Finding a method to keeping a budget that really made us aware of our money and spending was the first step that led to our FIRE journey, even if we didn’t realize it at the time. We didn’t have credit cards when we were first married, so we were (fortunately) forced to only spend money that we had.
2010-2011: our first few years
Our income was very small, Danielle was self-employed as a private music teacher, a church musician, and had a small part-time retail job. Joseph was finishing school and had a part-time paid internship. All we would do for budgeting was look at the balance in our bank account and if it looked like a few hundred, we’d think “ok, we’ve got some money, we can go eat out/buy this kayak…” Then our bills would need to be paid, and we’d suddenly find that we had no money. We had a line of credit on one of Danielle’s bank accounts that saved us a few times.
We knew something had to change. A few friends had mentioned using Mint for tracking their budget, so we signed in and set it up. We set up categories for spending and saving…but this too became something we’d glance at once in awhile and when categories were overspent, it got depressing to look at…so we’d stop. We had not taken ownership of our budget.
2012-2018: forming habits
We knew something had to change after we bought our home (and didn’t even have enough money for closing costs). As Danielle was working fewer hours (home more to raise baby #1) and Joseph’s job had become full-time at the company he’d interned with, Danielle began keeping a budget by hand in a notebook.
This was a game-changer. It doesn’t sound exciting…with all the fancy software and budgeting apps, why would we choose to keep our budget with old-fashioned paper and pen?
Because we had to literally manually update and track our budget, for the first time, we really paid attention to it. This was also the time we realized Out of Sight/Out of Mind (OOS/OOM bank accounts) were the only way we could force ourselves to save (sending a portion from direct deposit straight to an account we had no online banking set up for and no debit card). Every time Joseph was paid (weekly), we’d sit down and look over statements for how we’d spent money since the last paycheck. We also had actually budgeted the total income and figured out what was left for spending after we’d paid insurance, mortgage, utilities, and internet.
This period of time saw the biggest change for us. Our savings/emergency fund built up in the OOS/OOM account, we had a second account we put a set amount from every paycheck in for medical expenses, health insurance, car insurance, and charity, and our third account received what was left of each paycheck. A few raises came along to Joseph as he stayed at the same company, and we almost always put all or most of the raise into upping the amount being put in our OOS/OOM account.
We were able to start real estate investing, and budgeting had become a way of life.
2019: moving forward
Finally, Danielle decided to use technology to budget again! But we still didn’t move to an automated app or program. Danielle set up her own spreadsheet using GoogleSheets so that we can both access it and view what’s left (or overspent) in each category. Every pay period, Danielle still sits down and manually enters expenses and income, updates utilities that vary from month to month, and thankfully, the spreadsheet runs the calculations from there so we can immediately see how we need to adjust for the next week.
Our budget is set up for
- monthly outflow
- gift saving fund
- and then weekly budget for:
- Miscellaneous (hobbies, shopping, clothing, eating out–we do little of any of that)
- Car repairs
- Pets (food/supplies)
One benefit of having several years worth of budgeting behind us now is that we can average out the total for electricity, natural gas, and water, and on a month where we use less electricity, we can set aside some of the budgeted amount for the months when electricity runs higher.
All we let ourselves see and manage in our monthly and weekly budgeting is what’s left over after the set amount get sent to our OOS/OOM accounts for investments, emergency fund, and insurance/medical/charity.
With a few examples from over the years, it’s interesting to see how the numbers have changed. Recently, when Joseph got a raise at work, we moved additional money to charity and our money market direct deposit–this resulted in a decrease in our income! We cut some more corners and it’s tight, but the fire is lit.