Nobody wants to talk about their budget. Its the big elephant in most relationships and no one wants to talk about it. Why is that? I think it`s because when most people think of the word “budget” or being on a budget, they automatically associate it with being restricted in what they can buy. But, to me, being on a budget doesn’t mean I can’t afford something, it means I have placed priorities on my spending. I like to think that my budget allows me to buy anything, just not everything.
Budgeting means choosing how to spend your money and not everyone’s budget will be exactly the same. Someone may put a high priority on food and love to try new restaurants and new cuisines so they may spend a large part of their budget on food and eating out. Clothing, however, may not be so important, so they spend less money in that area. They have put a value on what is important and what is not as important to help them balance out how they spend their money. That is Budgeting 101 folks!
The problem is that a lot of people don’t have a budget and just buy because they feel they deserve it. We are fed the “American Dream” bull that tells us if we work hard we should be able to have a sprawling house, 2 shiny cars, gadgets, gizmos, and 2.5 kids. Unfortunately, a lot of Americans can’t afford all of these things at once, but still feel entitled to have them…resulting in credit card debt and a lack of savings.
According to the Federal Reserve statistics the median household income in the U.S. has fallen 8% since 2007, but personal consumption expenditures per capita continue to grow. In other words, we’re making less and spending more. We are falling into the trap of personal inflation! I know a lot of people who raise their standard of living as they get pay increases. As they make more money they spend more money…because that’s what you are supposed to do. But then they still feel strapped. The key, in my opinion, is to find a standard of living you are satisfied with and bank any pay raises! I’ve never heard of someone being upset that they put that extra money in the bank, but I have heard lots of people say they were upset that they spent their extra money on frivolous purchases leaving nothing to be saved.
I personally love having a budget because it lets me decide where my money goes (rather than fritter it away on stupid stuff).
Here is our budget; because let’s face it personal finance shouldn’t be so personal!
- Rent: $1585
- Car Payment $270
- Utilities $350
- Phone$40 )We have Republic Wirelessits the bomb
- Preschool Tuition $145
- Life Insurance $37
- Internet $40
- Auto Insurance $33 (we actually pay $200 semiannually, but its nice to see it in a monthly term)
- Garbage/Recycling $0
- Student Loans $210 (to be paid off soon!)
- Netflix $7
- Spotify $10
- Gas $30 (go me and my hybrid!!)
- Groceries/Household items $300-350
- Fun Money $350 (we usually don’t spend all of this…so the extra goes in an envelope in the cabinet. It is then available for bigger purchases like a new bike for me or when friends come to town and we want to go out to a fancy dinner.)
- Giving $600
- Savings $1050
- Retirement Savings $1050
How does our budget compare to yours? They say you can tell what is most important to a person by seeing how they spend their money. For us, our biggest costs are housing (although we would prefer it to be lower… and it will be when we buy a house), giving and saving.
Our housing cost is a little higher than we would like, but when we came to the area and had 1 day to find a rental, this was the only house we could find for under $2000! Our mortgage will be lower because we really value having extra money now and not being house poor (been there, done that!), so hopefully in a year or so we will have enough for our down payment and closing costs (about $65k! eek!)
You may also notice that our giving is a large chunk of money from our budget. For us, giving is a sign of faith. We believe that God has given us our money (through the ability to work, a secure job, etc) and He only asks 10% to help further his kingdom. He tells us in Malachi 3: 8-12 that He will pour out blessings upon us in return for our tithe. These blessing may or may not be financial, but I have seen this promise fulfilled, so I continue to put my faith in a God that asks so little from us but blesses us so richly.
Overall I am happy with our budget. It allows us to see where our money is going so we can attain our goals quickly, but it also allows us to spend freely when we want. By choosing a lifestyle that allows us to not focus on material things we are happy and satisfied in all areas of our finances. I also like to remember that finances and budgets are like a river, they will always be changing…and that’s a good thing!
How do you budget? Do you budget? What areas are important to you?