Budgeting 101

Cindy's Budgeting 101

for those who going from 2 incomes to 1

1)  Separate need versus want.  Shelter is a need, $300K house is a want.  If 2 people have to work to pay for a house that they can't enjoy because they are working all the time and the kids are in daycare, perhaps they need to rethink priorities. If both choose to work because they're better at their profession than being a stay home parent, than so be it.  But when I hear "I have to work to pay bills." it just screams, "I am a slave to my stuff."

2) Figure out who the saver is in the family and let that person take over family finances.  If neither are savers, there are certified professional financial counselors to help them put a budget together.

3) Give yourself and your spouse an allowance and stick to it.  When we first got married, we had an allowance of $50 per week.  This was for those indulgences.  Eating lunch out, manicure, pedicure, haircuts, music CD's (iTunes now)  etc.  We still follow this but it is so ingrained in us that we don't necessarily need to keep track.  We mostly spend much less than $50/week. Make sure you set up allowances for each child when they arrive.  Its too easy to impulively buy things for babies.  They are so darn cute but really, they won't even know the difference.  Give them a tupperware lid and let them stack lock n lock.  They'll have fun for hours.

4)  Pay yourself first.  Put away at least $50/month for your own retirement.  Especially important for the parent deciding to be a stay home parent.  While the spouse has a retirement account via work and his social security benefit is active, the non-working spouse will lose out should anything happen.

5) Create various savings budget.  Retirement, emergency fund, vacation fund, birthday fund, medical/dental fund, etc. and allocate a dollar amount to each.  Be sure to remember birthdays, anniversaries, Christmas, special holidays when we tend to spend a little more than average.  Figure out how much you will need in each fund, divide it by 12 and put that money away right away with each paycheck.  This is the "no touch" money.  Better not go in these accounts for latte. : ) 

6)  Create folders at home for receipts.  At the end of each week consolidate receipts and keep track of where your money is going.  MS money and others have a good program you can use.  Some banks offer budgeting computer programs free of charge.  If you are computer savvy, create your own budget spreadsheet.  I did. If you're spending more in one account and less in another you can shift things around. 
You'll need to keep a good budgeting pace for at least 6 months, preferably 1 year to get a solid budget together that everyone can live with. 

7)  Stick with your budget. Hold yourself accountable.

8)  Couponing is a great way to spend your time. Couponmom.com is a great website for couponing.  She does all the work for you.  All you have to do is cut the coupons.  And its all free. You can buy things you NEED on sale.  But only buy what you NEED.  A scarf is a scarf, you don't have to have designer scarves.  The designer's name is a want, not a need.  Like my husband says, "If you don't need it, it doesn't matter if it was 90% off, it's still junk.  If you paid $10 because it was 90% off, you have a $10 piece of junk in your house!"  I absolutely agree. (except when it comes to my shoes, but I use my $50 allowance money on my shoes so he leaves me alone.)  

9)  Budgeting is a team effort.  One person brings in the income but the other needs to be careful on how that money is spent.

10)  Budgeting takes creativity.  You have to learn to be creative in meeting your needs without overspending.  If there is a will, there is a way.  We just have to make some priority shifts.

11)  Bottom line, live within your means. Talk to your grandparents about saving.  They are the best saving generation.  Avoid keeping up with the Jones', they're broke too.  If you owe more than you save now with 2 incomes, BIG RED FLAG, get help.


Good luck!  Hope this helps.