Now that you’re humming For the Love of Money, I’m taking a quick detour from the (academic) planning series to talk about our budget. In addition to really enjoying how people plan out their days and spend their time, I also enjoy seeing how people spend their money. Given the number of personal finance blogs and blogs dedicated to paying off debt, I imagine I’m not the only one.
This post was inspired by a serious conversation on Christmas eve about our finances that boiled down to the fact that we need to get serious about our student loan debt. We’ve halfheartedly tried to address it and then ignored and then addressed it again for the ~10 years we’ve been out of our master’s programs. It was easy to push to the side when I was getting my PhD or when Ellie was a newborn and it was all we could do to leave the house with two matching shoes. Now that we’re more settled its presence is starting to feel pretty suffocating. Because student loans are a huge part of the lives of so many people with higher ed degrees, I will delve more into that topic, our current situation, and how we’re planning to address it in another post. For now I’d like to share our monthly budget, Cait Flanders style (big thank you to Indigo for introducing me to Cait’s blog).
Before you take a look at our budget, here are a few things to note:
This budget is far from perfect or ideal, but it is where we’re at right now.
As an academic I get 10 paychecks, 8 full and 2 partial. During July and August I don’t get a paycheck. Although I could have my salary distributed over the entire 12 months of the year, I figure I’d rather have a bigger paycheck for 8 months of the year, putting money for summer salary in savings and letting it gain a few dollars in interest during the school year.
The money we need to pay the bills over the summer (July and August, and also half of June and September) is immediately put into our savings account each month. It is not included in the %s below.
I am in the process of revamping our budget to reflect our focus on student loan payoff. Things may look a little different next month (I haven’t decided what this will actually look like yet). Below, I’ve included how much we budgeted (as a percentage of our monthly income), how much we spent, and where the extra is going (or if we spent more, where the additional $$ gets pulled from).
%s are rounded. The total for our budget adds up to 101 because a few categories were under 1% and a few were slightly over their %s, but this gives you the basic picture!
What is not in the budget...
Health insurance (comes out of my paycheck before I get it)
Transit pass (comes out of my paycheck before I get it)
Retirement contributions (my employer contributes 100% of what goes into here during the 10 months I get a paycheck, it amounts to ~6% of my gross paycheck for the month)
Health care FSA (comes out of my paycheck before I get it)
Short term disability (comes out of my paycheck before I get it)
I’ve been going back and forth about this one, but ultimately decided to sign up for it as I’m our only source of income
Child care (don’t use it)
December 2018 budget
This includes our mortgage payment, property taxes, home insurance, home warranty, and any home improvement costs. Our mortgage (for a 3 bed/2 bath house) is roughly $100 more than what we were paying to rent a 1 bedroom apartment (and twice what we paid in Ohio, sigh). Yes, there were probably cheaper options out there but I’d be trading a really long commute (and less time with family) for a slightly lower payment. We weighed our options and this is the decision that worked for us. For the upcoming year we’re going to push pause on any major home improvement projects and put that money towards student loans.
Leftover: 3% ⇒ student loans
Ah groceries, this is one place that can get out of control really easily for us. This is a huge improvement from where we were 2 years ago but we’re still working on it. In groceries we include things that go beyond food items, like toiletries, cat supplies, paper products, cleaning supplies, really anything you could buy at the grocery store goes in here. We’d like to cut down on our meat consumption, which will help reduce this a bit, and just in general be more thoughtful about our food purchases.
This includes the minimum payments for our low interest loans and my public service loan forgiveness loans, and then slightly higher payments for Mike’s loans where the minimum payment doesn’t cover the interest. As a part of our serious talk on Christmas eve, we made a massive decision to take 80% of our emergency fund and use it to pay off Mike’s largest loan, and also take part of a mutual fund to pay off most of his second highest loan. We’re starting with a bang. These #s aren’t included in the 10% above. I will walk through our thinking on this decision in another post about loans, but don’t worry, it was a very thoughtful process!
*On 12/25 we had 105,305.07 in student loans. On 12/28 (after our big discussion) we knocked it down to 92,582.50. Down 12% and under the 100,000 mark. There is certainly a LONG way to go, but we’ve started... Also the 10% spent does not include any additional leftovers from the other categories, this is just what we initially budgeted (I haven’t actually sent the extra money off to our loans yet since December is technically not over!).
Leftover: 2% ⇒ student loans
This includes electric, gas, water, and trash. Our gas bill goes way down during the summer and early fall (we haven’t had a gas bill since June of this year). We have some money set aside in case we go over, but I do set the budget at the peak of what we spend, so most months (especially in the summer & fall) we’re under.
Travel related expenses
Leftover: 2% ⇒ savings for yearly bills; 2% ⇒ student loans
This includes car insurance, gas, registration (billed every 2 years), AAA (billed once a year), savings for a car maintenance fund, and a general travel fund for family visits and smaller local trips.
Looking to get the phone bill down. I feel like every time I turn around they are adding another cost to the bill.
Leftover: 1% ⇒ student loans
This includes savings for a doctor’s bills fund (we also have an FSA but we keep this additional fund to give us a little more padding) and a gym membership.
Leftover: 1% ⇒ savings for yearly bills
A random assortment of things fall in here, jewelry insurance (billed once a year), a once a year haircut for me, Netflix, Prime membership (billed once a year), website hosting (billed once a year), and just a general miscellaneous category. For the things that are billed once a year, I just divide them by 12 and include it as a line on our budget each month, putting it into savings each month, letting it earn a tiny bit of interest.
This includes any dining out we do at restaurants or take out we get. Also, if we do anything like rent a movie (with Netflix/Prime we don’t really have a need for this but you never know) or go to a museum or something, we’ll pull from this category. We typically do takeout once or twice a month. We have a few places we’ll hit up, but other than that we usually find that what we cook at home tastes better (and is cheaper) than what we can get for takeout. Also, going out to restaurants or kid friendly bars is just not that fun with a really active toddler... we’d rather have people over and not worry about wreaking havoc in a public place. Not to mention that dining out adds up real quick and we’d rather spend our money elsewhere.
over budget: We knew we’d be spending a little bit more because of Christmas so we pulled over extra $ from the gifts fund in our savings account
This category is mainly for Ellie. Mike and I don’t buy each other gifts (aside from the occasional food item during holidays/birthdays) and we’re implementing a gift moratorium for family/friends because well... most the time we agonize over what to get people and what we want to get isn’t in our budget, so we end up getting something crappy that feels like a waste of their space and our money... so we’ll be writing nice notes, ha! Weddings have calmed down for us, but we do like to give at least a little something when people get married, and also when people have a baby. Anything left over in this category gets put into our savings until we need it... this will likely change when I update our budget.
We generally don't spend much on clothing. We’ve been lucky enough to get hand me downs and gifted clothes for Ellie. If Mike or I need something we’ll check out thrift stores or use gift cards from birthdays/Christmas strategically. This month was an anomaly in that we both replaced a pair shoes (using gift cards plus a bit of our money). Also, Mike didn’t have rain boots (and we live in the PNW), so he bought himself a pair. Otherwise, we usually spend 0% and put it in savings for any future clothing items that need to be replaced.
I’d love to hear how you divvy up your earnings!