Transparent Family Budget Update for August

Today I’m sharing our transparent family budget, including all of our spending and earning, from August. If you read my last post, then you already have an idea about the most exciting part of this budget update: we bought a car! While that might be the most exciting, it’s all of the other things in this budget update that made it possible.

If you take anything away from reading Six Figures Under, I hope it is that a budget isn’t a restriction, but rather a financially freeing way to live. Without a spending guide, it’s easy to fall into spending money on whatever opportunities arise first, then running out of money when it comes to the things that we really care about most. Spending like that keeps you constantly frustrated at not having enough money to reach your financial goals and always feeling stuck.

A budget is the answer!

If you don’t have an actual written (or typed) budget, what is stopping you? That’s a real question. I would love to know what is holding you back from making and following a budget so that I can help you get onboard. The budget life is great and I want to help you learn to do it in a way that you can love it! So please share in the comments what’s holding you back from making and following a budget. No judgment. I just want to help you have the peace of mind that comes from knowing you are intentionally using your money to do the things you care most about.

On to August’s spending, saving, and earning for our family of eight.

Spending in August

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 August, we budget and spend what we earned in July. We knew on August 1st exactly how much money we had to work with during the month. So on August 1st, we start the August budget by taking everything we earned in July and assigning it to our August budget categories.

We can’t see the future, so on the first of August, 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 during 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 August 1st guesses dictate what we can and can’t do all during the month. The important thing is to not spend more total in August than we earned in July.

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 August spending for all of our budget categories.

Giving

Tithing – $1,142 We start out the month paying a 10% tithe on our income. Like all of our August spending, our tithing is calculated on what we earned in July, which you can see in this Budget Update. 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 – $40 I bought some items for a community project focused on making school kits for refugee children and some other donations for a foster care drive.

Monthly Bills

Mortgage – $3,000 Our escrow account was reassessed and our total mortgage payment went down (from $2,823 to $2,525), but we decided instead to round up about $475 to make our payment an even $3,000. This move 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 about $165,000 remaining on our mortgage.

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

Car Insurance – $280 Having a teen driver made our rates go up $125 per month. And that’s for a girl. Thankfully our teenage boy doesn’t start driving until next year. Because we’re also insuring another vehicle now, our auto insurance cost will go up about a hundred dollars starting next month.

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 – $130 Our water bill comes every other month, so we usually set aside about half of what we expect the bill to be. Because the next bill will include the hottest months of summer and we’ve been watering the garden and orchard, this might be a little on the low side, but we’ll see.

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 – $180 We pay for eight cell phones: five for our family, and three for the Ukrainian family that we sponsor. 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. Visible just started offering a 12-month pre-paid plan as well so last month Mike prepaid his phone for the next year, which brings his monthly cost to $20.83 a month, but required the payment up front.

Everyday Expenses

Food – $744 Other than getting pizza once and Mike and our daughter getting Chipotle on a long drive up from San Diego, we ate all of our meals at home. 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.

Fuel – $668 Our new car is already having an impact on our gas budget even though we only had it for 9 days in August. I’m excited to see how our fuel spending changes next month.

Household Misc – $750 Our miscellaneous category in August was through the roof! We had been having some computer troubles with Mike’s remote work set-up, so he got a new router and some other computer-y stuff. We also had our normal subscriptions like Google Suite, cloud storage, Adobe, and Scribd/Everand. We also bought normal household/toiletry items.

Clothing – $0 – Normally this category isn’t a sinking fund, but we had some clothing/shoe returns last month that I put back in this category. So even though we didn’t budget any more here, we still spent $83 on clothing. We have $126 still available.

Animals – $0 The animal feed was all stocked up so we didn’t need to buy any in August.

Allowances – $130 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 – $115 We bought the sports booster family pass for the high school. This allows our big kids (or our whole family) to attend football games for free and then lets us attend our kids high school sports events for free for the whole year. With a large family like ours and kids doing sports in every season, we get our money’s worth out of this pass.

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 much 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.

In August, we did not add money to most of our sinking funds. I will explain why in the goal section below.

Medical/Dental – $0 added. We spent $497 on medical and dental in August. Current category balance is $1,740.

Car Maintenance – $0 added. In August we spent $451 on two new tires for our Chevy Express van! Current category balance is $706.

Christmas – $0 added. In August, I spent $0 on Christmas 2024. Current category balance is $1,390.

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 want to have disability insurance to help us protect it. Current category balance is $1,040.

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 $973.

Birthdays & Gifts – $50 added. We August we spent $55. Current category balance is $185.

Car Registration & Smog – $50 added. We spent $0 in August. Current category balance is $352.

Family Fun Fund – $0 added. I spent $63 on renewing my membership to Governerds Insider, my favorite online bookclub. Current category balance is $207.

Home and Garden – $0 added. We spent $297 to have the carpet in our living room and hall professionally cleaned. We hope to replace the carpet with other flooring sometime in the future, but it will be nice to have it look somewhat decent in the meantime. Current category balance is $166.

Big Trips – $56 added This sinking fund is to save up for a trip we are taking in 2025. We didn’t add any of our own money in August. The $56 is from credit card points. Current category balance is $4,280.

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 to over $15,000! 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 2024. Mike has about $1,300 each month deducted directly from his paycheck into the state pension fund for his retirement.

Goal Accomplished!

In case you missed it, we bought a new-to-us car in August. To see what we bought, what it cost, and how we expect it to impact us financially, then check out this new blog post!

At the end of July we had $8,217 in our new vehicle savings category. We previously had more, but (as I explained last month) used $4,330 on buying a new camera before our Guatemala trip.

In addition to the funds we already had saved, we needed another $541. While we weren’t planning on setting aside that much in the beginning of August, we knew it had to come from somewhere, which is why our sinking funds took a hit. As you saw above, there were several categories that we didn’t contribute to in August, but we are fine with that and happy with our car purchase.

Income Earned in August- $11,270

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

Attorney Income – $8,925 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.

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 cut himself a paycheck each month, just a couple of times a year.

Blog – $1,500 I only pay myself a couple 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 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 September’s budget.