My credit card bill is typically about $3,000. Last month it was $669.19. No joke. My new simple budget reduced my spending by more than $2,000. Yipee!
I did it by using my simple budget formula:
Income minus savings minus necessities minus irregular expenses = discretionary spending.
My discretionary spending, which is how much money I have to spend each month, totalled $796.50. I tracked my expenses on an index card, subtracting each purchase and I have never hated parting with my cash quite as much. Something about writing it down and subtracting each expenditure really made it easy to say no to my credit card.
To apply my simple budget system to your finances fill in the dollar amounts for each of these categories.
Income: (the easiest category if you are salaried)
Savings: $833 (to max out ROTH Ira accounts for Hubby and me)
Necessities: rent, gas, electricity, Internet service, cell phone service, gasoline (Hubby and I each get one full tank a month seeing how I work from home and he commutes on his bike), doctor visits, medicine, gifts and my newspaper subscription to the Sunday NY Times (which is on the chopping block)
Irregular expenses: car insurance, car registration, car repairs, dental visits, Christmas presents, magazine subscriptions, charitable donations, vacations, yoga classes, and oil changes. I totaled what we spent on these categories last year and divided by 12. I automatically deduct this amount from our checking account into a special ING savings account each month.
Discretionary spending: food, clothing, bus fare, entertainment, vitamins, toiletries, meals out, hair cuts, travel, and home maintenance. To see why I put food on the discretionary list, go here.
February was the first month Hubby and I tried this new system and we both had money leftover. (See my card above.) I’m wondering if it will be as easy to get through March. I’m also not sure what to do with the $207.02 I have left over!
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Welcome to Bargain Babe! I’m Mara, and I’m so glad you’re here. I am an obsessive bargain hunter and penny pincher, and I am determined to live a full life without EVER paying full price.
Save it for something else like a vacation or something else that you want.
Awww poor hubby, no love! Maybe you could MAKE a fancy dinner at home…candlelight, sexy dress, the whole nine!
Not a bad idea, Mags. Except that I’m not eating meat (gave it up for Lent) so cooking at home is more of a challenge than it used to be. I am quickly tiring of beans!
I think you can break the fast on sundays.
Another friend told me that too, but I’m not so sure. Isn’t the point that you are giving something up the entire period?
Hey Julia!
That’s a great way to create a budget nad find out how much money we would have left on discretionary spending! But I confess Slickdeals.net gets me in trouble when I see sales going on. I’ve been very good though in the past 2 weeks by saying that I don’t need those sale stuff. Food is just pretty much what I shop for now.
I also can not believe you only spend on 1 full tank of gas each month. That’s amazing! I save on gas by running only 60 miles/hour. 🙂 I’d rather just leave the house early and save on gas. Plus I do get great mileage on my Civic. And whenever I see cars that are speeding 80-90mph I just say my they have extra money to burn all that gas!
Michelle, I have to confess that I did not make it through the month on only one tank of gas. But Hubby was nice enough to fill up my tank from his discretionary account! I think two tanks of gas a month is more realistic for me.
Here’s a meatless recipe my family (okay not the kids as much and the hubby and I) enjoy:
1 T olive oil
1 med onion, diced
2 T curry powder (you could use less if you’d rather)
1 lb potato cut into 1-inch chunks
1 cauliflower cut into florets
1 C brown lentils
1 can diced tomatoes or pureed (I prefer pureed, or crushed)
1 can chicken broth (or you can use veg stock)
1 can red kidney beans or chick peas (optional)
1. In a 5-quart pot, heat oil over medium heat saute onion until soft, 7 minutes.
2. Add curry powder; stir constantly, 1 minute.
3. Stir in remaining ingredients, except for the beans
4. Bring to a boil; reduce to a simmer; cover and cook approx 25-30 minutes.
5. Rinse and drain the beans add to pot and stir to mix.
(PS: I very often, omit the potato and add 8 oz of a macaroni noodle, just be sure there’s enough liquid and the noodles are fully immersed in the liquid. If there isn’t enough as 1/2 cup of broth or water).
Thanks for the recipe! Maybe I will cook this tonight after yoga.
I never thought of food as discretionary before, but my hubby and I have had the discussion of reducing our grocery bills, so I think it’s a great way of thinking.
As far as your excess discretionary funds, I think you should store them in a separate account and see how much you can accumulate in a year. Or if you’re short one month, have an unexpected expense or find something you just can’t live without, you can “borrow” from one of your prior months.
We actually wound up having a meatless meal tonight. Tofu with a peanut-butter sauce (spicy for the grownups, not spicy for the boys) and bell pepper.
I ran into this other recipe in my notebook and this one is REALLY yummy. It does take a little bit of doing, but OMGosh is it worth it! Here’s the URL:
http://www.nytimes.com/2008/04/23/dining/231mrex.html?ref=dining
Can you use the $202 to pay down your credit card debt? Or is that already paid off? If it is, then I would save it for a 6-9 month emergency fund. It doesn’t seem like you have one of those?
Otherwise, I disagree that cell phone, gifts and subscriptions are a necessity. Vacations and yoga classes should also fall under discretionary. I couldn’t get the link to work to find out why you consider food discretionary, so I won’t go there.
And home maintenance is absolutely NOT discretionary!!! Renovations may be, but basic repairs to keep your investment sound -and a sound roof over your head- is a must. This is where the emergency fund comes in handy. For example this winter we had ice dams that resulted in water dripping into our roof and all over the floor. We also had a flood in our finished basement. I really cannot imagine viewing such repairs as “discretionary.”
A certain amount of clothing is necessity, especially if you have fast-growing kids.
I just noticed you have vacations under irregular and travel under discretionary so maybe that part is a typo. 🙂
Enjoy your blog!!
Jennifer, we do not have credit card debt and our emergency fund is well stocked. Where I want to save more is my retirement. I put cell phone, gifts and subscriptions in the necessity category because realistically we always ending up spending money on these things. We are contracted for the phone service and magazine subscriptions and have many birthdays and occasions to celebrate. I’d rather put gifts in the necessity category than show up to a wedding empty handed!
For Hubby and I home maintenance is discretionary because we rent. I don’t have kids and I’m better at keeping my clothing purchases low when these items come out of my discretionary money. Vacations are an irregular expense for us because we don’t take them regularly. Instead, they are something we save up for little by little. Travel is also discretionary in my mind because we are trying to fly less (so expensive) and this is a good way to discourage frequent plane trips.
I think it’s amazing how your take on what is necessary and what is discretionary is so different than mine! Just goes to show that budgeting and financial planning really is individualistic. Each person needs to find a system that works for them! I hope you can still use my formula, even if you classify your spending categories differently than mine.
Thanks for the clarification – that makes sense! I suppose the lesson is that there is no “one size fits all” budget, since every family and circumstance is different.
The method I follow, in general, is the “50-30-20” rule. 50% goes for “must-haves” like mortgage, utilities, car expenses, food. 20% goes towards savings (all categories) which is deducted automatically and never hits my bank account. And the 30% leftover goes towards “want to haves.” It makes life more pleasurable to have a percentage of income for the wants, even if your income is reduced.
However with this economy I’ve got several “emergency” budget scenarios worked out… just in case… and I’ve upped that 20% a bit to be able to give us more emergency fund. We already have 6 months, but I want to have 9 or even 12 months, since things are just so uncertain these days!
Congratulations on saving enough to max your Roth IRA savings. I would bet that very few people your age are taking that much care of their future.