Living on a budget is probably one of the most boring sounding things in the universe. But it can actually be fun, and, ironically, rather freeing. Instead of fearing the bills coming in throughout the month, we can enjoy knowing that we have enough to cover the bills and have some money for fun things, too. Instead of calling it a “budget,” I like to call it a monthly spending plan (a la Dave Ramsey). Basically, this means allocating all your money toward a category before it’s even deposited into the bank, including money toward savings. Something like this:
This is just a sample [note: not my real income or budget]. I liked trying out Dave Ramsey’s Gazelle Budget Lite calculator to see approximately how much we should be spending in each category; I love a good financial calculator like this one. Amounts will vary based on income and general cost of living based on location, but it’s helpful to see when a number is either far lower than a recommended percentage, or far higher.
Also, categories will vary depending on the household. This spending plan is based on a 2-income family with no children or pets, and no car payments. Medical insurance and other costs are not factored in since all of those needs are covered with pre-tax dollars (like an HRA, HSA, or FSA) taken out of the paycheck before it’s even deposited. Retirement savings is also not included, since those are also taken pre-tax (401k, 457b, etc.). A larger than average amount is allocated for new clothing, based on two young professionals building a needed wardrobe. Using a spreadsheet to play around with numbers to see what’s comfortable works well; sharing a Google Doc with the plan makes it easy for either spouse to check and adjust.
One thing we’re trying is to use cash on those things that are not necessities: eating out, clothes, and entertainment. Once the cash is gone, the spending in that category is done for the month. Will report on how well this works for us!