I’ve written a lot about budgeting, so any regular of my blog has heard a little about why I feel it’s important and how to do it (without pulling your hair out). And while I certainly enjoy budgeting more than the average person, I think it can be a really easy, non-threatening experience for most families.
I thought it might be helpful to share a sneak peek into my own budget from last month. I love doing this sort of thing. It helps me see my budget from a different point of view, and you might find it helpful as you put your own budget together.
So without further delay, here are some screenshots and explanations of my family budget from October 2018, along with some helpful insights into what the numbers mean and how you might apply these principles to your own financial life.
The Raw Numbers
My budget is broken into two sections: Income and Expenses. The first column shows the name of the type of income or expense, the second column shows my budgeted amount (the amount I expect to stay close to for income and expenses), and the last column shows my actual amount (the amount I actually earned or spent).
The TOTAL INCOME and TOTAL EXPENSES rows show the grand totals for each of these areas. The LEFTOVER (INCOME - EXPENSES) row shows what’s left after subtracting the total income and total expenses for the budget and actual.
The Benefit of Owning a Business
There are definite pros and cons to being a business owner. It makes budgeting interesting as well. While most people have a reliable paycheck, mine is far more volatile. I get paid each month, but the numbers tend to move up and down a bit more (October was a higher than average income month). This obviously makes budgeting a little more tricky, but we adjust by basing our budget on a conservative estimate of income.
Being a business owner also means there are some typical expenses that aren’t found on my budget. For example, my cell phone bill is partially reimbursed through my business. As my company grows, more of expenses can go through my business such as retirement savings, health and life insurance, car payment, computer equipment, and perhaps a home office. These items and more can be expensed directly against my company’s income.
Owning a Rental Property is Like a Business Too
Ever since we moved to Star Valley, we’ve been landlords of our Salt Lake City condo. We receive $1,400 per month from our renters, but this is mostly used to cover our mortgage payment ($1,094) and our HOA fees ($220). The excess goes into a separate bank account to handle repairs and upkeep, and acts as an emergency fund for larger, unexpected condo expenses.
In many ways, owning a rental property is similar to owning a business. First and foremost, there’s a tenant relationship we need to manage. We have amazing tenants right now, but if that ever changes and we need to deal with a bad tenant, then our time commitment and costs will likely increase.
Rentals also work like a business because the income we receive from our tenants can be reduced by certain expenses, such as mortgage interest, property taxes, HOA fees, and maintenance costs. This could allow for a significant reduction in rental income, which is an OK sacrifice for us as long as the property value continues to increase.
Why My Health Insurance is “Free”
You may have noticed that this year we paid $0 in health insurance premiums. How can this be?
If you’re self-employed, you’re likely familiar with the Patient Protection and Affordable Care Act--often referred to as Obamacare. This created a marketplace where people can purchase health insurance through exchanges. How much you pay is based on your income. Those with a low enough income can receive credits that go against their premium payments.
In our case, we are at a low enough level of income that we receive enough credits to cover 100% of our premium payments. That’s the free part. However, we still have a deductible and max out of pocket expenses and we’ve incurred some medical costs this year, so in reality our health insurance certainly hasn’t felt completely “free.”
To help save for these costs, we’ve used a Health Savings Account this year which has helped us save a bit on our taxes.
The Value of Having a “Miscellaneous Expenses” Account
Our “Miscellaneous Expenses” account casts a wide net. We tend to lump a variety of things into this budget category: household items purchased on Amazon, parking fees during a visit to Salt Lake City, and even some of our entertainment expenses, like date nights, could end up here if we fudge the numbers a little.
Although it’s a bit of a budgeting shortcut, I like the idea of having a miscellaneous account. Sometimes it’s just too hard and time consuming to make a category for EVERY.SINGLE.THING. A budget category to catch some of the hard to categorize expenses is helpful.
Main Budgeting Lessons
I hope seeing a one-month snapshot of our family budget is insightful. There is a lot that can be learned from looking at different examples, but remember that everyone’s budget is unique to them. Here are a few key takeaways.
A budget is personal. Some items on our budget likely shock people. For example, a $25 “allowance” for Tim and Kellie? $30 for date night? You’re grown adults! But this works well for us. It fits our needs. You may spend more of less, and that’s great if it suits you and doesn’t get in the way of other financial priorities.
Make your financial goals part of your budget. Our 529 account (college savings for Eleanor) and retirement savings are important financial goals for us. Rather than directing money to them after our expenses are paid, they are part of our budget and taken from our paychecks automatically. What’s left over after all of our expenses is gravy.
Don’t get too nit-picky. Having a Miscellanous account underscores an important budgeting point: It’s important to keep a budget, but always think big picture. Notice that in October my family ovespent our total budgeted expenses by about $130. Extreme budgeters will beat themselves up over this, but please don’t. A budget should not be obsessed over. As long as you’re keeping fairly close to what you’ve budgeted for, you’re ahead of most Americans who aren’t even watching where their money goes.
Create a system and stick to it. Whether you use an online tool like Mint, a spreadsheet, or pen and paper, it’s important to find a budgeting method that works for you and to stick with it. I like Mint because I can simply link up all my financial accounts. You may want more customization by using a spreadsheet. Whatever your method, make sure you’re updating and regularly reviewing your budget.
I hope my “pulling back the curtain” on our family budget has been helpful for you. If you haven’t started a budget yourself, please take some time to get one started. It can be extremely rewarding. The key is to adopt a system that works for you and be consistent. And heck, why not share it with a friend, like I’ve just done with over 100 of you! :)
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