Part Two: Execution

Welcome back! I hope you feel a little excited to have a goal in mind and empowered by knowing exactly what your monthly expenses are. Maybe it was a little eye-opening to see how much you are spending a month? Don’t worry, we’re going to make all the numbers work out.

Once I had a clear picture of my expenses I really leaned into finding a way to manage my money with a budget. If you’ve ever looked you know there are a LOT of budgets out there! I tried conventional paper budgets first. The tedious nature of 50 million little lines where I was supposed to insert proposed amounts and later put in actual amounts EVERY MONTH?? Too overwhelming for me. So I tried different apps but logging each item was too involved on the day to day basis for me. Shoot, I’ve never even kept a check register… Maybe I’m just a little lazy, but money, at the root of it, is NOT complicated and I wanted a budget that was uncomplicated as well. But I kept striking out.

Light at the End of the Tunnel

Eventually, while no single plan made sense, I was able to patch together an idea from two that seemed to deal in common sense: Dave Ramsey plan and the 60/40 Budget Method. Now let me go ahead and say I’m not paid or otherwise compensated or even endorsed by Dave Ramsey or any of his companies or anyone who owns the 60/40 method (I couldn’t find an originating source). That being said, I seriously recommend you explore the Dave Ramsey website and familiarize yourself with his principles, starting with his “baby steps”. They are the cornerstone of so many financial truths. But when addressing just budgeting it was missing something, for me. – but when combined with the 60/40 Method which calls for 60% of your monthly income to cover recurring monthly expenses (like housing, insurance, and bills), then split the remaining 40% equally into retirement, irregular expenses, long-term savings, and “fun money”… When I mentally hodge-podge-ed these two plans together the reasoning part of my brain lit up saying “Hey, that makes sense”!

So now to create the budget.

This is the part you’ve been waiting for!! Seems easy enough, right, plug in the numbers: how much you have, how much you need, easy peasy, you have a budget! Sorry, but it doesn’t go like that. I started plugging in numbers running into a problems pret-ty quickly. You see, there are bills that are paid weekly, some paid monthly then, of course, there’s my pay, which is bi-weekly, not monthly. With weekly bills, they might be due four or five times a month and then, of course, some months I received 2 paychecks, some three, how on earth do I manage that without losing my mind?!?.

Divide and Conquer

It dawned on me that to make this budget crazy easy and optimize the 60/40 Method I needed to know how much to allow for my bills bi-weekly, too! So I used the spreadsheet to divided the monthly average by 26. Why 26? Because I receive 26 paychecks per year! If you are military you would divide that yearly total by 24 because you get paid twice a month. If you get paid weekly you would divide by 52. See how it works? For you math brained folks, you could liken it to finding the common denominator. And by averaging, you put the same amount in the lower cost months as the higher cost months so your budget stays level. By averaging I had the amount that I needed per paycheck to pay my bills, in full, year round. Additionally, I had the amount per paycheck, that I needed to pay my bills. Things were finally starting to look stupid easy!

So now I have my income and expenses all nice and pretty divided up into numbers that will fit together, time to make them do just that! Now the reason the 60/40 Method is called as such is that it calls for your monthly expenses to be no more than 60% of your income. Of the remaining 40%: 10% in retirement, 10% is irregular expenses, 10% is long-term savings, and 10% is “fun money”. Now where things like gas money and groceries come from are up to you. If there is room in your 60% definitely put it there! For our family, our monthly expenses only took up 50% of our income. So we were able to use 10% of our income for groceries, and gas came out of the irregular expenses.

The Chopping Block

But here’s the even tougher part. If your expenses are over 60% of your income. If your expenses are simply too high you have two choices: cut expenses, find more sources of income or a combination of both. Which of these you want to do is up to you, but you have to do one or the other. It is essential to live within your means. You cannot spend what you do not have. This principle seems so simple… yet soooooo many people seem to forget. Y’all, I have financially counseled several households so let me assure you, if your expenses are over 60%, you are not alone. However, it is not a setup for financial success. You can only spend what you have, it’s so simple yet so many people struggle. And don’t even get me started on credit cards. They are designed to keep you in debt and are such a huge waste of money.

When it comes to cutting expenses I know it can be tough but you have to do it. You may have to sell your vehicle that you are making payments on, opting instead for one you can pay cash for. You may need to sell your home to get out of that overbearing mortgage payment. Need some help getting rid of stuff? Check out these real-life situations from Dave Ramsey: selling to get started, selling everything not nailed down, why sell a car you already have financed.

Cut, Downsize or Shop Around

I have found most families can get under 60% by cutting expenses. If you don’t think you can cut something out completely try downgrading or shop around for services. We cut our insurance bill but not only upping our car insurance deductible but we also opted for bi-annual payments. Brainwashed into thinking it was acceptable, we were paying about $185 for 2 phone lines. We also needed new phones but I’m sorry, I’m strongly against spending $600 on a phone. Period. So we dumped AT&T and picked up phones for $130 each and unlimited everything with Boost at $80 for both our lines. $80!!! WE CUT OVER $100 A MONTH OFF OUR PHONE BILL ALONE! And we still have smartphones!!! That’s over $1200 a year!! We also recently switched our daughter’s once a week gymnastics to a lower priced FAMILY membership at the local gym. She now attends a hip-hop dance class she loves twice a week! We cut out cable for Netflix and Hulu a long time ago. Recently we cut out Netflix and Hulu for an Amazon Firestick. Whatever your bills are you can almost always cut them!

Tonight:

So your first take home for tonight is to average your expenses by your pay frequency. Once you get that done go ahead and make sure your expenses below 60% of your income. (Don’t forget to budget for gas and groceries! I know this part can be majorly un-fun… But the rewards are worth it, I promise!

Next time we meet we wrap up with Kitschy Budget: Maintenance.