals and something that you can use forever. We are in it for the long haul. We want you to be fit for life not just the summer!
Pop quiz! What’s the difference between using a debt card or credit card if you use a Spending Plan that you follow?
Answer: You get to use the security and benefits of the credit card without having to pay any interest or fees.
You also get 30-45 days of float to pay the credit card bill. If you have a Spending Plan that you follow and update, you will soon realize the restrictions of a debit card/cash plan.
Tell me about your Spending Plan?
Leave a comment letting me know what you think of our spending plan?
Do you have any tips or suggestions on how to improve the YFS spending plan?