budgeting

This is a guest post from Erin who writes about sustainable living at The Conscious Shopper and The Green Phone Booth. Connect with her on Twitter or join her Go Green without Going Broke group on Facebook.

I’m the type of person that could be perfectly happy in that most boring of all professions: accounting. I love lists. Spreadsheets are my friends. Lists of numbers on spreadsheets are a thing of beauty. Needless to say, I am a big fan of budgeting.

But that doesn’t mean I’ve always been good at budgeting.

For many years, my budgeting strategy went something like this: Last month, we spent approximately X dollars on groceries, and Y dollars on gas, and our rent is this, and our car payment is that…And it all adds up to just a little less than we make, and this tiny bit leftover will go into savings…Unless I feel like buying new shoes…The important thing is that I don’t spend more than I earn.

For years with this strategy, we paid all of our bills on time, and we avoided any credit card debt. But our savings grew very. very. slowly.

And then one day, I stumbled across an article on MSN Money called A Simpler Way to Save: The 60 Percent Solution. The author, Richard Jenkins, describes how he divides his budget into five categories. The largest category, committed expenses, comprises 60 percent of his gross income and includes things like food, clothing, housing, insurance, charitable contributions, utilities, and all taxes. The other 40 percent of his budget is divided evenly between retirement savings, long-term savings, short-term savings, and fun money.

I was immediately attracted to the simplicity of Jenkins’ budgeting system. By keeping his committed expenses at 60 percent of his income, he ensures that he spends way less than he earns. By dividing his savings into several different categories, he establishes a cushion for repairs and emergencies without needing to delve into his long term or retirement savings. And by providing a large and guaranteed fun money category, he makes sure that his budgeting strategy doesn’t become restrictive, leading to binges on shoes.

But how to apply this system to my own budget?

I sat down that night and stared at my budget spreadsheet. And squinted. And stared some more. And finally determined that it was impossible. There was no way we could live on 60 percent of our income with our current expenses – our house payment was sucking up too much of our money. So I presented my findings to my husband, and we agreed: If we wanted to be able to reduce the cost of our committed expenses and increase our savings, we would need to move. Fast forward four years, and we’ve moved to a city with a lower cost of living and downsized to a much smaller home.

With that big expense tackled, I made a few alterations to Jenkins’ original plan to fit our lifestyle:

• Because we donate 10 percent of our income to charitable donations, I decided to make that a separate category rather than lump it into the 60 percent chunk of committed expenses.
• The remaining 30 percent, we divided up between long-term savings, short-terms savings, and fun money.
• Unlike Jenkins, I include a few committed expenses like cable and Netflix in the “fun money” category because we could live without them if we needed to.

At this point in our lives, the 60 Percent Solution is still a goal – we’re not quite there yet because we still have a car payment and some other debts to pay off. Even so, I feel like this budgeting strategy has helped us prioritize and plan for our needs. It really is a “simpler way to save,” and in this modern age of go go go, simplification is definitely a good thing…Even for those of us who love spreadsheets.

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Mint is still messed up and showing my transfers between my own accounts as expenses so I have no graph or chart to share with you this month.

This month I blew the budget but just barely scraped by with a net income of $148 so I did still save a bit. January 18th I went on disability leave and work paid out the rest of the 60 or so vacation hours I had saved up but I won’t get my first disability check from the state until sometime in February so I’m glad that even with reduced income this month and a fair amount of discretionary spending for the purpose of making myself feel better I didn’t have to dip into my savings yet.

How’d the spending break down?

Well after the largest categories of rent and stuff to make myself feel better, utilities came in next: the weather has been cold, I’ve had an almost constant fever, insomnia has frequently kept me up at all hours of the night, and I’m home all day so I’ve been running the heat a lot more than usual.

Medical expenses came in next at $123 for January bringing the total for my cancer related medical expenses to $346.

Thanks to the Eat from the Pantry challenge, I spent a mere $42 on groceries for the entire month including my post challenge stock up run to Safeway today. I’ll be hitting Costco later this week to stock up on organic meats so that’ll bring my grocery spending back up for February.

Between not driving to work anymore, having family members drive me to most of my appointments, and not really being able to leave the house because of my low white blood cells, I’ve barely been driving and only got one tank of gas this month for $32 and half of that is still in my tank.

So my goal for February is don’t buy stuff just to make myself feel better and continue to have a positive net income even with a further reduced income.

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