This week’s challenge is to make next month’s budget. Budgeting was a key part in paying off our house early. I thought it would be helpful to put together an introduction to budgeting. I have the brain of an artist and budgeting does not come naturally to me. Luckily we have been able to put some processes in place, and figure out some tricks to make budgeting easier.
Budgeting is just taking all of your money and telling it where to go instead of getting to the end of the month and wondering where it went. Here is the process that we go through to track our spending.
- Budgeting can be stressful! Especially if you are just starting out and talking about money with your spouse can be frustrating. So start by making your budget session an event. Set aside a full night of the week, order your favorite takeout and grab a beer along with your paper and pencil.
- Get out your laptop and pull up your bank statement from last month so that you will be able to make educated estimates of your spending.
- On the top of a piece of paper write out your take home income. Then make a list of all of your spending categories. I made a little printable worksheet which will be helpful to get started available here.
- Now go through and assign each of those categories an amount starting with necessities. Most of them will be predictable like your internet, phone, and water bills. You can just grab these exact amounts from last month’s bank statement.
- The first category in our spreadsheet is giving. We believe in giving 10% of our income off the top and did that throughout the process of paying off our house. You can give to whatever organization that you want, but I would encourage you to do it. It changes the way you see what you earn. This will probably end up being its own blog post.
- The second category is retirement. You should make your giving towards retirement automatic. We have it taken out electronically so that we don’t even have the chance to spend it.
- Once you have gone through necessities, you should see what other goals you want to accomplish like paying off debt or going on a vacation and allocate money to those categories.
- Fill up every category until you have $0 unaccounted for.
- Find a way to track your spending for the month. You can’t manage what you don’t measure, so you HAVE to find a way to track your spending in a way that works for you. We use mint.com, it automatically tracks our spending and gives us a clear overall picture of our finances. It also notifies me by e-mail if I am reaching my spending limit in a particular category. There is also the envelope method, and I have friends who track all of their spending in a little notebook.
- Repeat on a monthly basis. Once you have the initial budget made up it will make next month’s tracking much easier.
If you enjoyed this post please like us on facebook or subscribe to our feed.
I am fascinated by homesteaders, self sufficiency, communes, counter culture, and people who choose to go their own way. I find it inspiring, and while we’re not shipping out to the farm any time soon I love to read about the experiences of others and hopefully apply some of their lessons to our urban living.
Here are some of the people that I love.
1. Lloyd Kahn Jason and I have probably watched this video about Lloyd Kahn 20 times. He was an editor of the Whole Earth Catalogue and Shelter Publications. He and his wife built their own house, farm most of their own food, and have never owed money to a bank. He shares his knowledge in his publications. My favorite quote from the video is Lloyd talking about home, “I like the idea of shelter. The feeling you get in a house is really important, and in these old houses there have been a lot of lives led in there and a lot of things have gone on. The feeling you get of warmth and comfort and a place you can go to rest and heal, eat and live with your loved ones is something that is almost genetic and it’s kind of gotten lost. You almost have to build your own house to get it nowadays unless you fall into a wonderful old house.”
I also just love the idea that he expresses about living on less and how it gives you more time. And the balance that he has struck between living in this modern world and still doing what you are able to provide for yourself.
2. Helen & Scott Nearing They moved back to the land in Vermont during the depression after Scott was fired from UPenn for having “radical beliefs” like thinking that child labor was wrong. His favorite slogan was, “Pay as you go” and also believed in living a debt free life. I love this article that was written in 1977 from Mother Earth News about the Nearings and summarizes the philosophies found in their book Living the Good Life published in 1954. I love this quote from their book, “The business of procuring the necessities of life has been shifted from the woodlot, the garden, the kitchen, and the family to the factory and the large-scale enterprise. In our case, we moved our center back to the land. There we raised the food we ate. We found it sufficient, delicious, and nourishing.”
3. The Farm I’m not really into pot smoking, soy eating, or cultish behavior but I love community, growing your own food, self publishing and folk music. So I love the idea of The Farm with it’s 1700 sprawling acres and 200 San Francisco transplants trying to make a go at living together off the land. Their book that they published Hey Beatnik provides a wild look into their world. You can download a pdf version of it from publiccollectors.org.
Favorite quote, “We started putting value into some sixty and seventy year old people in our county because they knew so much. Man they’ve been making it for so long, they know how to fix everything, build everything, how everything works. And they found themselves being hung around by all of these strong young long hair cats trying to learn their thing. It turned them on, and they said, “sombody wants to know all this old stuff? I didn’t know anybody wanted to know this old stuff.” And we said, “Yeah man. How do you do it?”
4. Hugh Fearnley-Whittingstall Hugh has a television program about moving the the english country side called Tales from River Cottage. My friend Thao tipped me off to it, and we have been enjoying episodes on youtube. My favorite parts are when he is off to a vegetable growing competition competing for things like longest green bean and all of the charming old farmers that he learns from.