My number one tip? Budget your spending money!
Starting in January, we added a new category to the budget. Spending money! I'll explain why this was such a game changer for us and can be for you as well. In the past, if we wanted to buy something we would just ask the other if it was ok. Is it alright if I spend $5 for this game? Do you mind if I spend a few dollars on a coffee? Is it ok if I get this shirt? We try to be very communicative about our finances and not just spend money without the other knowing. Well, naturally we never said to the other, No you can't get that, or Sorry, I really don't think you should get that, even though we technically have enough money. This of course, led to many small purchases which added up to a substantial amount of money every month being eaten out of our bank account.
Both of us work, but we are not great about taking lunches everyday. Thus, we spend money on lunch most days (we are working on this!). Also, if I want to buy something for myself when my husband isn't around, it seems a bit silly to call and ask every time for every little thing. So, here is our solution.
At the beginning of the month we each get our allowance/spending money. I have mine and N has his. This is our money to do with whatever we want. But, it is reserved for certain things, which are listed below. We also use cash for spending money (whereas we would usually just use our bank card) so it only comes out of our bank account once a month (I will go into online purchases further down).
Lunch (or meals when we are not together)
We have money budgeted for groceries, but eating out individually cuts pretty deep into that category. If we choose not to bring a lunch to work, or if we want to stop and grab something on days that we won't be able to have dinner together, we use our spending money for that.
Non-necessity personal items
Clothes, coffee, PC games, books, accessories, or anything that is not already budgeted that we want to get. We do have a category for household items, so things like shampoo and deodorant are safely budgeted there. It isn't a necessity for me to get that cute shirt, so that is up to me to buy from my personal spending money.
Gifts
On (rare) occasions we like to buy each other things. It wouldn't be much of a surprise for me if I looked at the bank account and saw N had just spent $20 at a flower shop, nor would it be very romantic if he called to ask if he could spend money to buy me flowers. So, it is nice to have funds available for those kinds of things now and then.
Online spending
We purchase a lot of things online, particularly my husband who is a PC gamer and can't pass up a good humble bundle on steam (if you have no idea what I just wrote, don't worry about it. It is a gamer thing.). We have an envelope for "money to deposit." If we make a personal purchase online or with a check (I do actually use checks on some occasions!) we take that amount out of our allowance cash and put it in the envelope. We then take it to the bank as we need to, but often end up redistributing that money at the beginning of the month so we don't have to withdraw anything from the bank.
Our allowance is ours to spend as we please, but it also is ours to budget. Once it is gone, it is gone. If I blow all my cash on something at the beginning of the month, that means I don't get to eat out for lunch, nor can I grab that coffee I really want later on in the month.
Savings
We recently opened up a savings account. We did have a savings account set up already, but it was with a out of town bank and we have that money reserved only for major emergencies at this time. It was high time for us to get a savings account adjacent to our checking account. When all of your funds are in one account it feels like you have more money to spend than you actually do, and you don't notice as much when you are spending a lot of money. We have a certain amount that we keep in our checking account at the start of each month. Anything that is over that amount is transferred to savings before we pay our bills on the first of the month. What is left in our checking is what we have budgeted, plus some wiggle room so that we don't have to transfer out of savings into checking if there is an emergency, or when we want to make a larger purchase that is not in the monthly budget (e.g. We have been in the market for a futon and found one we liked yesterday. I was able to write a check and know there was enough money in the account for me to make the purchase.). We do have the luxury of two pay checks, so we have more available to put in savings. If you are working on a single paycheck, it may take a little longer for you to build up enough outside of your monthly budget to do this, however if you are able to live within your means and not spend a lot of extra money, I think you will find that before long you will be able to transfer money to savings and/or pay off your debt faster.
To be honest, we still spend a lot of money. We are still living more generously than we could and should be. But having budgeted spending money has made a huge difference. Since we have a separate emergency savings, we are currently building up our normal savings account in order to purchase a new car (rather, new to us). We are still quite a long way off from our target, but since we started this upgraded budget 2.5 months ago, we have greatly increased our savings!
Do you have any good budgeting tips?
