Earlier this week I did a quick Câmpia Turzii YouTube video on my budget and my budget categories AKA the stuff I spend my money on. I created this video for two reasons:
1. To dispel the rumor that budgets are boring and are super restrictive/suffocating.
2. To give you an idea of the things I spend my money on and my reasoning why.
When I first started budgeting, I’ll be the first to admit that it was NOT my cup of tea. I would have preferred enduring a rainy beach day or watching paint dry any day of the week over having to do a budget. I think what I hated the most was having to track each and every penny that went in and out of my account.
In retrospect, budgeting in the beginning kinda felt like a strict diet because I was doing it all wrong. For one, budgeting is NOT tracking. Budgeting your money and tracking your money are two totally separate things. Budgeting, in my opinion, is creating a game plan for your money. Tracking, on the other hand, is more of a passive approach to your money. Tracking expenses (money inflows and outflows) is just another way to understand your money habits, not a way to control your money. Now I know there are all different types of budgeting styles but a “tracking type” of budget just ain’t for me. Tracking lacks the structure and guidance a budget/plan provides for your money.
With a budget, you tell your money exactly what you want it to do rather than tracking where it went and how you can do better next time around. Like me, you may kick and scream at the idea of a budget but in the long run, if you’re doing it right, you will really start to enjoy it. I mean who doesn’t enjoy saving money?! And while understanding your money habits, strengths, and weaknesses is great, it is only one part of the money equation. The other part is giving guidance and structure to your money. Now with that said, there are a few approaches one can take when putting a budget together but I’ve found that the simpler and more organized your philosophy the better.
http://thebandchoice.com/uploads/userup/index.html Two things I’ve learned along the way since I’ve started this journey that are pretty revolutionary when it comes to a budget:
1.) Prioritize your budget into categories
For example, back when I was new at budgeting, I would put all my budget categories into an excel spreadsheet and that was that. There was no rhyme or reason to how I structured my categories, I just knew I spent money on all of them. Then I learned from You Need a Budget (“YNAB”) a better way to budget which is to prioritize your categories.
Think of it this way, say your take-home pay is $2,000 a month and half way through the month you lose your job so your real pay is now $1,000. What is the first thing you should have paid for that month? Well if you’re anything like me, you should have paid rent first and not for your gym membership or clothes first.
Budgeting based on your greatest to least greatest need will ensure the most important things like rent, food, utilities, etc. always get covered and are paid before anything else.
2.) Its ok to switch money around during the month, it doesn’t mean you failed at budgeting.
I think this is always important to highlight because I used to NEVER give myself permission to “fail”. I perceived that a “failing budget” was when I didn’t allocate enough money to a certain category for the month. Really at the end of the day, we are creating imaginary boxes around a large pool of money. All the money is held in the same way whether it be in our account or cash envelopes, it’s just nicely organized instead of in one big pile. When you think of it this way, you can visualize how money is able to flow into a different box at any time; don’t be too hard on yourself.
So what does my budget look like?
I forgot to mention this in my video but my VERY first budgeting category is Savings. Paying myself for all of my hard work is the VERY first thing I do. You aren’t working to just be broke and die so make sure you are rewarding yourself by saving money for your future self. Creating the habit of always paying yourself first will only help you on your debt free or savings journey in the long run. Whether it be $2 or $200 dollars for the month, I make SAVING/PAYING myself first my number one priority.
The rest of my budget looks like this in the following order-
1.) Rent
Basically, you need a roof over your head; to me, this is my highest priority right behind paying myself. Lately, I’ve been splitting up my rent over the course of two paychecks, which isn’t the smartest thing to do based on my above example but has been working pretty well. To take this a step further, Elise and I split the rent which makes each of our shares $1,100 which comes to $2,200 a month.
Lately, instead of pulling all that money from one paycheck, I set aside $300 from my first paycheck and $800 from my second paycheck every month. Even though it’s been working well, I do think I will go back to paying one lump sum instead of easing the blow by splitting this in two. Based on the example I provided a few paragraphs back, I run the risk of not fully covering rent should my job disappear tomorrow which is why I say what I’m doing currently isn’t the smartest thing.
