Yesterday, my post on 12 Tips for Saving Money resonated with you. Within 4 hours, this blog post quickly moved to fourth on my list of most-read blog posts. The three posts receiving more hits than that one are these:
#1: Running around Like a Crazy Woman: Why Less Is More
#2: Up In the Clouds or Down on the Ground: When Marriage Is Difficult
#3: Why I’m Uncomfortable with Mother’s Day
Since you seem somewhat interested in money and how to save it, I decided to follow yesterday’s post with another post on this topic. Today, I’m writing about how (and why) I created a budget and what it has done for me and my family. This process involves a story, a spreadsheet, cash, and envelopes.
First, the story. In 2006, Shane and I lived in Gatesville, Texas. We had been married for four years, and Shane was a preacher at a church there. I had just finished my Ph.D. in May of that year and began working at Baylor in August of the same year. I was finally making a salary after so many years living off of Shane’s salary and a meager graduate school stipend. We were excited about almost doubling our income and beginning the process of paying off school loans and other debt we had accrued, including our car loan, loans on some appliances, and our mortgage. Luckily, we did not have credit card debt. We only had one kid. We didn’t really need a budget.
Shane liked his job, and we loved that church (our first child was born there and those people and that church will always hold special places in our hearts), but we felt a desire to reach out to “non-church” people. People who didn’t know about Jesus. People who hated the church or who had been burned by “church people.” We wanted to reach out to, meet, and befriend the so-called “unchurched” or “dechurched.” We had heard about Mission Alive, a church-planting organization, and became interested in this thing called”church planting. After many months of praying and planning and preparing, we decided to move to Waco at the end of 2007 to plant The Grove Church.
During the transition time (or the “in-between” time as Shane called it in one of his blog posts at the time), from the time we decided to plant until we moved (which was about one year), I began to think seriously about our money. Like I said before, I’ve always been a saver, but now we were about to have to raise money for Shane’s salary and the church’s operating expenses. This was not a part of the church planting process that we liked. So much was unknown. We didn’t know how much money we could raise or how much money we would need to live on in Waco where we would soon be moving to a new, bigger, and more expensive house. We did not want to rely on the generosity of others for very long (less than three years). In the worst-case scenario, I wanted to be prepared to live off my salary alone if we had to.
So, in late 2005 at the very beginning of our dreaming and conversations on church planting (years before we took any action), I created a budget in an Excel spreadsheet. I looked online to determine what categories I needed for my budget. I decided on 18 categories, ranging from Household Purchases, Saving, and Groceries, to Giving Student Loans, and individual bills (cable, internet, phone, water, electricity, etc.). I then input Shane’s salary (I was writing my dissertation and bringing home zero dollars) and divvied up the money according to his paycheck. I followed the budget for three months, all the while adjusting it according to what I really spent.
After I started working and bringing money home a few years later, I decided to implement a cash envelope system. Here’s what this system entailed: I wrote out all the categories in our budget on various envelopes (see picture), which had been extended to about 35 different items.
When we got our monthly paychecks, I went to the bank and took out the amount of cash I needed for that month’s envelopes. I then put the right amount of cash in each of the envelopes. We used the cash until it ran out, and we were very diligent about not stealing from one envelope if we had run out in another one.
I took the envelopes with me when I shopped. I even found a nifty checkbook-size organizer that had eight different sections in it to carry around the cash I needed when I shopped. The system worked great. It did take me a while to get “caught up.” What I mean by this is that before beginning the cash system, I paid my bills based on the paychecks for that month. With the cash system, however, I had to have enough money in the envelopes before I spent the money. This meant that I had to have money in the envelopes and the bank. It was a process to be able to save enough money for this to happen, but it did.
Around this same time, I also decided to read Dave Ramsey’s The Total Money Makeover. I found many of his principles helpful, especially the ones about reducing debt, namely paying off the loans with the least amount of debt (which we did with my student loan, our freezer purchase, and two of our car payments). I also liked his suggestion to have a $1,000 emergency fund for use in, well, emergencies. If you had to use the money, then your immediate goal was to replace it.
One note about the book: I did not implement Ramsey’s principle of abstaining from giving (or “tithing”, as he called it) until you are completely out of debt. No matter how much money you make or have or how much debt you are in, I think it’s important to give some of it away throughout the process of getting out of debt. If we all wait until we are completely debt-free, we will NEVER give anything. Remember the widow in the Book of Luke? She gave all she had, even in her poverty. One of my friends did recently tell me, however, that he has since revised his stance on this issue (good!), but I’m not sure what he advocates now.
For several years, I carried around a lot of cash. Cash for groceries, household purchases, baby, haircuts, medical expenses, and a few other categories. However, this all changed two years ago when my husband and I went to see Wicked at Faire Park in Dallas. While we were eating lunch, someone stole my big organizer with all my cash right out of my purse (my driver’s license, social security card, and credit cards were also inside–ugh). I lost thousands of dollars.
I thus discovered a flaw in the system. A HUGE FLAW.
I began looking for other ways to utilize this system. I decided to still utilize the cash system but to do so without having to take out so much cash each month. I decided to organize it all in a spreadsheet and to just keep track of it electronically. It has worked even better.
Today, our budget contains 57 items in the list. Shane thinks I’m crazy for how detailed it is, but it works for me (and him, I think). I am constantly adjusting the items and the amount designated to each item because different expenses come up as your situation changes.
And what have been the results? We have a balanced budget. I don’t stress over money. I adjust the budget when necessary. We have paid off or gotten rid of at least seven loans (2 school loans, 2 car loans, 1 furniture loan, and 2 large appliances). We have not accrued any more debt. We now save in advance for cars rather than paying for them after we buy them. We only spend what we have. We have gained financial peace.
I want to leave you with a list of five budget categories that have helped me in one way or another. These may not be the typical items you will include in your budget, but they have been helpful to me so I’ll share them with you.
1. “School Fees”, one envelope for each child you have (this includes teacher gifts, school supplies, school pictures, field trip money, t-shirt money, and all those other expenses that come up once kids start school).
2. “Extracurricular Activities.” Includes tee-ball and other sports for your kids, as well as piano lessons, swim lessons, or art lessons. It can also include art, cooking, or tennis lessons for yourself (This category could also include the gym, but I typically have a separate item for it when I have been a member of the gym since it’s a recurring fee). You could also include going to the movies or other family activities.
3. “Babysitting.” If you want to have a Date Night with your significant other, or if you are a single mom/dad and want to go out at night, this envelope is a MUST. Saving for a babysitter is also good incentive to actually go on the date. You already have the money saved, so go spend it.
4. “Christmas.” I have a “Gift” envelope for birthday parties, holidays, and other special occasions, but I have found that I am more conscious about how much I spend on Christmas and what I buy when I have a special envelope designated for Christmas. Beginning in January, I start putting money in this envelope. By the time Christmas comes around, I know exactly how much I have to spend, and it is there before I spend it. No worries. No fuss. I have also noticed that I spend much less than I did before. It’s not because we don’t necessarily have the money to spend; it’s just that I became aware of how much money I spent on Christmas and realized that it was way too much…and not even what Christmas is about for me anyway. If you don’t celebrate Christmas (or if you don’t spend enough to warrant a separate enveloped), then maybe you can think of a different occasion.
5. “Work Expenses.” I have two separate Work envelopes–one for Shane and one for me. We both have expenses for our jobs (most of them are for books we need to buy). It’s important to itemize all of these small items so that you don’t mess up the budget.
Thanks for reading.