I know that talking about money is a little taboo and can be kind of uncomfortable, but renovating a home actually costs money (what?!) so we’re going to make today’s post a safe place to have a conversation about how our finances and budget have evolved to a place where we can afford to make major updates in our home. I hope you’ll chime in with your favorite budget tips!
First, I think it’s worth mentioning, however obvious it may be, that everyone prioritizes their finances differently. Some people prioritize vacations, dining out, clothes, home decor, etc.. But no matter where you like to spend your money after the bills are paid, a budget should allow you to do that. We make projects a high priority in our budget. It won’t be like this forever (that’s the goal, anyway), but we work project funds into our budget every month using YNAB (You Need A Budget), a personal budgeting web app (with companion apps for Android and iOS!).
I’ve been money conscious from a very young age, always earning, saving and tracking, thanks to my parents. They made a chart for all of my siblings and me that we had to fill out every time we got money from any source. It actually used to bring us a lot of tears to see that we would get $10 from babysitting, but after 10% to tithing and then putting half of the net in our savings account, we only had $4.50 to spend. I dug up this old photo as proof! Haha!
In college, I started using Quicken to track my expenses, but now that we’re older and our finances seem to be going 100 different ways, it’s YNAB or bust! It automatically syncs our bank account and credit card spending to our phones and computer. The futuurrreee.
Budgeting isn’t synonymous with restriction. Being “on a budget” doesn’t imply that you are poor, or frugal, or cheap, or anything like that. It simply means you have decided to tell your money where to go, like a boss. If you care about spending money, whether you have a lot or a little to work with, you should have a budget. It’s how we are able to allot money to projects, guilt free.
When we set out project goals at the beginning of the year (we always share those), we also set our project budgets, too. We then take those budgets and make them financial goals in YNAB. If projects aren’t one of your goals, substitute “paying off student loans” or “taking that big family vacation” in there. Our budget=our goals. So if we know that the back deck is probably going to cost us around $5k in May (EEeee!!!), that could break down to just $208 every pay period. And anytime YNAB tells us we have $30 left in our dining out budget or we didn’t use the $20 clothing budget (am I the only one that would rather by a throw pillow than a shirt?), we have the option of just moving that money over to the renovation budget that we add to every pay period.
On the flip side, if there’s $400 in the medical emergency fund, and Greta broke her arm (she didn’t, this is just hypothetical) and it costs us $500, we can assess which budget we want to move that from. Budgeting with YNAB is FLEXIBLE! Your plans change, life changes, you change your mind, and your budget can and should change, too. No guilt, just adjust and move on.
There’s four rules that we have learned through YNAB that we financially live by.
1. Give every dollar a job. This way you never waste a penny. YNAB encourages you to budget to zero, which means not leaving any dollars unaccounted for. Just ask yourself, “What does this money need to do before I get paid again?” And assign every dollar accordingly. We love throwing extra dollars at our mortgage principle!
2. Embrace your true expenses. Don’t lie to yourself when you’re putting together your budget. If you always seem to spend $60 on gas a month, don’t budget for $50. And at the same time, if you need fresh flowers on your dining table, add them in if you can swing it! It’s the only way to budget correctly. Be honest about what you spend money on and how much it actually costs. We like to look ahead to larger, less frequent expenses and break them up into monthly amounts, so when you have that $1200 landscaping project coming up this summer (or Christmas in December!), then you would say, “OK, landscaping is a $100/month bill.” And really, it all flows back to #1, you are giving every dollar a job. It’s just that some of the jobs will be done today, and some won’t be done until far into the future.
3. Roll with the punches. People change, seasons change, budgets change. It’s a fact of life. If your insurance goes up, your salary goes down, or anything in between, be flexible and save a little for a rainy day so that small changes won’t affect you in a big way. You can create any category in YNAB, but there’s a default category, “Things I forgot to budget for” that always makes me smile and reminds me to just roll with it. And then we put $5 in there.
4. Age your money. This one might take a little bit of time to build up to, but once you are living on money that you earned last month (or the month before!) your stress will plummet, you will sleep better at night and it will feel awesome. Old gets a bad rap, but old money is good. In fact, I think the secret to getting ahead with our finances has been accounting for money we’re going to spend as far in advance as possible. As we save money for large projects, the age of our money naturally goes up (The program tells you how old your money is at all times, it’s truly fun to watch and I don’t even care how nerdy that sounds). And when you’ve been saving up for something big, and you spend that money, it will go down. That isn’t necessarily a bad thing, the goal is just that it never drops below 30 days, even when we spend a big amount at once.
While we don’t often do a budget-breakdown of projects here (would you guys like to see more of that?), now you know that we definitely do behind the scenes. :) We are also in a fortunate situation after doing this for 7 years, that companies are eager to be a part of our projects, which helps us stretch our budget even farther–always a plus!
Ready to take a new look at budgeting? YNAB is offering our readers 3 months completely free (no credit card required) when you click this link.
Special thanks to YNAB (You Need A Budget) for sponsoring this project and, really, providing the most important tool we use.