January 2025 Family Budget Update

Budgeting has always been key to reaching financial goals, but in these uncertain financial times, budgeting really is crucial! I’ve been sharing our family’s real budget since 2013 when we were in six figures of student loan debt. A lot has changed with our finances since then, but one thing hasn’t changed- we still budget faithfully every month.

After taking a break for a few months, I’m back to sharing our family’s budget. I debated about whether I should keep going, but your messages have made it clear that you find it inspiring and helpful in your own financial journey, which is exactly why I started sharing in the first place. We’ve had some frustrating things happen in life and in our finances that put me in a non-blogging mood, but I’m now ready to keep going.

Our homeowners insurance dropped us starting at the first of the year due to fire danger in our area. This isn’t the first time this has happened to us. It seems to happen every couple of years. The number of insurance companies who will write policies for our area of California is very small. Like many, many others in our area, we had to get the fire portion of our home insurance policy from the insurer of last resort, the California FAIR Plan. After all of the horrific fires in southern California during January, we know the FAIR plan is going to levy big assessments on all policyholders, so that cost, which is already high, is only going up.

Seeing grocery and other prices soar has me worried about those of you who were barely making ends meet previously. If you don’t have much wiggle room in your budget, price increases can undo all the financial progress you’ve made.

If you’ve given up budgeting, thinking it won’t make a difference in your finances, let me promise you that it absolutely will!

As always, the budget I share is just meant as an example. Our numbers won’t be the same as yours. Your family’s priorities are different and your spending will look different. That’s why it’s personal finance.

Spending in January

When we first understood the concept of living on last month’s income, it rocked our financial world in the best kind of way. If you have no idea what that means, here’s a video walk-through. Or you can read up on how you can get started.

At the beginning of each month, we start budgeting by first adding up the income we earned the month before. In January, we budget and spend what we earned in December. We knew on January 1st exactly how much money we had to work with during the month.  So on January 1st, we start the January budget by taking everything we earned in December and assigning it to our January budget categories.

We can’t see the future, so on the first of January, these dollar assignments were really just best guesses and goals. We’ve been doing this for years and can make some pretty good guesses, but every month is different. Our dollar assignments at the beginning of the month almost never stay exactly the same because our needs and priorities usually change during a month. And a budget that changes during the month is good!

It’s normal for our spending plan to change as we move through the month. The important thing isn’t spending exactly how much we guessed we might spend in each budget area at the beginning of the month. It would be silly to let our January 1st guesses dictate what we can and can’t do all during the month. The important thing is to not spend more total in January than we earned in December.

If we need to spend more in one budget category than we had originally assigned, that money has to come from some other budget category. We revise the budget categories to meet our priorities during the month, but we can’t just add more money to all of them, because the total amount stays the same all month long. A changed budget is not a failed budget. A budget needs to be flexible in order to be successful!

Here’s our family’s final January spending for all of our budget categories.

Giving

Tithing – $1,403 We start out the month paying a 10% tithe on our income. Like all of our January spending, our tithing is calculated on what we earned in December. We often get questions about this. You can read our thoughts on tithing here.

Fast Offering – $100 Each month we take one day to go without food and drink (fasting) and contribute to a program that helps people who need it.

Other Giving – $98 We donated pizza for a gathering of our Spanish-speaking friends and bought a bike light for one who rides a bike to work.

Monthly Bills

Mortgage – $3,000  Our actual mortgage bill each  month is $2,525 but we round up any pay an even $3,000. This shaves two years off of our mortgage and saves us over $4,000 in interest. If you’re new here, we have a 15-year mortgage on our 2200 sq ft house in Northern California. We’re so thankful to have locked in our mortgage interest rate at 2.375% when we refinanced in December of 2020 (all of the details and numbers are here.) We currently have $157,423 remaining on our mortgage.

I finally updated the goal tracker house (you can get your own copy in my shop)!

Electricity – $6 Two years ago we installed solar panels on our property, a $70,000 investment that we finished paying for last year.  Our electric bill is just the $6 unavoidable fee.

Car Insurance – $376 We have three vehicles with two adult drivers and one teen driver, soon to be adding another teen driver.

Internet – $105 We have cable internet through Comcast. When we bought our home seven years ago, we invested $5,000 to have Comcast extend cable internet to our property. It has been worth it every single day since then, even though the cost for internet service went up recently.

