Pembirdie

Tag: budgeting

  • Lumpy bumpy expenses and peace of mind

    When I was using a Google Sheets spreadsheet to track our purchases, I found that “one time” expenses were always popping up. There would be the airline tickets to visit my mom for Thanksgiving. Then our semiannual insurance premium. Then Christmas presents. Then an unexpectedly expensive car repair. It seemed like every month had one or two of these “unpredictable” expenses. It made planning hard.

    After struggling with this for some time, I finally realized: you can plan for these expenses. You just need to look a little farther into the future.

    You see, most unexpected expenses really aren’t that unexpected, they’re just easy to forget. A semiannual insurance premium, for instance, predictably occurs twice a year. Christmas happens every December 25th. Mom wants a visit at least once a year (okay, twice a year).

    Here’s a list of some of our expenses that may or may not come at predictable times, but they definitely come some time:

    • Property taxes (so expensive! Like $8,000 per year expensive!)
    • Insurance with semiannual premiums (we do all our insurance this way, it saves a little money) (also expensive!)
    • Automobile registration (gets less expensive each year your vehicle gets older!)
    • Phone plan (we use Mint Mobile, you can buy a year at a time for a discount)
    • YNAB
    • Home maintenance (various sources say to estimate spending 1-4% of your home’s value per year – you may not spend it every year but will have larger expenses every so often like paying for a new roof or HVAC system)
    • Auto maintenance (I have no idea how to estimate this one… we randomly chose $500/month. If we have extra it will just help pay for our next car)
    • Medical expenses (I aimed to save enough to meet our yearly deductible)
    • Home projects (subjective, but necessary when your husband loves interior design and building furniture)
    • Travel (again, subjective, we need to pay for a least two flights a year)
    • Presents (depends how generous you are, I guess)

    After compiling all these lumpy expenses, I came up with a dollar amount that we’d need for each expense for the year. Our house cost $370,000, for instance, so 3% of that for home maintenance is $11,100. Divide that by twelve, et voilà! Each month we need to set aside $925 for home maintenance. Essentially, you create sink funds for all these categories to draw upon when the lumpy expense finally appears.

    I love this, because now instead of feeling slightly panicked when an “unpredictable” expense comes up, I know the money is there in the sink fund, just waiting to be used. So far I’ve done a good job predicting these “unpredictable” expenses, but if a truly new, unsaved-for expense came up we’d move things around and then I’d add a new category for the future.

    This is definitely possible to do with a spreadsheet, but YNAB makes it easier to see what we’re doing (especially helpful for my husband!), and other budgeting apps have similar capabilities.

    SDG

  • Easier money conversations with a budget

    I think about money a lot. I’ve read articles with stats saying that poor people think/stress about money more than anyone else, what with having to creatively come up with ways to pay the bills and etc. I am squarely in the upper middle/rich category, but it kinda feels like thinking about money is a hobby. A boring one.

    My husband, on the other hand, seems to think about money hardly at all. Part of this may be his disdain for math or numbers in general (unless they happen to be measurements for his woodworking projects… and even then he seems to find them tedious). Part of it may be that his family didn’t engage in long-term financial planning as he grew up. Whatever the reason, for my husband, money talk is a boring and painful chore that he’d prefer to avoid.

    He loves me, however, and so agreed to my request/demand for a “Financial Friday” every month, where we talk about our financial situation and strategize about short and long-term goals. I’ve tried to sweeten the deal with take out, with limited success. Initially, our money dates mostly consisted of me explaining a detailed spreadsheet containing meticulously compiled inflows and outflows with cells containing our savings targets. My husband played along, but Excel makes his eyes glaze over.

    Overall, it felt lonely. My husband was supportive, but despite politely listening to my explanations didn’t seem to have a meaningful understanding of what was going on. Even worse, at times I felt like the budget police, telling him how much or how little he could spend in a particular category.

    To solve this problem, I did something past me would never have imagined doing: I paid for a budgeting app. And after using it for the past five months, I plan to continue to do so.

    There are lots of apps available, but the one we use is called YNAB. (It used to stand for You Need A Budget, but this has now gone the way of the erstwhile Young Men’s Christian Association.) We each have the app on our phone, which allows us to see the available amount in each category and enter in expenses as they come up. (I am better at doing this than my husband, but he participates.) More revolutionary, each category has a green bar than depletes as money is spent, which is incredibly helpful for his visual mind. As a numbers gal, I couldn’t care less, but it allows him to stay focused during our finance talks instead of unconsciously checking out.

    As a result, we actually spend less time discussing our finances on Financial Fridays, because I have less to explain and he understands it better. I feel like I’m not doing all the work because he’s more involved in the day-to-day stuff, and his contributions to our conversations are more informed because he understands it better. I still think about money a lot, but I fret about it a little less.

    SDG