Weekly paychecks

My sister recently got a contract position in a school, which introduced both of us to a whole different kind of budgeting. Since she’s contracted, she won’t get paid on all of those lovely days off that the students have (3 days at Thanksgiving, 10 days at Christmas, etc.) nor will she be paid in the summer. So she asked for my help in figuring out how much she needs to save out of each check in order to have enough money during those breaks.

And then she told me she gets paid every week.

I used to get weekly paychecks when I worked retail, and it was pretty handy, since I could really only spend what I made in the last week. If I had a bigger surplus at the end of the month, I would transfer that to savings. It was easy, even though I wasn’t making much.

I sat down with my trusty Google Docs spreadsheets and figured out the breakdown. First, I had to figure out exactly how much she would make (net/take home) for the entire year. I used one of those handy paycheck calculators to get a close estimate, then rounded down to be safe. Then I took that and divided it by 9 months and then 12 months. The difference is what she needs to save in order to live comfortably the other 3 months she’s not working (she could get a summer contract position, but we’re assuming she won’t, but if she did, then the savings can go toward debt/a replacement vehicle). Then, I figured out her budget. She decided on five very simple categories which she mainly keeps track of mentally:

-rent (includes all utilities)
-debt (student loan payment)
-savings (for breaks/summer)
-mom (who pays for car insurance and cell phone family plan)
-everything else (food/gas/fun stuff)

So I figured out how much she can put toward each of those categories each week, which makes it really easy for her to know if she’s on track. As soon as the deposit hits her account, she can transfer some to savings, some to her student loan, and mentally set aside a bit for rent and mom, and the rest is her grocery, gas, clothes, and eating out budget for the week.

This was actually a pretty interesting exercise, and I hope that it gets her excited about having a real income again (she worked through college) and about paying off debt. She already wants to pay extra on her loans, since I’ve talked up Dave Ramsey so much, and she could save a bundle in interest even paying an extra $20/month toward her loans.

I was pretty proud when she graduated, but I think I’m almost more proud of her for wanting a budget and to pay off debt.


Ideal budget vs. reality

One reason people hate budgets and following them is that they create an ‘ideal budget’ instead of a reality budget. An ideal budget would be a fantasy budget, a budget where nobody ever overspends a category, and categories like ‘restaurants’ and ‘amusement’ are tiny compared to money spent on necessities.

This is not the kind of budget I have, which is why I think it’s more fun and easier to ‘follow’ my plan each month.

My budget follows the money, instead of me following the budget. This won’t work for everyone, but if you have wiggle room each month but don’t want to feel guilty about spending some money on frivolous things, I think this is the way to go. Tracking expenses for a few months helps you see where your money goes, and then you create a budget based on that.

For example, if I see that my husband and I spent $75 on gas last month, and $70 the month before, and $80 the month before that, then I can easily set our gas budget at $80 or $90 and know we aren’t likely to overspend that. I’ve noted similar patterns with our eating out and fun money categories, so I’ve made each month of the budget match our actual spending habits. Then I can see what will really and truly be ‘left over’ and can be used for the debt snowball, savings, etc.

It’s this type of budget that lets me know we can pay off our debt by our goal date or even earlier. This also lets us absorb a car repair or larger medical bill without too much fuss and bother. It’s also easy to see if one category is out of proportion with another, and make me stop an analyze spending habits and change them.

So close…

We are very close to paying off debt #2.

I am a bit annoyed with the Federal Student Loan servicer because they are switching websites sometime in early October (supposedly) and then http://www.dl.ed.gov will be no more. It will then be http://www.myedaccount.com, which means all of my payment history will probably be wiped out, just as it was when I switched servicers when consolidating my debt. And, no doubt, Mint.com won’t work with the new site right away, which means tracking the debt snowball with the ‘Goals’ feature will be messed up. I can’t really see a positive to this, other than maybe the new site being easier to use… we shall see.

Husband and I have had houses on the brain since seeing a listing for a super cheap-o house in a neighborhood we like. Like, $60K cheap. The major issue that made it so cheap? No appliances. But I just saw that as a potential opportunity to have the freezer-on-the-bottom fridge, the energy efficient dishwasher, the gas range with warming drawer, and the front-loader HE washing machine that I so desire. Someone else snatched up the house within a couple days, but it got us more seriously considering getting pre-approved.

We checked with the loan specialist at my husband’s credit union, and determined our income will most definitely allow us to buy what we want (small, probably older home, in the middle of the city). However, we decided we definitely want to pay off all of the debt before saving for that down payment. And, we’d like to go on that trip to Paris before buying a house, too. Maybe even get that convertible I’d really like. Why? Because we are weird, that’s why.

I actually mentioned my dream to buy a house with 100% cash to a family member at our vacation last month, and got a very “you are really WEIRD” look, but that is absolutely okay with me. So what if we live in an apartment until we’re 35? So what if we insist on a 15 year mortgage that can be paid off before we retire? So what if we care more about being able to save money than have a McMansion? As Dave Ramsey says, normal is broke–don’t be normal.