Water – $44 Our water bill comes every other month. With the $150 set aside in December, we only needed $44 more to reach to total of our latest bill.

Garbage- $54 Like the water bill, our trash pick-up bill comes every other month, so each month I set aside the money for half of the bill. The cost on this service recently increased, too.

Cell Phones – $175 We pay for eight cell phones: five for our family, and three for the Ukrainian family that we sponsor. Mike is trying out the annual plan, so we now only pay 7 phone bills per month). Our phones are all through Visible. Visible is a Verizon subsidiary that offers no-contract plans with wifi calling, unlimited cell calls, and unlimited data on the Verizon network. We’ve been using them for years. You can’t beat paying just $25 per phone each month with unlimited data.

Gym – $60 For the first time in our lives, we joined a gym. Our teenagers were extra excited, since it’s a small local gym that many of their friends go to. We have been going early every morning. We hope that investing in our fitness now will make life better now and for years into the future.

Everyday Expenses

Food – $762 We eat at home, cooking meals with fresh ingredients or those we already have in our pantry and freezer. We are trying our best to keep our overall grocery costs down even though the price of food keeps going up! If you need help getting your grocery spending under control, you can learn all about my strategies and method in my Grocery Budget Hero online course. Right now it’s available with pay-what-you-can pricing.

Fuel – $553 Getting our Prius was a game changer for our gas budget. We drive it whenever we’re going somewhere with 5 or fewer people. We still have our 15-passenger van, but we don’t need to use it very often. We often take both the minivan and the Prius when we are all going somewhere close. We don’t have to fill up the big van every month, but we did fill it in January, which alone accounted for 20% of our gas spending.

Household Misc – $708  We bought another new Chromebook laptop for our kids to use, since all six of them need computers for various school assignments. We had our normal subscriptions like Google Suite ($6), CrashPlan ($30), Adobe Lightroom ($20),  Scribd/Everand ($12), and Sadie Active ($10). We also had the $100 annual subscription for Google One cloud storage. In addition, we bought normal household/toiletry items and various things on Amazon, including my favorite purchase of the month which keeps all of our laptops organized and safe! We bought a few videos on Amazon for fun family movie nights.

Clothing – $60 – My second son needed wrestling shoes. I saved all of my older son’s wrestling shoes, so we have sizes 8, 10, 14, and 16, but our second boy needed a 12. That’s the size my older son was during covid when there was no wrestling happening.

Animals – $22 We only needed some chicken feed since we were stocked on dog and cat food.

Allowances – $143 We give our kids “practice money” as a weekly allowance.  You can read all about why we decided to pay our kids allowance that’s not directly tied to chores, as well as all the details of when and how much in this blog post.

Sports – $263 This includes donations to our oldest’s basketball team and admission to away games.

Sinking Funds

For our regular budget categories above, we take out any funds that are still left at the end of the month and send them toward our big financial goal. For example, if we started the month with $600 in our food budget category, but only used $520 of that, the other $80 would go toward our current major financial goal. Focusing all these extra funds from each category into one goal helped us pay off our law school debt years earlier than we thought possible.

In contrast to the regular budget categories above that we zero out each month, we also put money into the categories below. These are our sinking funds. Our sinking funds are categories where we set aside money for periodic expenses each month and let it roll over and build up until we need it.

The amount in bold is the amount we added to the fund this month, followed by spending notes and the current balance of each fund.

To answer a question we often get, we do not have separate bank accounts for these funds. We had separate accounts many years ago when we first started budgeting but we learned that was overkill. Instead, all of the money sits in our checking account. Since we spend according to our budget category balances, not our checking account balance, we’re not worried about getting the money mixed up. We seriously never even look at our checking account balance unless we’re reconciling the account. We track our budget categories and spending in YNAB, a budgeting tool we absolutely adore. Yes, you can adore a budgeting tool. Don’t believe me? Try it out. If you have been using Mint or something similar to manage your finances, you’ll want to read about our switch to budgeting with YNAB.

Medical/Dental – $300 added. We spent $1,417 on dental work and orthodontics in January.  Current category balance is $332. 

Car Maintenance – $400 added.  In January we spent $746 on 4 new tires for the Prius and a battery for the minivan. We knew the Prius would need new tires soon when we bought it. In January we needed them. Current category balance is $54.

Christmas – $200 added. In January we spent $20 on Christmas 2025. I can’t remember what it was, but I’m sure it was a great deal. 😂 Current category balance is $180.

