Before explaining our recent change in budgeting that I mentioned in our last income report, I want to give a short overview of our budgeting history and background. Later this month I will go into detail about the specifics of our budgeting system.
Growing up, I don’t recall ever learning any concrete budgeting skills, though I was born with a frugal gene and the sense not to spend more than I earned. Over the years, my understanding and implementation of budgeting has evolved. Our budget, now at its best, is helping us pay off over $100,000 in student debt.
BUDGETING IN MY HEAD
Before I was married, I kept close tabs on my bank account, lived frugally, and stayed out of debt. I paid for my college education without ever having a written budget. A frugal lifestyle, part-time job during school, and general awareness of my cash flow kept me afloat.
My husband was eager to put together a spreadsheet to keep track of our finances after we were married. Together we have tracked our spending ever since I can remember. He turned me into a receipt-saver. Both of us have a frugal, low-maintenance lifestyle, so living within our means was fairly easy. We kept a mental budget and always discussed possible purchases in advance so we were always on the same page financially.
Soon life got busy, babies were born, and all those saved receipts just stacked up and never made it into our spreadsheet. We continued to live frugally and save money, both for retirement and to eventually buy a house, but we didn’t make time for budgeting.
A WRENCH IN THE BUDGET
When my husband felt strongly that he needed to go back to school, we knew we would have to take out some student loans since I would be staying home with our young daughter (and two sons who were born during the four years of his JD/MBA program). It was time to crack down and start keeping a budget again.
Through law school, we tried to spend as little as possible. Not having a real income made budgeting tricky. Still, we outlined a budget and followed it closely. Looking back now, we would have done some things differently, but at the time we felt we were doing the best we could.
BUDGETING WITH PURPOSE
After graduating nearly two years ago, my husband joined a small law firm. Having a real income, albeit modest, made budgeting much more exciting. In addition to budgeting our own money (rather than borrowed money), we were budgeting with a purpose: to save for a down payment on a house.
Our budget outlined how we planned to spend our money. We tracked our expenses and made sure we stayed within our limits. Periodically we would transfer whatever money was left in our checking account into our house fund.
In May 2013, I happened upon Dave Ramsey’s Total Money Makeover
Even though our income-based student loan repayment plan does not require us to pay anything yet (our income is low for a family of five), we knew that paying our student loans first and fast was the right thing to do. The purpose of our budget changed from saving for a house to paying off our student loans as quickly as possible.
BUDGETING WITH A GOAL
Even better than budgeting with a general purpose, is budgeting with a specific goal. We decided to set a specific, measurable goal that would stretch us. We crunched some numbers and set a date for when we would be debt-free.
We set an goal amount to pay toward our debt each month. Our audacious goal not only keeps us strictly on our budget, but motivates us to work hard at increasing our income. Our income isn’t quite to the point that we can reach our monthly loan payment goal, but we are doing what we can to increase our income and are optimistic about the future.
From casual budgeting in our heads, to focused, consistent budgeting with a goal, we have come a long way. Challenged and motivated by our goal, we have paid over $40,000 toward our student loans in just over a year. By the end of 2016 we hope to have paid the remaining $99,000, saving tens of thousands of dollars in interest and making us debt-free (and ready to save for a house)!
In the past couple of months we’ve revamped how we budget. It makes such a difference and is solving all of the problems that our past budgets have had. I am excited to talk about the details of what we were doing and why and how we changed. UPDATE: You can read about our awesome changes here.
- How has your budgeting style evolved over the years?
- Has there been a certain impetus for budgeting or is it something you’ve always done?
Thanks for sharing this part of your background story – as always, with everything that you write, I really enjoyed reading it. I love that you and your husband are such a cohesive team….your goal-setting and focus never fail to inspire me. Looking forward to reading the next installment!
Thank you the encouraging comment Belinda. It made me smile. 🙂
We have been budgeting for the past 2+ years. It has evolved some, become simpler with less categories. But, now that we rent out our house we budget the month before for the next mortgage payment. For example, April’s mortgage payment is in the March budget. That way all the money, including the rent from our renters is in the bank (and has had all month to get there). That way if the renters are a couple days late, we don’t have to do last minute transfers or anything.
In the past we have always just let most of the “extra” at the end of the month in the budget roll into our emergency savings and then every 3-6 months pay that extra towards our debt. But the last couple of months we are tracking every single dollar, and anything left over at the end of the month is applied to our debt the next month. It will probably only save us a couple dollars in interest this way, but a savings is a savings!
Thanks so much for sharing! Can’t wait to see how your budget has evolved!
That’s a great to be a month ahead in budgeting the rental property’s mortgage! I can only imagine what a headache that would save!
I think tracking every dollar is awesome! It’s a lot easier to prevent money from slipping through the cracks that way. And with debts to pay off, it makes a big difference!
Oooooooooooooooooo, such a tease: Can’t wait for Part 2!!!!!!!!!!!!!! :p
Sorry Liz! I wasn’t trying to tease. I was just afraid the post would be super long, so I split it up 🙂
I just stumbled onto your site. You are so right about budgeting. In the past I never ever created a budget and steered far from it. When I finally invited budget into my life it changed so many areas in my life. Thank you for sharing your story.
Hi Petrish! I totally agree. It makes such a difference in more than just finances!
Hi Stephanie. First of all, thank you for being so open and honest about your personal debt situation. I don’t know if I’d have the guts to fully disclose my debt situation (or my husband’s) in such an upfront way.
But once I finished reading this post, I was struck by how much you’ve done to support your husband’s decision to go back to school and to work as a lawyer in a way that he prefers. I also went back and read your personal story. Then came back to this post and re-read it again.
You’re one incredibly supportive lady. Seriously, I think it is wonderful how supportive you are to your husband and his chosen life. But I am wondering about your own dreams. What is it that you want for yourself?
You’re sweet to wonder about me Nathalie 🙂 I am actually living the dream!! Seriously, there is nothing I would rather do than be at home to raise my little ones. I have a bachelor’s degree and worked in my field before having children. I enjoyed it, but I always knew that once I had kids, being home with them was where I wanted to be.
Besides typical stay-at-home mom stuff, I love being creative. Whether it’s planning themed birthday parties, sewing Easter dresses, making handmade gifts, or solving a problem, I love being creative. When my kids are all in school or grown, I will probably continue my formal education because I enjoy learning. Between my family, church involvement, blogging, etsy shop, and other creative endeavors, there are plenty of opportunities to learn and grow.
My husband is amazing! It doesn’t show much on this blog, but he is incredibly supportive of me, too. He is always very encouraging and appreciative. We have a wonderful relationship where we are both very supportive of one another. We really are best friends and equal partners.
The debt situation isn’t ideal, but I’m glad we’re in it together 🙂
Hi again Stephanie. I’m so glad that you are living your dream. I was just wondering because being busy with kids at home inevitably gives way to them in school full-time (unless you decide to home school that is). And then there is a possible “what now?” that can happen. I’m happy for you, truly I am. Your blog is a favorite of mine because you’re so positive and cheerful.
Thanks Nathalie! You’re right that is does happen that some women don’t know what to do with themselves when their kids are gone. I have the opposite problem– more ideas than I have time. I’m not planning on a mid-life crisis or anything 🙂