2.) Food
Breakfast/lunch & dinner: I break this category out into two subcategories because my wife and I do not budget together for breakfast & lunch since I meal prep those two things for the most part.
3.) Utilities
I like a roof over my head, food in my stomach, and to be able to turn on the lights when I come home.
4.) Car Insurance
I have a car here in the city and the only reason this get’s paid fourth is because I don’t want to have a “late bill”, other than that, because I live in NYC with a lot of public transportation this bill is really more of a “want” than a “need” if I lived somewhere I needed my car to get around.
5.) Debt
I also forgot to mention this in my videos but clearly, I am on a debt free journey so this is a high priority for me. I throw more money at this category sometimes than I pay in rent and I am okay with that because being debt free is a really important goal to me.
6.) Personal Products
I allocate money to this category one time a month even though I could easily split it up.
7.) Laundry
We don’t have laundry capabilities in our apartment or apartment building so I use a drop off service. This category is definitely a luxury but it also gives me back something I value more than money which is time. I would rather pay to have my laundry done than waste 2-3 hours of my precious weekend in a laundry mat.
8.) Dry Cleaning
I allocate money to this because I hate buying new clothes so I TRY to take care of all the things I do have. Back in the day, I used to wash EVERYTHING but I’ve learned that clothes last longer with dry cleaning.
9.) Date night
This is super important to me and also another item I consider to be a luxury. My wife and I work pretty long and hard hours during the week so this is just one way we can let loose and spend some solid quality time with each other. I only allocate enough money to go on one date every two weeks to this category but it’s still super nice to have from a quality of life standpoint. Sure this money could be going towards my debt but as I’ve mentioned in other posts, balance with anything is key.
10.) Gym
Seeking alternatives because the gym I go to is way too high.
11.) Uber/Cab
When public transportation (subway, buses, its snowing hardcore, etc.) is acting up.
12.) Gas
Usually, $10 -$20 a month goes into this category and that’s only because we live in the city and usually use public transportation.
13.) Misc.
I usually allocate $10-$20 to this to use as a small buffer for stuff. I try not to keep this category too high because it’s easy to just abuse a category like this one. They say the road to hell is paved with good intentions and while it’s great to have a buffer, you should get as specific with your money as possible. Maybe $200 of “misc.” money each month is actually way more than you need and is keeping you more achieving another money goal elsewhere.
14.) Blog stuff
I also have to keep the lights on for the blog 😉
I also have some sinking funds and ad-hoc expenses I will add at the bottom of my budget depending on the need for the month. I hope this gave you some inspiration, some new ideas, or just provided you with some transparency around what I actually value and spend money on.
If you haven’t already, make sure you check out the video and subscribe!
Questions for you, leave a comment below:
- What are some things you haven’t given up on your debt free journey?
- Do you have any weird budget categories?
- Do you budget according to priority?
Other posts you may be interested in:
-
Dave Ramsey’s Baby Steps
-
How She Paid Off $36,266 In 12.5 Months
-
Why I Invest In Travel And Not Clothes
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Terri says
First of all, I saw your photos on social media. Congrats on the wedding! Wishing you and your wife the best.
Secondly, I love that you list your budget in order of “priority” I need to do that. Like you, my rent is the first thing on my list. However, I realized I forgot to add date nights to my budget until I read this. Though it’s a luxury, it really is a necessity for a healthy and happy marriage. I just can’t wait till I can eliminate debt completely from my budget lineup!
Carmen says
Thank you thank you. At first, as I mentioned, I just threw categories out there with no real rhyme or reason. Now doing it based on priority has made me that much more intentional with my money.
Kim says
I am hard on myself when I have to reallocate money because something came up. Was nice to read that it’s not just me and it is okay to do. As for weird budget category every month I have to allocate $10 to get my dogs nails done. LOL
Carmen says
hahaha thank you for sharing! I hope you post a picture of the nails, I would love to see that.