Disability Insurance- $190 added We set aside money each month for disability insurance so that when the annual premium is due we have the money ready. If Mike is unable to do his work as an attorney due to illness or injury, this disability insurance will replace about 60% of his current income. Since our income potential is our greatest financial asset right now, we have disability insurance to help us protect it. Current category balance is $1,990.

Life Insurance – $100 added. Our life insurance premiums are due each November, so we set aside a portion of the estimated total each month which will go toward next year’s premium. Current category balance is $222.

Birthdays & Gifts – $0 added. We spent $20 in January. Current category balance is $125.

Car Registration & Smog – $50 added. We spent $145 in January for car registration. Current category balance is $242.

Family Fun Fund – $52 added. I put $6 on my transit card for San Francisco. In February we’re all going to see a musical. We’ll have to add to the balances of everyone else’s transit cards in February.  Current category balance is $46.

Home and Garden – $585 added. We spent $585 on 13 additional fruit trees for our orchard.  Current category balance is $0.

Big Trips – $255 added This sinking fund is to save up for a trip we are taking in 2025. We added $150 of our own money. We added $105 from cash back from our credit card. I wrote in detail about how we’re saving for this trip creatively. In January we paid the balance for our cruise, so now we’re just saving for everything else like the drive down to Long Beach, the parking garage, excursions, and spending money on shore. Current category balance is $771.

Investing

Kids’ 529s – $150 added. Investing just $25 per child per month for college isn’t much, but we are okay with that. Neither of us had much college savings when we went to college, but with scholarships, grants, loans, and jobs during school we were able to get our undergraduate degrees without debt. We may contribute more later, but right now we’re happy with small, consistent contributions.  I looked at the balances recently and was pleased to see that this small contribution that is barely noticeable in our monthly budget has added up and grown to over $21,000! If you want to know more you can read about how we decided to start 529s for our kids.

IRA (Steph) – $583 added. With this same amount each month, I will reach my $7,000 IRA contribution for 2025.  Mike has about $1,300 each month deducted directly from his paycheck into the state pension fund and a 457 plan for his retirement.

Income Earned in January- $11,697

The categories above show everything we spent and saved in January, which was all the money we had earned in December. At the same time we were also (of course) earning money during January. At the beginning of January, we set up our budget to allocate spending from our December income.

This concept of getting a month ahead, has made such a huge impact on our finances! It takes some work to get to the point where you are living on last month’s income, but the effort is completely worth it!

The income section below shows the money we earned in January, which we will use during February.

Attorney Income – $9,764 Mike works as an attorney for the state of California. This is his take-home pay after taxes, social security, his pension contribution, and health insurance premiums. As happens at least a few times a year, it looks like the amount withheld in January is not quite right, so they’ll probably fix that next month.

Rental Income – $0 For years we rented out a one-bedroom apartment on our property through Airbnb. We gave that up to take in a Ukrainian refugee family for a couple of years. We loved Airbnb and will likely go back to that in the future. If you’re thinking about renting out your space on Airbnb, check out this post where I talk about how much you can make on Airbnb.

Law Firm- $0  Before working for the state, Mike did estate planning and business transactional work. Over the last few years he has had a steady stream of potential clients, most of whom he refers to other attorneys, but he still occasionally helps former clients. He doesn’t write himself a paycheck each month, just a couple of times a year.

Blog – $1,088  I only pay myself a few times a year now. My blogging income took a major hit when I put the blog on the back burner during Covid to start homeschooling my kids. It is slowly recovering as I put more effort into posting regularly and all of the things I do behind the scenes. Thankfully the income still covers my fixed blogging expenses (which are a lot more than most people would guess) and allows me to pay myself a few times a year.

Child Care – $845 For the past year I have been taking care of the 2-year-old of the Ukrainian family that we sponsor. The state pays for childcare while the mom is at work. It’s much less expensive and more convenient to have her stay with me than to bring her to a standalone child care facility.

Come back next month to see how we used this income to spend and save in February’s budget.

How’s Your Budget Working for YOU!?

That was a lot of words and numbers! Congratulations for making it all the way through our January 2025 family budget update!

Now we would love to hear from you!

Any questions on what or why we spend what we do?

What are your current financial goals?

Do you find that your budget is helping you reach your goals, or is it not working like you wish it was?

Let’s chat in the comments!

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